Ghana Study Tour ARB Apex Bank Ltd and Rural Financial Service Project

103499 Public Disclosure Authorized The World Bank

Study Tour Proceedings Internal Use Only March 2007

March 26 – 30, 2007

Public Disclosure Authorized Accra, Ghana

Romeo Esangga, STC Consultant, Rural Finance, ARD Jonathan Agwe, Research Analyst, ARD Renate Kloeppinger-Todd, Rural Finance Advisor, ARD Public Disclosure Authorized Public Disclosure Authorized © 2007 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org/rural E-mail [email protected]

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Table of Content List of Tables ...... ii List of Figures...... ii Acknowledgements...... iii Executive Summary...... iv 1. Retrospective on Rural Banking in Ghana...... 1 1.1 Introduction...... 1 1.2 Regulatory and Legal Environment for Ghana’s Banking System...... 2 1.3 Restructuring in the Ghanaian Rural Banking System ...... 3 1.4 Ghana’s Rural Banks, their Social Responsibilities and Impact on Rural Development ..... 3 1.5 Group Borrowing in Ghanaian Rural Banking: An Acceptable Collateral ...... 5 1.6 The Association of Rural Banks (ARBs) in Ghana: Serving the “Unbanked” and the “Underbanked” ...... 5 2. The Association of Rural Banks (ARB) Apex Bank ...... 6 2.1 Supportive Political/Legislative Enabling Environment Makes ARB Apex Bank A Mini Central Bank ...... 6 2.2 ARB Apex Bank’s Mission and Functions...... 7 2.3 Financial Highlights of the ARB Apex Bank ...... 7 2.4 Accomplishments of the ARB Apex Bank ...... 8 2.5 ARB Apex Bank and Cross Fertilization...... 9 2.6 Challenges faced by ARB Apex Bank...... 10 3. The Rural Financial Services Project (RFSP)...... 11 3.1 Overview...... 11 3.2 The Aim of RSFP...... 11 3.3 Objectives of RFSP...... 11 3.4 Specific RSFP Achievements ...... 12 3.5 FRSP’s Financing Plan ...... 12 4. ARB Apex Bank/RFSP Joint Deliverables: Issues of Special Interest...... 13 4.1 Nationwide Technology Platform for Computerizing Ghanaian Rural Banks...... 13 4.1.1 Expanding Rural Finance Outreach...... 13 4.1.2 Benefits and Beneficiaries of the National Technology Platform...... 14 4.1.3 Accomplishments and Achievements of the National Technology Platform...... 15 4.2 The ARB Apex Bank Capacity Building/Training Program ...... 16 4.3 Efficiency Monitoring by ARB Apex Bank ...... 17 4.4 Banking Operations of ARB Apex Bank...... 17 5. Lessons learned from the ARB Apex Bank with its Network of Rural Banks...... 17 6. Recommendations for the ARB Apex Bank and its Network of Rural Banks ...... 19 7. Alphabetical List of Presenters with Presentation Titles ...... 20 7.1 ARB Apex Banking System Presentations...... 20 7.2 Presentations on Experiences of Study Tour Participants ...... 21 8. Annexes...... 22 A - Presentations Profiling the Ghanaian Rural Banking System ...... 22 B - Study Tour Participants Sharing their Country Microfinance Experiences...... 46 i C - Field Trip – Group I Encounters...... 55 D - Field Trip – Group II Encounters ...... 66 9. List of Participants ...... 92

List of Tables Table 1: Number of Ghanaian Rural Bank Offices, 2001 and 2006...... 4 Table 2: Growth of the Rural Banks - Financial Indicators of RCBS ...... 4 Table 3: Donors to RFSP ...... 13

List of Figures Figure 1: ARB Apex Bank – Wide Area Network (WAN)...... 14

ii Acknowledgements

The Agriculture and Rural Development Department’s Rural Finance Team, organizers of the study tour, wishes to express its gratitude to Ghana’s Association of Rural Banks (ARB) Apex Bank’s management and staff, especially to Mr. Emmanuel Kwapong, Managing Director of the ARB Apex Bank. Their invaluable support and all their efforts in organizing a superb agenda made this study tour a great learning experience for all participants. Special thanks to Mr. Daniel Asare Mintah of the Bank of Ghana, and Ms. Patience Mensah (Senior Economist) and the other colleagues from the Ghana World Bank Office, for their great assistance with logistics, immigration and customs arrangements, workshop organization, and for leading two successful field trips. Special thanks also to all volunteers who assisted in taking proceedings during the field trip: Romeo Esangga, Christiane Kuhn, Medhat Massoud, Fumiko Nakai, Pierre Olivier Colleye, Sandra Broka, Lucie Tran Houng-Giang, Cherine Samir El Sayed, Yewande Olaopa, Essam AdelRahim Ali, Gamini Batuwitage, Tawfiq z.n. Al jáafreh, Jonathan Agwe, and John W. Fraser Stewart.

We also profoundly thank the management and staff of all the rural banks and other institutions that were visited for taking time out of their busy schedules to participate in and contribute to the study tour. Their presentations and the follow-up discussions were very insightful and helpful in providing a comprehensive picture of the overall effort to succeed in reforming the rural financial system in Ghana.

iii Executive Summary

In March 2007, a team1 of 27 finance practitioners and executives traveled to Accra, Ghana, to learn about the progress achieved in that country’s rural finance system. The participants can be grouped as follows: Task team leaders from the Bank, specifically from the following regions: Europe and Central Asia (ECA), Middle East and North Africa (MENA), and Africa (AFR). Project counterparts and government officials for Bank projects (Nigeria, Sri Lanka, India and Bangladesh); and Participants sponsored by IFAD (three IFAD HQ staff and officials from Egypt, Sudan, and Jordan).

The key objective of the study tour was to provide senior practitioners in rural finance in client countries and World Bank task team leaders and managers with the opportunity to: Learn about the important aspects of the development of a sustainable rural financial system, based on rural and community banking that uses the apex system approach, which also includes other financial institutions, such as financial cooperatives, credit unions, susu collectors, and microfinance institutions; Enable rural finance practitioners to determine if and how parts of the project or the complete approach (if deemed valuable) can be replicated2 in their respective countries.

The study tour had two main purposes: The primary purpose of the study tour was to expose participants to the apex banking system approach and enable them to enhance their capacity to provide appropriate advice to their partners and project teams. The other purpose was to use organized field trips to determine firsthand progress and achievements accomplished on the ground by the ARB Apex Bank with its rural banking network and its clients; and to assess rural banking approaches applied to the development of the rural and community banking sector, thus, providing participants with excellent opportunities, overviews, and professional hands-on perspectives.

The study tour set out to accomplish the following: Provide hands-on experience and knowledge (know-how), as well as practical skills to the participants, so they can provide appropriate advice to partners and project teams on issues related to planning, designing, implementing, and monitoring and evaluating rural finance activities;

1 Nine World Bank staff and 18 finance practitioners from the Central Bank of Sudan; the Federal Ministry of Agriculture and Water Resources, Nigeria; the Agricultural Credit Corporation Jordan; the Ministry of Samurdhi and Poverty Alleviation, Sri Lanka; the Ministry of Finance and National Economy, Sudan; the Social Fund for Development, Egypt; the International Fund for Agricultural Development (IFAD), Rome-Italy; the Niger State Fadama Development Office, Minna-Nigeria; the Second National Fadama Development Project Lagos, Nigeria; the Social Development Foundation (SDF), Bangladesh; and the Tamilnadu Empowerment & Poverty Reduction Program, India 2 The World Bank team which includes task team leaders and specialists may consider the rural and community banking model in their rural finance work. iv Share other countries’ experiences on approaches to rural development, such as Gemidiriya Foundation in Sri Lanka and The Agricultural Credit Corporation of Jordan, in supporting agriculture, as well as in increasing the living standards of farmers by providing adequate working capital for agricultural projects; and Learn and share key points in rural finance and rural development, including major improvements in project outcomes, sustainability, and institutional impact, as well as to offer opportunities for participants to share their experiences and views and get answers to questions that came up about rural finance activities in general.

