Rural and Community Banks in Ghana are grappling with challenges stemming from increased taxes and the issue of locked-up funds totaling GH¢400 million.
Speaking at the 22nd Annual CEOs Conference of Rural and Community Banks (RCBs) in Ho, the Volta Regional capital, Mr. Alex Kwasi Awuah, Managing Director of the Association of Rural Banks (ARB) Apex Bank, shed light on the difficulties these banks face in fulfilling their corporate social responsibilities in rural areas.
The primary obstacle, according to Mr. Awuah, is the imposition of high taxes by the current government. Rural and Community Banks, which play a crucial role in the economic development of rural regions, have been significantly hampered by a substantial increase in tax rates.
The government has raised the corporate tax rate on these banks from 8% to a considerable 25%. This dramatic tax hike has made it increasingly challenging for Rural and Community Banks to carry out their corporate social responsibilities in essential sectors such as education, healthcare, water and sanitation, police stations, and infrastructure development.
These projects are vital for the well-being and progress of rural areas, and the tax increase has significantly impacted their ability to support such initiatives.
Mr. Alex Kwasi Awuah, Managing Director of the Association of Rural Banks (ARB) Apex Bank, recognized the substantial operational costs faced by Rural and Community Banks as they serve their catchment areas, particularly in rural regions and communities where universal banks are often hesitant to provide services to the unbanked, small traders, and impoverished farmers.
In light of their distinct mission, he urged the government to consider reducing taxes for RCBs. Such tax incentives would not only motivate RCBs to continue their essential work but also promote financial inclusion and rural development.
Mr. Awuah also highlighted another pressing issue faced by RCBs, which is the Domestic Debt Exchange Program (DDEP), inadvertently burdening the banks’ capital and profitability. Consequently, more than GHC 400 million owned by Rural and Community Banks is locked up with the Securities and Exchange Commission and Regulated Financial Houses, further impacting their financial stability.
Building on this viewpoint, Dr. Toni Aubynn, the Chairman of the Board at ARB Apex Bank, emphasized that while the Domestic Debt Exchange Program (DDEP) has indeed affected the financial health and profits of Rural and Community Banks, it also presents an opportunity for these banks to innovate and expand their deposit networks.
In the face of these financial challenges, Dr. Aubynn underscored the importance of Rural and Community Banks adapting and devising new strategies to prosper within the evolving financial landscape.
The 22nd Annual CEOs Conference of Rural and Community Banks, hosted in Ho in the Volta region, served as a platform for addressing these critical issues, with a focus on finding solutions that strike a balance between the financial sustainability of rural banks and their dedication to corporate social responsibility. Ultimately, these efforts aim to contribute to the growth and development of rural areas throughout the country.