Rural and Community Banks in Ghana say the hike in taxes coupled with GH¢400 million locked up funds are affecting their operations.

In an interview with the media at the 22nd Annual CEOs Conference of Rural and Community Banks (RCBs), held at Ho, the Volta Regional capital, Mr. Alex Kwasi Awuah, Managing Director of the Association of Rural Banks (ARB) Apex Bank, shed light on this hurdles facing Rural and Community Banks in honoring and expanding their corporate social responsibilities in rural areas.

The main culprit, as per Mr. Awuah, is the imposition of high taxes by the current government.

These rural banks, which play a vital role in the economic development of rural regions, have seen their operations significantly impeded by a substantial increase in tax rates.

The government has raised the corporate tax rate on these banks from 8% to a staggering 25%.

This dramatic tax hike has made it increasingly challenging for Rural and Community Banks to fulfill their social corporate responsibilities in vital sectors such as education, healthcare, water and sanitation, police station and infrastructure development.

These projects are crucial for the well-being and development of rural areas, and the tax increase has put a significant dent in their ability to support such initiatives.

According to Mr. Alex Kwasi Awuah, Managing Director of the Association of Rural Banks (ARB) Apex Bank, Rural and Community Banks (RCBs) face substantial operational costs in serving their catchment areas, particularly in rural areas and communities where Universal banks often hesitate to enter, to provide banking services to the unbanked, small traders, and impoverished farmers.

Recognizing their unique mission, he called on the government to consider tax reductions for RCBs.

Such tax incentives would not only encourage RCBs to continue their vital work but also promote financial inclusion and rural development.

Additionally, Mr. Awuah pointed out another pressing issue faced by RCBs, which is the Domestic Debt Exchange Program (DDEP) which has inadvertently become a burden on the banks’ capital and profitability.

As a result, more than GHC 400 million belonging to Rural and Community Banks is locked up with Securities and Exchange Commission ,and Regulated Financial Houses, further affecting their financial stability.

“Because as we speak I’m reliably informed that GH¢400 million of RCBs funds including banks in our region remain locked up with Security and Exchange Commission Regulated Financial Houses. Although about two of these self regulated companies are still in court with the government over disagreement and the way forward, it appears the big discussions on the locked up funds seem to have died down a little bit , I don’t know for what reason but we need to bring that back to the centre table for discussions”

He added “these locked up funds if releases to us will be invested in productive sectors in our economy of Ghana thereby creating more jobs , transforming lives and improving value of the shareholders of the banks.Interestingly , since the completion of the financial sector clean up by the bank of Ghana , the central bank has placed moratorium on people of dividends by certain RCBs, this constrains the ability of many of the banks to raise additional equity and increase the speed of expansion of their operations because if I am not getting any dividend then I’m not going to put in the money”.

“Credit arguably is the life large of the operations of the RCBs and we believe that with the release of the locked up funds will enable the banks to grant more credits for customers , it is the hope of our chapter and I believe the desire of the other players the RCB ecosystem that something drastic immediately be done by the government to get the investments released to the RCBs,” Mr. Awuah stated.

“This will ease the burden on the Directors and the CEOs of the banks, this will enable them to strategize and create better values for the banks on behalf of the shareholders.”

Adding to this perspective, Dr. Toni Aubynn, Board Chairman of ARB Apex Bank, explained that while the DDEP has had an impact on the finances and profits of Rural and Community Banks, it is also a challenge to rural and Community banks to devise innovative strategies for expanding their deposit networks.

In the face of these financial challenges, Dr. Aubynn highlights the need for RCBs to adapt and find new ways to thrive in the changing financial landscape.

The 22nd Annual CEOs Conference of Rural and Community Banks held in Ho in the Volta region served as a platform to address these crucial issues, seeking solutions that balance the financial sustainability of rural banks and their commitment to corporate social responsibility, ultimately contributing to the growth and development of rural areas across the nation.