Main recommendation: In view of the diversity and sometimes country-specific approaches to rural finance, such tours are very informative and should be conducted as often as possible. With the experience gathered from the Mexico tour in 2006 and the Ghana tour in 2007, participants recommended that the next such tour be envisioned for India and/or Sri Lanka in FY08.

v 1. Retrospective on Rural Banking in Ghana

1.1 Introduction Since its independence in 1957, the Government of Ghana (GoG) made several attempts to promote rural development to improve the living standards of its rural residents. One of the attempts involved the provision of credit services to the agriculture-dependent rural population. GoG cites several reasons for the failure of these attempts: i) the power of lobby groups advocating for commercial banking, ii) the unaffordable high cost of living for the generally rural poor, and iii) the lack of coordination between government agencies. However, in the last three decades, GoG has instituted new changes in government organization and developed new sources of rural financial services to encourage private endeavors and investment.

The 1992 Constitution of the Republic of Ghana made a commitment to rural development as a part of its national strategy to improve the living conditions in rural areas. In an effort to mitigate government agency coordination problems and obstacles, the constitution incorporated a decentralization approach under which the national government established political and administrative regions and districts. There are some evidences showing that the efforts of the district assemblies are making improvements in the lives of their rural people and consequently rural development. The primary areas of development have included the rehabilitation and building of new schools, feeder roads, local market places, health centers, and water treatment facilities.

Despite the district governments’ successes, the national government recognized a need for rural credit: access to rural credit increases the participation of rural people in development and economic activities. A rural finance policy that mobilizes rural resources and redistributes them to the rural sectors creates the potential for more development.

Traditionally, financial services in rural areas are being provided along the continuum between formal, semi-formal, and informal institutions. The semi-formal and informal sources prevail in rural communities and constitute the most common credit providers. Examples of such semi- formal and informal rural credit sources in Ghana include moneylenders, relatives, friends, traders, commission agents (Susus), cooperatives, consumers, distributors of farm inputs, and processors of agricultural products. Friends and relatives are also included in the most common providers of loans in rural areas. They usually charge no interest nor do they ask for collaterals. This type of credit market is small and the total credit from its sources is insufficient to implement rural development programs.

As in many developing countries, there have been accusations of lack of interest by commercial banks in Ghana to provide rural financial services. The lack of interest in providing small rural credits by the commercial banks and other formal financial institutions is explained by the high transaction cost they face, hence, the urban-based bias of commercial lending. Transaction costs are high due to the following: 1 i) administering a large number of small credits spread over a wide geographic area, ii) the comparatively high level of default that has often accompanied small/rural credits, iii) the inability of rural borrowers to offer adequate security/collateral for loans, and iv) the enormous risks associated with agricultural production and sales (low/volatile prices, lack of external markets for most agricultural products, weather-related seasonal fluctuations in production) Considering the deficiencies and risks within the rural financial system, GoG decided to design a public policy to transform the sector and deepen the system.

1.2 Regulatory and Legal Environment3 for Ghana’s Banking System Ghana’s multi-tiered regulatory structure evolved through early efforts in the 70’s to extend the outreach of the formal financial system to service the cocoa sector by permitting locally-owned unit rural banks. The 1993 Non-Bank Financial Institutions Act was also intended to diversify the financial sector. Although credit unions were included in the latter, Bank of Ghana’s (BoG) supervision proved unworkable, and a new Credit Union law was prepared that envisages dual responsibility of the BoG and the Department of Cooperatives.

Ghana’s 1989 Banking Law regulates activities of the Rural and Community Banks (RCBs). The Banking Supervision Department (BSD) of BoG supervises activities of RCBs, while the Association of Rural Banks (ARB) Apex Bank is licensed to undertake limited inspection functions for rural banks. BoG administers registration of RCBs, which are required to organize legally as community-based banks with limited liability company status. Restrictions on ownership include shareholding restrictions (30% individuals and 50% groups). Ownership must be mainly community-based, but there is no explicit exclusion of foreigners.

Savings and Loan Companies are regulated by the 1993 Financial Institutions (Non-Banking) Law. Non-Bank Financial Institutions are regulated by Non-Banking Financial Institutions (NBFI) Rules. The NBFI Department of BoG is the government agency responsible for supervising the NBFIs, which are defined as licensed corporate institutions that can mobilize deposits from the public.

Credit Unions are regulated by two laws: the 1968 Cooperative Decree and the 1993 Financial Institutions (Non-Banking) Law. Credit Unions are defined as cooperatives or mutually-owned organizations formed by groups to mobilize savings and make loans. NBFI law states that BoG is the regulatory entity of these institutions, though the Credit Union Association (CUA) might serve as a self-regulatory apex body. The registration of credit unions is authorized by the Department of Cooperatives and Credit Unions are required to organize legally as a member- owned cooperative society.

3 Sources: World Bank Development Indicators, The World Bank Group, The Consultative Group to Assist the Poor and Bank of Ghana

2 NBFIs (deposit taking, savings, and loan companies) are registered and licensed under the 1963 Companies Code, the 1993 NBFI Law and the 2002 BoG Act. BoG administers registration of privately-owned limited liability companies. There are no restrictions on registration and licensing. Foreign investors are required to show evidence of foreign currency and asset importation.

Some NGOs are registered under the Law on Trusts and Charitable Institutions. For corporate entities, registration is filed under the 1963 Companies Code. Organizations must organize legally as trusts, charitable institutions, or privately-owned companies limited by guarantee.

1.3 Restructuring in the Ghanaian Rural Banking System By 1990, Ghanaian rural banks were experiencing negative profitability resulting in capital inadequacy and in some cases, the inability to meet depositors’ withdrawal demands. As a result, BoG ordered a restructuring of the rural banks. By December 1991, all the rural banks had undergone diagnostic studies conducted by ‘outside’ consultants. Before the establishment of the multidonor-supported Rural Financial Services Project (RFSP), the diagnostics revealed that some 24 banks were in distress, 56 were mediocre banks, and 52 banks were performing satisfactorily. The restructuring was designed to determine financial strength, organizational capacity, and management status in line with existing statutory requirements. The rural banks updated and standardized accounts and procedures. The banks introduced internal control systems and management information systems. As of December 31, 2006, there were 123 rural and community banks along with 440 agencies that could be rated as good performers. According to BoG (2007), after the restructuring process, the number of rural banks meeting the capital adequacy requirement increased from 2 to 52.

1.4 Ghana’s Rural Banks, their Social Responsibilities and Impact on Rural Development To overcome many of the difficulties with rural banking, GoG, through BoG, introduced the idea of rural banking to the country in 1976. BoG initiated the rural banking system with the hope that small-scale rural producers and small towns and villages would benefit from the basic functions for which the banks were created. Today, the rural banks have the opportunity to determine who should benefit from their credit resources. The rural banking system organized itself into an association of rural banks (ARBs) with the following aims: i) To stimulate banking habits among rural dwellers; ii) To mobilize resources locked up in rural areas into the banking system in order to facilitate development; iii) To identify social activities and viable industries in their respective catchment areas for investment and development; iv) To promote financial intermediation in the rural areas; and v) To bring financial services to the largest segment of the population in the country and precisely to those engaged in agriculture – the back bone of the Ghanaian economy.

Ghanaian rural/community banks (RCBs) undertake deposits and loan activities structured to satisfy the needs of the communities they serve. These rural banks have transformed the banking 3 landscape in Ghana. Such transformation is reflected by the invaluable proliferation of rural banking operators as depicted in Table 1, which shows the increase in the number of rural banks between 2001 and 2006.

Table 1: Number of Ghanaian Rural Bank Offices, 2001 and 2006 2001 2006 REGION No of Banks No of No of Banks No. of in the Region Agencies in the Region Agencies

ASHANTI 22 103 22 111

BRONG AHAFO 18 59 19 69 CENTRAL 21 64 21 68 EASTERN 19 77 19 85 GREATER ACCRA 6 11 6 13 NORTHERN 3 2 4 3 UPPER EAST 3 6 4 10 UPPER WEST 2 2 4 4 VOLTA 9 12 10 22 WESTERN 12 52 14 55 TOTAL 115 388 123 440 HEAD OFFICE + AGENCIES 503 563 Source: ARB Apex Bank, Accra, Ghana (2007).

The 115 RCBs in 2001 and the 123 in 2006 and their network of agencies are widely dispersed in the various regions of the country. RCBs follow the concentrations of economic activity and they thrive on their intimate knowledge and relations centered on the communities they serve. RCBs are in a position to practice effective Know-Your-Customer principles and prudent lending.

Table 2: Growth of the Rural Banks - Financial Indicators of RCBS Narration YEAR %TAGE 2001 2002 2003 2004 2005 2006 INCREASE ¢’BN ¢’BN ¢’BN ¢’BN ¢’BN ¢’BN 2001 - 2006 Total Assets 518.19 863.79 1,275.37 1,798.28 2,260.83 2,987.54 476.53 Total 381.27 667.04 949.19 1,363.33 1,688.02 Deposits 2,264.61 493.96 Total Loans 144.88 225.59 348.43 567.68 775.23 1,148.86 692.97 Investments 247.31 383.22 524.66 719.57 830.64 In Gov’t Securities 846.90 242.44 Networth 73.33 107.71 120.36 240.88 320.89 384.28 424.04 Stated 9.58 14.06 22.26 35.18 54.12 Capital 93.51 876.10 Source: ARB Apex Bank, Accra, Ghana (2007).

4 Along with the growth in number of RCBs is growth in financial volume (Table 2). Ghanaian RCBs are called upon to facilitate the purchase of cocoa and coffee, as well as other basic commodities produced in the current agricultural production system. They have extended their reach of financial intermediation to many people in various rural communities and villages. RCBs play numerous roles that inculcate prudent banking habits like encouraging savings, accessing credit and establishing sound creditor-borrower relationship among the wider rural population.

1.5 Group Borrowing in Ghanaian Rural Banking: An Acceptable Collateral Rural loans are granted to both individuals and groups but because of lack of acceptable collaterals, group loans are preferred. Due to peer pressure, each member of a group acts as collateral to the other. Before granting a loan to a group, the banks require that there be mutual trust and respect among its members. In the case of a group loan approval, members are held jointly and severally liable. As seen during the field trip, a normal group cannot exceed 20 members. For example, in the case of Obrayeko Village (“Life is War Village”), a cassava production and processing group has 19 women and one man; and another group of smoked-fish producers also made up of 19 women and one man. In all cases, the group leader must have a clean loan record.

Loan repayment conditions are determined with reference to the borrower’s capacity to pay. A ‘grace period’ is allowed between the loan approval date and the time the borrower is expected to generate sufficient income to repay the loan. During the ‘operation period’ of the loan, the banks’ lending officers monitor the borrower to ensure proper use of funds and punctual repayment. Routine and emergency visits by loan officers are common during the operation period of the loan. Rescheduling may be allowed if there are circumstances which the loans committee or board of directors accepts as ‘unforeseen developments or events.’ If there is default on the loan, the case is referred to the banks’ legal department for action.

1.6 The Association of Rural Banks (ARBs) in Ghana: Serving the “Unbanked” and the “Underbanked” The concept of rural banking evolved in Ghana since July 1976 in response to the need and the demand for formal rural finance and rural banking services by small scale farmers and other rural economic actors. Many attempts in the past to encourage the commercial banks to expand their rural network to provide credit to the agriculture sector failed. Even attempts to create specialized banks to serve the sector, especially the rural poor yielded poor results as they tended to gravitate towards commercial banking activities which in turn discriminated against rural credit.

The first rural bank was established in the Nyakrom region in 1976 and as of December 2006, the number of Ghanaian rural banks had increased to 123.

5 In 1981, 31 rural banks came together to form the Association of Rural Banks – Ghana, a non- profit and non-governmental organization. It is registered under the Companies Code 1963 (Act 179) as a company limited by guarantee.

One of the major roles of rural banks is to deliver financial services among the unbanked and underbanked as well as to increase and improve financial literacy and sophistication among these groups. For these reasons, rural banking was then conceived to be simple, flexible, and customized to meet the needs of the predominantly small depositors and borrowers in the rural and even in peri-urban areas.

2. The Association of Rural Banks (ARB) Apex Bank

The ARB Apex Bank was incorporated in 2000, as a public limited liability company with rural banks as shareholders. It was granted banking license in 2001 and commenced commercial business and operations in July 2002. It was incorporated to resolve the following problems: i) Rural banks were facing numerous challenges, for example, a. lack of trained human resources b. lack of effective internal controls inefficient operational systems c. weak capital base d. lack of public confidence ii) Bank of Ghana’s withdrawal of technical services in 1994 iii) Rural Banks relying on Commercial Banks (their competitors) for technical support services iv) Rapid deterioration in the conditions of the rural banks, a number of which were closed by the Central Bank

2.1 Supportive Political/Legislative Enabling Environment Makes ARB Apex Bank A Mini Central Bank In November 2006, a special legislative instrument was passed by the Ghanaian National Parliament to give legal effects to ARB Apex Bank’s operations. This will enable the Apex Bank to operate as a mini Central Bank in the country. The new regulation would empower ARB Apex Bank to establish compliance measures that would enhance monitoring, supervision and control of its members’ operations. This measure taken by the Ghanaian National Parliament formed part of the government’s strategy to improve the policy and regulatory environment of the rural banking sector. This will encourage the establishment of more rural banks and support their efforts as part of the financial sector reforms to deepen the scope and scale of financial services and payment systems for the rural economy.

6 2.2 ARB Apex Bank’s Mission and Functions ARB Apex Bank’s mission is to offer banking and support services to its shareholders to transform them into efficient and viable financial institutions, which would continue to serve the rural communities in which they operate. Its principal services include: i) Check clearing services to rural banks ii) Account maintenance services iii) Investment services iv) Funds transfer services v) Supply of cash to rural banks vi) Guarantee support for rural banks’ own checks vii) Product development viii) Credit facilities to rural banks ix) Special support to distressed or marginal rural banks x) Training of staff and directors of rural banks xi) Computerising the rural banks xii) Inspecting of rural banks xiii) Supervising the rural banks

2.3 Financial Highlights of the ARB Apex Bank ARB Apex Bank’s stated capital on December 31, 2005 stood at 54.12 billion cedis (Table 3). This amount is above BoG’s minimum required of 500 million cedis for rural and community banks. ARB Apex Bank declared a dividend of 150 cedis per share at the end of December 31, 2005.

Table 3: Financial Indicator of RCBs, 2001 to 2006 Narration YEAR 2001 2002 2003 2004 2005 2006 % increase ¢’bn ¢’bn ¢’bn ¢’bn ¢’bn ¢’bn 2001 - 2006 Total Assets 518.19 863.79 1,275.37 1,798.28 2,260.83 2,987.54 476.53 Total 381.27 667.04 949.19 1,363.33 1,688.02 2,264.61 493.96 Deposits Total Loans 144.88 225.59 348.43 567.68 775.23 1,148.86 692.97 Investments In Gov’t 247.31 383.22 524.66 719.57 830.64 846.90 242.44 Securities Networth 73.33 107.71 120.36 240.88 320.89 384.28 424.04 Stated 9.58 14.06 22.26 35.18 54.12 93.51 876.10 Capital Source: ARB Apex Bank (2007).

7 2.4 Accomplishments of the ARB Apex Bank ARB Apex Bank has realized a number of accomplishments, notable among them are: ARB Apex Bank began clearing RCBs’ checks in July, 2002. There has been steady increase in the value and volume of checks cleared as of December 31, 2005. There has been tremendous improvement in the specie supply to RCBs. Cash is now supplied to the door-steps of RCBs since the inception of the specie operations in August, 2003. This development has been made possible with the provision of 15 bullion vans and 7 escort vehicles. As of December 31, 2005, a total of 2.1 trillion cedis was supplied to RCBs. In January 2003, ARB Apex Bank launched Apex Certificate of Deposit (ACOD) which is a treasury product to enable RCBs invest their excess liquidity in short-dated instruments. Before the ACOD was introduced, the only financial product available for the RCBs was to invest in BoG’s 91-day T-Bill. Now, the RCBs have the opportunity to invest their excess cash into 7, 15, 30, and 60 days at very competitive rates. This product improves RCBs’ profitability and sustainability. As a Primary Dealer, the ARB Apex Bank purchases T-Bills and Notes on behalf of its member banks. The brokerage fees generated are shared with the banks. This has given the member banks additional income apart from the interest earned on the T-Bills and Notes. ARB Apex Bank is also a ‘rediscounter’ of BoG’s T-Securities which enables RCBs to have access to their funds invested in T-Bills and Notes before they mature. Apex Link is another product lunched in June 2003, which enables RCBs to transfer funds domestically. Through Apex Link, a bank client can transfer funds electronically from one end of the country to another in a timely and secured manner through the network of 563 offices and agencies of RCBs in Ghana. Before the product was launched, there were no linkages among the RCBs to facilitate such funds transfer. The introduction of Apex Link has brought a huge relief to the entire citizenry especially those in rural and remote areas, who now use this product to avoid the high risk associated with conveying cash from one town to another. This product has been profoundly patronized since inception. Home Cash (‘Efie Ne Fie) is another investment product which was launched in October 2005. This product operates on the Apex Link platform and is aimed to mobilize savings and share capital for the RCBs. Inward remittances collaborations with ARB Apex Bank is a recognized advantage for RCBs due to nation-wide network of offices as well as national network link to other financial institutions engaged in foreign inward remittances that lacked the outlets to deliver their products in the rural areas. ARB Apex Bank currently collaborates with five (5) national financial institutions: 1. Metropolitan and Allied Bank Ltd 2. Merchant Bank Ltd 3. First African Financial Services Ltd 4. Express Funds International Transfer Ltd 5. International Commercial Bank 8 This collaboration has enhanced the image of the RCBs and ARB Apex Bank as a result of the promotional advertisements and the efficient services delivery. It has also opened RCBs to more business since some of the beneficiaries use their remittances to open accounts with them. These activities have contributed to the deposit base of the RCBs. The ARB Apex Bank and its five (5) regional branches have been fully computerized using the banking application software and linked them to the head office in Accra using leased VSAT links. There is now better and efficient service delivery to the rural banks served by these branches. Rural banking operations seem to indicate that they needed robust and flexible banking applications which will support their micro-finance operations. At the same time, they needed to integrate a seamless operation within the network of rural banks and their Apex Bank. In August, 2003, Terminus Globus and eMerge were procured for implementation. Ten (10) Globus and 40 eMerge user licenses were contracted for ARB Apex Bank and six (6) user licenses for each of the 123 rural banks for installation and execution. As of February 2007, four (4) ARB Apex branches (Kumasi, Takoradi, Sunyani, and Bolgatanga) have been computerized. So far, 50 rural banks have each been supplied with an average of 2 servers, 5 PCs, and 3 printers. This is the standard hardware requirement to meet their needs to deliver efficient and effective rural banking services. Forty two (42) rural bank sites have been provided with Local Area Network (LAN) infrastructure to allow them to manage their data appropriately. Training was provided to IT officers in the rural banks to manage IT infrastructure which include 80 persons trained on Windows Server and LAN administration. The Accra head office has been fully operational and functional. Departments have been established to help provide efficient services to RCBs. They include the Training, Legal, and Efficiency Monitoring Unit; the Micro Finance Unit; and the Public Relations and Marketing Unit. So far 135 ARB Apex Bank staff have been trained by the project in various subjects including: o assets & liability management; o international trade finance; o strategic planning & budgeting; o human resource management; o micro finance; o central bank accounting & budgeting; o bank supervision; o ICT (Globus/eMerge); o result-based management (performance indicators); o program for women managers; o money laundering; and o business process re-engineering.

2.5 ARB Apex Bank and Cross Fertilization Inter-institutional collaboration and strengthening is one major outreach strategy of the ARB Apex Bank. ARB Apex Bank and the RFSP work in collaboration with the government 9 supported Microfinance and the Small Loan Scheme (MASLOC) and the Ghana Microfinance Institutions Network (GHAMFIN). i) MASLOC ‘s objective is to undertake sound and judicious administration on fiduciary basis, of government and/or development partners funds for micro and small-scale credit program and also to serve as an apex body of the Microfinance Sub-sector. It was established to promote or facilitate the emergence, development and growth of sustainable and decentralized microfinancial services. ii) GHAMFIN is a network of five categories of microfinance institutions, namely the Rural and Community Banks (RCBs), Savings and Loans Companies (S&Ls), Credit Unions (CUs), Financial NGOs (FNGOs), and Susu (daily itinerant savings) Collectors (SCs). GHAMFIN evolved in 2000 from a research project, based on the recognition that it would serve as a useful forum for MF practitioners. Its objective is to backstop MFIs with support in designing the best credit products for their clients. GHAMFIN engaged with Microfinance Information eXchange (MIX) to develop performance monitoring benchmarking system in Ghana. In addition, its members include financial service providers as well as associate members, for example, research institutes and training institutions. There is also a possibility for honorary membership. The network’s activities span from studies, conferences, a social investment fund, an information centre, and a web-site to policy advocacy related to microfinance.

2.6 Challenges faced by ARB Apex Bank In spite of these great achievements, there is still much to be done in order to further improve financial intermediation in the rural communities. The critical areas or challenges include: Completion of the computerization of all member rural banks in a timely manner. Ability to commission all rural banks within the budget provided by the Millennium Challenge Account Project. Ability to fund internally (cash flows from operations) the extensive rural banks inspection or on-site examinations. Sustainability of the ARB Apex Bank when it is undercapitalized due to inadequate capital from the members. Ability to improve financial performance to recover fully the operating cost from rural banks. Ability to manage and improve profitability. Ability to create new business lines and financial products and services to diversify income and hence, to improve internal cash flow to finance internal growth. Ability to attract needed capital to strengthen finance position and improve financial conditions.

3. The Rural Financial Services Project (RFSP)

3.1 Overview With the exception of very few rural banks in Ghana, it is evident that both formal and informal financial institutions need to be strengthened as they currently operate with outdated technologies. Special efforts have been attempted to support formal financial sector institutions operating in resource deficit communities and villages. Since the implementation of RFSP, results have been achieved such as increase in depositors’ confidence and willingness to transact business with rural banks. The project was conceived as a financial sector capacity and institution building program. Some of the focuses are on improving access to rural financial services by the large rural population, particularly women; building capacity of the constituent stakeholders; and instituting the regulatory and policy changes and reforms needed to enhance the efficiency of the rural financial system through BoG and ARB Apex Bank.

3.2 The Aim of RSFP By focusing on the specific subgroups in the rural economic sector, RFSP aims to realize more results that would culminate into building rural banking synergies. RFSP supports GoG’s strategy to deepen and broaden rural finance services as its long-term economic strategy to accelerate rural economic growth and development. The project covers the continuum of financial institutions and other institutions of the rural financial sector and will do so in an integrated manner to maximize the synergies, complement ongoing economic and social activities, and make best use of limited and existing resources both human and capital.

3.3 Objectives of RFSP RFSP’s objectives are as follows: Collaborate with ARB Apex Bank to support and enable its member banks to address generic technical and institutional constraints on their full potential and impact on rural economic development; Support ARB Apex Bank and its network of rural and community banks in the development, training and empowerment of informal financial institutions and rural groups to expand and deepen rural finance outreach with rural financial services to a large number of rural clients, including women, many of whom are among the poorest; Strengthen the overall capacity of the ARB Apex Bank and its member banks including the Rural Finance Inspection Department (RFID) of BoG, for effective financial intermediation through technology enhancement and modernization, human resource development, and the development of innovative rural finance products and services that are best suited for the fast changing financial needs of rural clients; Strengthen and improve rural banks’ linkages for more efficient information transmission, knowledge sharing and cost-effective provision of services such as check clearing, investment, funds transfer, specie services and guarantees support; and

11 Enhance and improve technical competence of BoG’s supervision of ARB Apex Bank and its members.

3.4 Specific RSFP Achievements Capacity Building of Informal Sector Trained Rural MicroFinance Institutions (RMFIs) in corporate governance and financial management (10,330 beneficiaries) Developed 17 “ Good Practices” Manuals for practitioners Built competencies for 19 training practitioners Strengthened Microfinance Apex Bodies Capacity Building of Rural/Community Banks (RCBs) Trained RCB personnel in customer care, treasury management, and credit management (4,843 personnel trained) Computerized and in the process of additional computerization of RCBs Supplied and in the process to supply more computers and office equipment Supplied and installed radio and communication equipment to RCBs Institutional Building of ARB Apex Bank Ltd. Civil works at Head Office and four (4) regional offices Trained all staff in all aspects of banking and credit, administration, internal auditing and others Designed a methodology and prepared a operational manual for implementing a microfinance outreach and capacity building for RCBs Developed a methodology for capacity building in financial literacy for rural women to increase their access to rural financial services and to enable women to obtain productive resources like credit independently and confidently Institutional Support to Bank of Ghana Trained staff in Microfinance Provided vehicles and office equipment Able to restructure the whole rural banking sector (prior to RFSP, there were 24 distressed banks; 56 mediocre banks; and 52 satisfactory banks). As of December 31, 2006, there are 123 performing rural and community banks along with 440 agencies.

3.5 FRSP’s Financing Plan RFSP is a multidonor funded project. Table 3 summarizes its donors with their respective contributions.

12 Table 3: Donors to RFSP

The total project cost over a period of six to eight years amount to US$22.96 million with the following financing structure:

Source of Finance Amount Contributed (US$ Million)

IBRD-IDA 5.11 IFAD 11.02 AfDB 5.01 GOG 0.748 Beneficiaries 1.95 Total 22.96

Source: Bank of Ghana (2007).

4. ARB Apex Bank/RFSP Joint Deliverables: Issues of Special Interest

4.1 Nationwide Technology Platform for Computerizing Ghanaian Rural Banks 4.1.1 Expanding Rural Finance Outreach A significant percentage (over 65%) of Ghana’s population lives in the rural areas. Similarly, over 65% of the same population is rural poor. It is therefore fundamental that any program targeted at reducing poverty should result in improving the rural economy. A significant proportion of the rural dwellers finds the banking system very cumbersome and therefore tries to avoid it if they can. This has resulted in a predominantly cash-based payments system which involves high transaction costs. The high cash-based nature of the economy does not result in the economies of scale necessary to reduce the costs of banking. High costs of banking transactions further alienate the general public from operating bank accounts.

The Millennium Challenge Account (MCA) addresses this issue and supports the major overhauling of Ghana’s payments systems by integrating the rural banks and savings and loans institutions effectively into the national payment system.

All the 123 rural banks and their 563 branches and offices are to be computerized and provided with a standard banking software. This would complete the computerization process begun under the World Bank/IFAD’s RFSP. Rural banks and their branches and offices are to be linked through a Wide Area Network (WAN) using satellite (VSAT) infrastructure (Figure 1).

13 Figure 1: ARB Apex Bank – Wide Area Network (WAN)

Source: ARB Apex Bank Ltd.

The following deliverables are expected under the provisions of the network program: Provide the rural banks with back-up power supply (generators) to manage the above systems. Provide technical training to manage the new computerized payment system environment. A National Automated Clearing House for electronic credits and debits will be established Check Codeline Clearing and Transfers will be introduced to allow for the electronic processing of checks entering the banking system. A public education campaign on the usage and advantages of electronic-based payments and settlements system and the services offered by financial institutions including the rural banks. Rights and obligations as well as risks and opportunities will be undertaken.

4.1.2 Benefits and Beneficiaries of the National Technology Platform Linking rural banks through a Wide Area Network (WAN) with the whole banking system will allow them to operate on a common payment platform with a Switch connected to existing bank switches and would essentially mainstream the rural banks into the national payment system. This would mean that a customer of any rural bank would be able to make cash withdrawal at a rural bank ATM. It also means that payments can also be made for the credit of any rural bank account within the network. Rural farmers and traders should not need to carry large amount of cash when they travel to transact business in other parts of the country. Highway robberies should also be reduced due to this advantage. 14

The computerization of rural banks with standard software along with VSAT-based WAN should lower their operating costs. It would also reduce errors and fraud within the banks as an audit trail can be traced for all transactions. Supervision would also be a lot less time-consuming and less-costly under a computerized and networked environment. Rural Banks data is currently not part of the Bank of Ghana monetary survey due to the long delay in the submission of data. The computerization and networking of rural banks should allow more timely submission and a more comprehensive and timely assessment of monetary and financial sector developments. Rural banks can also quickly process loans and payment requests and thus reduce the waiting time for their customers.

Electronic debits and credits, under the Automated Clearing House (ACH), along with the codeline truncation system should significantly reduce the amount of time it takes to clear a check and electronic payment within the rural banking system. Under the present system, checks have to be physically taken to the clearing house to obtain value and this can take between three days to two weeks for some rural banks. Under the new ACH system, the rural banks will only need to capture the image of the check electronically for processing. This should reduce check clearing time which will reduce cost of processing, reduce the need for cash transactions, reduce risk of cash losses, reduce duplication of recording transactions, increase rural banks and customer liquidity, improve and increase rural banks’ and customers’ profitability; hence rural economic activities would increase and rural economic development would accelerate.

With implementation of WAN for rural banks along with the ACH for electronic debits and credits, rural banks would be able to deploy a range of products targeted at specific clients. For instance, cocoa payments and pension payments can easily take advantage of the network. Pensioners in rural areas should be able to have their payments directly credited to their accounts without the need to travel to Accra or to other major cities for collection of payments. With increased confidence in the rural banking system, rural banks would be able to mobilize more deposits as people increasingly channel their savings through the banking system.

Remittances to the rural areas can also be expected to increase as a result of the integration of the rural banks into the national payment system.

4.1.3 Accomplishments and Achievements of the National Technology Platform While the RFSP-supported computerization of rural banks is on-going, the nationwide technology platform has already accomplished the following: Installation of LAN at ARB Apex Bank head office and forty (40) rural banks. Installation of various applications at ARB Apex Bank including treasury management application system, SWIFT, Ghana Interbank Settlements (GIS) system, Central Depository System (CDS), MICR check requisition system and other internet based fund transfer products like Western Union. Installation of Wide Area Network Satellite (VSAT) linking all communications at head office level. 15 Installation of Remote Access Service (RAS) to link the clearing centres to the head office for data transfer and internet connectability. Commissioned Termenos Globus banking application at ARB Apex Bank offices and provided appropriate training to end users. Deployed Termenos Globus system to all 6 regional branches on online real time basis through the WAN infrastructure. Deployed eMerge banking system to 12 rural banks on LAN infrastructure Full computerization of Union Rural Bank which will provide data and voice (VoIP) transmission thereby reducing or eliminating communication costs within the branch and head office. This will also allow customers to transact business at any of the Union Bank’s branches and agencies irrespective of where their accounts are domiciled and the transaction is on real time. Maintenance with 24/7 helpdesk support to ARB Apex Bank’s regional branches and their respective rural banks.

4.2 The ARB Apex Bank Capacity Building/Training Program The ARB Apex Bank management has designed a training architecture for management personnel and other staff. The training is offered through four (4) training zones of ARB Apex Bank’s network, namely: the Northern Zone, the Ashanti Zone, the Central/Western Zone, and the Eastern Zone, which includes greater Accra and Volta regions. There are four stages of training as follows: 1. The Foundation Stage which entails customer care and relations, office management for managers, rural banking practice and its dynamics, cashiering, business communication and basic bookkeeping. 2. The Advance Stage which is for middle management staff. Courses include group dynamics, legal environment of banking, change management & personal attitude, new work habits and improving organizational skills at all times, internal control & audit, loan delinquency management, customer mandate management, credit management & loan appraisal, microfinance best practices and productivity & work economics. 3. The Senior Management Stage – to qualify for this stage, the manager has to undertake stages I & II. This course’s syllabus contains loan syndication, product development, change management, annual planning & budgeting/strategic planning, human resource management, interpretation of financial statements, report and speech writing & presentation, preparation of prudential returns to Bank of Ghana, Asset & liability management and the New Banking Act and regulations. 4. Directorship Stage is a specialized course for bank directors who are training in: fiduciary duties & powers of directors, the New Banking Act and its regulations as well as Bank of Ghana reporting requirements, board room procedures & practices, policy formation principles & process, code of conduct and ethics and corporate & strategic planning.

16 4.3 Efficiency Monitoring by ARB Apex Bank The Efficiency Monitoring Unit (EMU) was established in August 2004 with support from the International Fund for Agricultural Development (IFAD), through the Ghana Government’s Rural Enterprises Project Phase II. The overall objective of the unit is to monitor the performance of member rural banks and recommend necessary measures to strengthen their operational efficiency and sustainability. EMU functions include: To collect, collate and analyze standardized performance data, report results and make corrective actions. To train and coach operational staff in the area of credit management with emphasis on the efficiency of lending operations. To undertake evaluation of financial products and services and make appropriate recommendations to management. To prepare and assist to execute intensive care programs to revive weaker rural banks. To carry out an evaluation of rural banks’ business processes and undertake a re- engineering programs to enhance efficiency. To produce quarterly reports to management of ARB Apex Bank and Government of Ghana project coordinator.

For the year ending 2006, 14 rural and community banks were monitored based on ARB Apex Bank’s CAEL rating, while staffs from 20 rural and community banks were trained in performance analysis in the same period ending 2006.

4.4 Banking Operations of ARB Apex Bank The Banking Operations Department (BoD) provides banking support services to rural and community banks to facilitate efficient delivery of financial services to clients in their catchment areas. The department consists of head office operations, six (6) regional branches and five (5) clearing centers. Products and services offered by the department are as follows: Check clearing operations which includes MICR checks. Cash supply services which include cash delivery and evacuation services. Development of new and innovative banking products which include domestic funds transfer through Apex Link, inward foreign remittances, Home cash product, Akuafo check operations, government salaries & pension payment, correspondent banking services, treasury management services, brokerage services, maintenance of central securities depository, short term fixed deposit (ACOD), and rediscounting of treasury bills.

5. Lessons learned from the ARB Apex Bank with its Network of Rural Banks i) Development of rural finance and micro-finance and other financial services through Apex rural banking system unveils that access to economic activities especially in rural areas of

17 Ghana for the rural self-employed and the rural poor is essential for their economic and social survival. ii) Partnership with the private sector is also crucial to further private sector development which will contribute to rural economic growth and be its prime economic movers.

iii) Strengthening further the legal and regulatory framework of the rural banking sector through BoG contributes to the development of new/innovative financial products and services to cater for the demand for rural finance services in Ghana. iv) For ARB Apex Bank and its network of rural banks to be able to deliver financial services to their constituencies while remaining financially profitable and viable, they should streamline their operations effectively and create new products and services attractive to both the banks and clients. v) The rural banks are not equipped to grant medium and long-term loans due to lack of long- term refinancing funds and undercapitalization of the banks themselves. vi) Some restrictions from BoG for the delivery of financial services to a given category of clients still prevail, while the viability of the financial institutions remain a secondary concern. vii) The adoption of the Apex rural financial system development approach is a key to obtaining sustainable impact and maximizing such impact. This approach emphasizes on the legal and regulatory framework and the promotion of a viable Apex banking system as financial intermediaries within a reasonable period to deliver wide variety or range of financial services to the poor. viii) Rural finance clients are more concerned about access to the services tailored to their needs than about service costs, provided that their activities can bear such costs. There are cases where interest rates of up to 40% have been charged but the clients don’t seem to complain that it is high. ix) Relay intermediation of rural institutions are essential to extend permanent access to financial services and to impact significantly on poverty reduction, hence building capacities of these institutions is vital for reaching the urban and rural poor. x) Demand of savings product by the poor and micro-enterprises is as important as demand for credit.

18 xi) The development and demand for savings products can increase the impact of these institutions’ programs while at the same time ensuring institutional sustainability and poverty reduction.

xii) ARB Apex Bank and its network of rural banks which provide micro finance services need further technical assistance in capacity building and it is necessary for all institutions targeting the poor.

6. Recommendations for the ARB Apex Bank and its Network of Rural Banks i) After many years of industry failure and restructuring and of gaping regulatory void, the rural banks and their mother institution would have to carry their mandate through the intensification of special technical and financial supports to distress and marginal rural banks to enable them to better serve the rural folks. ii) Given an overview of the Bank’s operations over the past five years, the institution has to establish an effective inspection or bank examiners’ unit to enable undertaking an effective off-site and on-site inspection of rural banks to ensure sound financial operations. Linkages should be promoted between rural banks and other rural market actors as well as to offer training in agricultural lending, credit management, financial literacy for women and product development. iii) In spite of Bank’s achievements over the years, senior management has to intensify operations to assist rural banks to make access to credit cheaper to rural farmers and other rural clients. Management has to further develop more attractive products specifically designed, for example, insurance and leasing products for the rural populace. iv) Management should engage and speed up the completion of the full computerization of all rural banks to help improve operational efficiency and the full integration of the rural banks in the national payment system. v) As the new legislation was passed by the Ghanaian National Parliament to enable ARB Apex Bank as a mini Central Bank in the country for the rural banks, the Bank faces huge task to establish compliance measures that would enhance monitoring, supervision and control of its network of rural banks operations. This will empower ARB Apex Bank to improve the policy and regulatory environment of the rural banking sector. It should also continue to put in place necessary controls to ensure that all rural banks under its umbrella observe prudent banking practices.

19 vi) As a mini central bank for the rural banks, it has the mandate to resuscitate distressed or ailing rural banks, but has not got sufficient funds to cater for such tasks. As this could arise in the near future, there is need for the creation and establishment of a Special Fund. Such funding requires careful thinking and should come out with a proposal which would sustain the rural banking system and ensure that it grows from strengthen to strength. ARB Apex Bank should come out with certain modalities as to how the fund should be raised and managed, the kind of sanctions and penalties which should go to directors, managers and bankers who mismanage the affairs of such banks that would be supported.

vii) ARB Apex Bank’s management should continue to engage their attention and aim at improving the competencies of rural bank personnel to meet the ever and fast changing banking environment in Ghana. The bank should contemplate consolidating and merging all its training facilities to be cost-effective and efficient in training personnel to enable all rural banks in the country to operate soundly and profitably.

7. Alphabetical List of Presenters with Presentation Titles

7.1 ARB Apex Banking System Presentations Anane Kyeremeh, General Manager Akuapem Rural Bank Ltd, Mamfe: “Rural Financial Services study tour presentation on the activities and performance profile of the Bank”

Arthur Vincent King, General Secretary, GCSCA: “Ghana Co-op Susu Collectors Association (GCSCA)”

Augustus Yanky, Manager, Bawjaise Rural Bank Ltd: “Bawjaise Rural Bank Ltd Corporate Profile”

Charles Boedy, Manager, Union Rural Bank, Senya Beraku, Central Region, Ghana: “Union Rural Bank Ltd Corporate Profile”

Charles Pinkrah, Head of Information and Communications Technology, ARB Apex Bank Ltd: “ARB Apex Bank Ltd Technology Platform and Processes”

Daniel Asare Mintah, Project Coordinator, Bank of Ghana: “Rural Financial Services Project and Regulatory Environment of Rural Banks in Ghana”

David O. Andah, Executive Secretary, GHAMFIN: “Overview of Ghana Micro finance Institutions Network (GHAMFIN)”

Emmanuel K. Kwapong, Managing Director, ARB Apex Bank Ltd: Rural Financial System in Ghana and Overview of ARB Apex Bank”

20 Emmanuel O. Darko, General Manager, CUA: “Ghana Co-operative Credit Unions Association Ltd (CUA)”

Eric Osei Bonsu, President of the Board, ARB Apex Bank Ltd: “History of Rural Banking and the Role of the Association of Rural Bank (ARB) in Ghana”

E.Y. Sarpong, Head of Banking Operations, ARB Apex Bank Ltd: “Report on the Activities of Banking Operations”

Godfried Odame Asare, Chief Executive Officer Atwima Kwanwoma Rural Bank Ltd: “Speech on the visit of World Bank study tour team.” J. Afful, Manager Lower Pra Rural Bank Ltd, Shama: “Corporate Profile of the Pra Rural Bank Ltd.”

Johnson Peter Mensah Manager St. Peter’s Co-operative Credit Union, Kumasi: “Overview of the Union”

Patrick Agesingabe, Chief Executive Officer, Christian Rural Aid Network (CRAN): “Introduction of Christian Rural Aid Network (CRAN) with Focus on Its Microfinance and Village Enterprises Development Programs”

Richard Mettle Addo, Head of Training Department, ARB Apex Bank Ltd: “Overview of ARB Apex Bank’s Training Activities Since Inception”

Seth Ankrah, Ashanti Regional Branch Manager of the ARB Apex Bank: “A presentation on activities at the Kumasi Branch of the ARB Apex Bank Limited”

S.T. Sackey, Chief Executive Officer, Kakum Rural Bank Ltd, Cape Coast, Ghana: “Who Are We?”

Theophilus Obeng, Director of ARB Apex Bank Ltd, Takoradi Branch: “The Activities of the ARB Apex Bank Ltd. Takoradi Branch”

7.2 Presentations on Experiences of Study Tour Participants Gamini Batuwitage, Managing Director, Gemidiriya Foundation, Sri Lanka: “Comprehensive Approach for Rural Development - The Sri Lanka Experience”

Tawfiq z.n. Al Jaafreh, Director General of Agricultural Credit Corporation, Amman, Jordan: “The Role of Agricultural Credit Corporation in Agricultural Development in Jordan”

8. Annexes

The annexes that follow are replicas of the various presentations made during the five-day rural finance study tour. The rationale for reproducing them is to give the reader the level of details that the presenters wanted the study tour participants exposed to. The presentations are reproduced almost verbatim. It is worth noting that they have not been edited.

A - Presentations Profiling the Ghanaian Rural Banking System

A.1 - History/Background of Rural Banking in Ghana A.1.1 Background: 1. The concept of rural banking evolved in Ghana in July 1976, in response to the need and the demand for institutional finance and banking services by small scale farmers and other rural economic operators. 2. Attempts in the past to encourage the traditional banks to spread their rural network and provide credit to the agricultural sector failed to achieve the desired results since they tended to concentrate on financing international trade and urban commerce and industry. 3. Even the creation of specialized banks to serve the sector yielded no better results, as they also tended to gravitate towards the traditional banking activities, which were more profitable and less risky. There was thus, a gap in the provision of institutional finance to the agricultural sector and rural banks were expected to fill this. 4. The seed of rural banking was thus sown in the Central Region with the establishment of the first bank at Nyakrom in 1976. After Nyakrom other rural banks were established in rapid succession and to date, there are 123 rural banks dotted across the face of Ghana.

A.1.2 The Concept: 1. Because of the special role of the rural banks were expected to play in an environment with a high rate of illiteracy and lack of financial sophistication, the rural banking system was conceived to be simple, flexible and tailored to meet the peculiar needs of the predominately small depositors and borrowers in the rural areas. 2. Rural banks were basically supposed to function as deposit-taking, stand-alone, autonomous unit banks so as to enhance the ability to tailor their operations and services to reflect peculiar circumstances in their catchment areas. 3. The rural banks were to be owned and managed by the community in which they are located. This was not only to promote community identity with the banks and encourage patronage and support but also to ease information flow to customers to facilitate the processing of request for facilities. 4. Thus rural banks are set up with the specific objective of meeting the banking needs of the rural people so as to act as catalysts for rural development with respect to the following: 22 9 The provision of banking needs to the rural communities 9 Promotion of commercial activities 9 Contribution of the provision of some social amenities in rural communities 9 Promotion of the establishment of rural-based industries.

A.1.3 Problems of Rural Banks: 1. The rapid growth of rural banks was accompanied by a number of operational, managerial and financial problems, which tended to constrain their effective development. 9 Loses from operations 9 Deteriorating capital base 9 Tight cash flow 9 Low rates of loan recovery 9 Problems associated with cash movements from nearest Bank of Ghana office and the rural banks 2. To help address the above problems, the Association, supported by regular grants from Bank of Ghana and donor agencies like Danida, pursued a wide-ranging training programs for Directors and all levels of rural bank staff- managers, accounts, project officers, cashiers, etc; in virtually all areas of banking. 3. The Association however was not legally qualified to provide banking services to the rural banks. 4. This handicap led the Association to explore the possibility of the establishment of an Apex body (the Apex Bank) to provide banking and non-banking services to rural banks to make them more effective and efficient.

A.1.4 The Association of Rural Banks (ARB): 1. In 1981, 31 rural banks came together to form the Association of Rural Bank – Ghana, a non-profit and non-governmental organisation. It is registered under Companies Code 1963, (act 179) as a company limited by guarantee. 2. The cardinal objective of the Association is to protect and defend the interests of rural banks. 3. Until training was ceded to the Apex Bank following its establishment in 2000, the main thrust of the Association’s activities has been training of Directors and all categories of rural bank staff, supported by regular grants from Bank of Ghana and donor agencies like Danida. 4. With the coming into being of the Apex Bank, the role of the Association has been redefined and refocused. In the main, the new role of the Association which is essentially one of advocacy, covers the following areas: 9 Promoting the establishment of new rural banks in collaboration with Bank of Ghana and the Apex Bank. 9 Advocacy 1. E.g. acting as the mouthpiece for all rural banks, collaborating with the Government, Bank of Ghana and other institutions 23 2. Analysing government policies as they affect the operations of rural banks and making appropriate interventions, eg. With regard to Akuafo Cheque system. 9 Creating an overall data base on rural banking on issues such as: 1. Information on all aspects of rural banks 2. The nature and size of contributions made by rural banks to their communities 3. Information on purchases of Cocoa, sheanut and other agricultural produce. 4. Information on fraudulent personnel of rural banks 5. Any other issues relevant to rural banking 9 Setting and enforcing standards in rural banks especially in relation to the type of Directors elected to the Board and instituting a code of conduct for them. 9 Co-operating and collaborating closely with the ARB Apex Bank to ensure that rural banks operate more effectively and efficiently 9 Resolving conflicts among member banks, the Boards, management and staff of rural banks. 9 Strengthening Regional Chapters and building even stronger links with same. 9 Negotiating with the TUC of Ghana in respect of minimum salary levels and other conditions of service for all rural bank employees 9 Ensuring the publication of the newsletter (“Rural Bankers”) to promote the aims and objectives of the Association. 9 Networking with other microfinance institutions

A. 2 - Rural Financial Services Project (RFSP) A.2.1 Overview: It is evident that both formal and informal financial institutions need to be strengthened as they currently operate with outdated technologies with except of very few rural banks (currently being upgraded through MCC funded project) and some residual constraints. Efforts have been made since the implementation of RFSP such as increase in depositors’ confidence and willingness to transact business with rural banks.

The aim of the Rural Financial Services Project is to meet these needs focusing on specific strata of the rural finance sector. Special efforts were made to support informal financial sector institutions operating in resource deficit communities and villages. It supports the government’s strategy to deepen and broaden rural finance services as its long-term economic strategy to accelerate rural economic growth and rural development. The project was conceived as a financial sector capacity and institutional building program. Some of the focuses are on improving access to rural financial services by the large rural population, particularly women; building capacity of the constituent stakeholders; and instituting the regulatory and policy changes and reforms needed to enhance the efficiency of the rural financial system through the Bank of Ghana and ARB Apex Bank. The project covers the continuum of financial institutions 24 and other institutions comprising the rural financial sector and will do so in an integrated manner to maximize synergies, complement ongoing economic and social activities, and make best use of limited and existing resources both human and capital.

As a result, the project’s objectives were achieved. They are as follows:

9 Created ARB Apex Bank which would support and will enable its member banks to address generic technical and institutional constraints on their full potential and impact on rural economic development; 9 Supported ARB Apex Bank and its network of rural and community banks the development, training and empowerment of informal financial institutions and rural groups to deepen rural finance outreach and expanded rural financial services to a large number of rural clients, including women, many of whom are among the poorest. 9 Strengthened the overall capacity of the ARB Apex Bank and its member banks including the Rural Finance Inspection Department of Bank of Ghana, for effective financial intermediation through technology enhancements and modernization, human resource development, and the development of innovative rural finance products and services that best suited for the fast changing financial needs of rural clients; 9 Strengthened and improved rural banks linkages for more efficient information transmission, knowledge sharing and cost-effective provision of services such as cheque clearing, investment, funds transfer, specie services and guarantees support; and 9 Enhanced and improved technical competence of Bank of Ghana’s supervision of ARB Apex Bank and its members.

A.2.2 Specific RSFP Achievements: 9 Capacity Building of Informal Sector • Trained Rural MicroFinance Institutions (RMFIs) in corporate governance and financial management (10,330 beneficiaries) • Developed 17 “ Good Practices” Manuals for practitioners • Built competencies for 19 training practitioners • Strengthened Microfinance Apex Bodies 9 Capacity Building of Rural/Community Banks (RCBs) • Trained RCBs personnel in customer care, treasury management, and credit management (4,843 personnel trained) • Computerized and in the process of computerization of RCBs • Supplied and in the process to supply computer and office equipment • Supplied and installed radio and communication equipment to RCBs 9 Institutional Building of ARB Apex Bank Ltd. • Civil works at Head Office and four (4) regional offices • Trained all staff in all aspects of banking and credit, administration, internal auditing and others • Designed a methodology and prepared a operational manual for implementing a microfinance outreach and capacity building for RCBs 25 • Developed a methodology for capacity building in financial literacy for rural women to increase their access to rural financial services and to enable women to obtain productive resources like credit independently and confidently 9 Institutional Support to Bank of Ghana • Trained staff in Microfinance • Provided vehicles and office equipment • Able to restructure the whole rural banking sector (prior to project: 24 distressed banks; 56 mediocre banks; and 52 satisfactory banks). As of December 31, 2006, there are 123 performing rural and community banks along with 440 agencies 9 RSFP Financing Plan

The total project cost over a period of six to eight years amount to US$22.96 million with the following financing structure:

Source of Finance Amount Contributed (US$ Million)

IBRD-IDA 5.11 IFAD 11.02 AfDB 5.01 GOG 0.748 Beneficiaries 1.95 Total 22.96

A.2.3 - Status report on institutional support to the Banking Supervision Department (BSD) under the Rural Financial Services Project for the period January 2002 to June 2006: Objective of the component: The objective of the aforementioned project component is to strengthen the capacity of the Banking Supervision Department of the Bank of Ghana to provide effective supervision of ARB Apex Bank and the Rural and Community Banks. This includes the provision of information technology support linked to the ARB Apex Bank’s management information unit, training for staff and supply of logistics to augment operations.

Component activities a) Training In line with the objective of proving training and logistics, the following training programs were provided for some of the personnel of the Banking Supervision Department Institution/Country Purpose No. of Beneficiaries Microfinance Development Institute, Expose participants to respond more 6 Southern Hampshire University, effectively to the changes in the Manchester, USA industry Certificate in Community Based Equip participants with the tools for 3 Microfinance, Coady Institute, Nova monitoring CBOs Scotia, Canada Microfinance Training, Provide participants with the requisite 3 Bankakademie, Frankfurt, Germany exposure for monitoring and evaluating MFIs Microfinance Training Program, Expose participants to modern trends 10 Naropa University Colorado, USA in the supervision and monitoring of MFIs TOTAL 22

The training provided by the Project to the staff of the Banking Supervision Department has enhanced knowledge and skills of the supervisory staff of the Bank of Ghana. BSD staff now have better understanding in financial analysis relating to micro finance institutions. b) Logistics The following logistics were provided as part of the institutional support under the project for the Banking Supervision Department of the Bank of Ghana.

Item Quantity Server 1 Table Top Computers 2 Printers 2 Nissan Patrol 4 Toyota Land Cruiser 7 Lap Tops Computers 25

These logistics have facilitated the on site and off site examination of the rural banks. The server was procured so that the rural banks could then be linked up through the ARB Apex Bank to the Bank of Ghana for on-line submission of BSD returns.

c) Impact of the RFSP on the rural and community banks (RCBs) The institutional support given to the Banking Supervision Department has strengthened the capacity of the Department to effectively supervise the banks. The effective supervision is impacting positively on RCBs as shown in the key financial parameters of the RCBs below.

Comparative analysis of pre-project and post-project positions of RCBS DEC. 2001 SEPT. 2005 CHANGE CHANGE Item ¢ billion ¢ billion ¢ billion % Total assets 518.19 2,549.11 2,030.92 391.17 Networth 44.55 258.47 213.92 480.18 Paid-up capital 9.58 78.65 69.07 720.98 Loans & adv (gross) 144.88 899.19 754.31 520.64 Investment 247.31 850.86 603.55 244.05 Deposits 381.27 1,934.97 1,553.70 407.51 No. of satisfactory rural banks 87 105

Though the support received so far has been very helpful, further help will enable the Department to be more efficient and effective in its supervisory activities for the RCBs.

Challenges facing BSD in supervision The main challenge faced by the BSD in its supervisory work is inadequacy of staff coupled with approval of new rural banks.

Secondly, the working environment is not conducive for the supervisory work. The Department’s central air condition has not been functioning for over a year and the resultant heat has affected the computers and the main server of the Department.

Though the project procured some computers for the supervisory work of BSD, they are not enough to support the enormity of the work available.

The Way Forward for BSD The way forward is to improve the off-site supervision of the rural banks through improvements in technology. This could be done through a technology link between the rural banks and the Apex Bank. The rural banks could then be linked up through the ARB Apex Bank to the Bank of Ghana through a server for the on-line submission of BSD returns.

The following logistical support will be needed to enable us supervise the RCBs effectively y 2 Printers

28 y 2 Photocopiers y 3 Toyota Landcruisers y 15 Laptop Computers y 20 Desktop Computers y 10 Mobile Air Conditioners

It is also important to provide training programs overseas in supervising micro finance institutions for other staff in BSD, who have not benefited from the programs. This will afford the opportunity of having better understanding in financial analysis relating to micro finance institutions and also to share experiences with micro finance supervisors from other jurisdictions.

Bank of Ghana Banking Supervision Department (BSD FORM LGRB.1) Guidelines for rural banking license: 1. Restricting Eligibility to Corporate Bodies: No person other than a body corporate incorporated in Ghana shall be eligible to apply for a license to carry on the business of banking in Ghana. 2. No person shall carry on the business of banking (whether as principal or agent) except by or under the authority of license issued in accordance with the Banking Act, 2004 (Act 673). 3. Application for License A. Every application for a licence shall be made in writing to the Central Bank and shall be accompanied by: i) A certified true copy of the Regulations or other Instrument relating to the proposed business of banking, or by or under which any person proposing to carry on such business was established. ii) Names, addresses and occupations of persons including their corporate affiliations who would hold significant shareholdings directly or indirectly in the proposed banking venture and the respective values of such holdings as also their corporate affiliations. iii) Particulars of first directors and key management personnel concerned with the management of the banking business, including their background, certified financial position, business interests and performance of the business concerns under their control or management. iv) Statutory Declaration from each of the first directors stating whether she or he had • ever been convicted of any offence by a competent court of jurisdiction, or • censured, disciplined or warned as to their conduct, or • publicly criticized or made the subject of a court order at the instigation of any regulatory body in which she/he belongs. v) Each first director should submit a Criminal Record Certificate from the Criminal Investigation Department of the Ghana Police Service. 29 vi) Feasibility reports including a business plan and financial projections for the first five years and areas of specialization, if any, intended. vii) Capital and sources of funds. viii) Such other particulars as the Central Bank may require. B. The Central Bank may interview the promoter, proposed directors and senior management personnel in the course of appraisal and may also inspect the books and records of the company to satisfy itself about the representations made or information furnished by the applicant. 4. Permissible Activities of Banks A bank shall be permitted to carry on any of the following banking business activities: (a) Acceptance of deposits from the public. (b) Lending. (c) Inward money transmission services. (d) Any other services as the Bank of Ghana may determine. 5. Capitalization The promoter shall ensure that a minimum paid-up capital of ⊄500 million is available as part of the conditions for provisional approval. The shareholding limits are; a. Individuals – not exceeding 30% of total shares, b. Corporate bodies – not exceeding 50% of total shares. For corporate entity participation, the following additional information is required: • The feasibility report supported with the last three years audited financial statements of the corporate entity, and • Board resolution authorizing share subscription in the proposed bank. The Central Bank reserves the right to vary the capital requirements at any time. 6. Provisional Approval: The Central Bank may issue provisional approval for the issuance of a license to the applicant on such terms and conditions, as it may consider necessary and appropriate if it is satisfied that: a) the applicant would carry on banking business with integrity, prudence and the required professional competence and b) the applicant has an initial paid-up capital as required under section 5, to hold a license. The applicant may then proceed to do the following: a. The acquisition and refurbishment of suitable premises for banking business and accommodation for the manager; and arranging with the undersigned for the premises to be inspected. b. Acquisition of stationery and other logistics to support the bank’s operations, c. Submission of operational and policy manuals on the banking activities, d. The submission of audited pre-operating accounts (i.e. statement of affairs) including a full list of shareholders and their contributions, e. The submission of operational budget for the first year, f. Collection of manuals from the Banking Supervision Department to guide the operations of the proposed bank, 30 g. Recruitment and induction of staff to banking operations. h. Collection of personal questionnaire forms for Directors of the proposed bank from the Bank of Ghana for completion and return. Under no circumstance should the promoters/applicant solicit for deposits from the general public at this point. 7) Final Approval and Issue of Banking License The Bank of Ghana shall issue a final approval and a license to carry on banking business, after the Bank of Ghana is satisfied (a) with the organizational and infrastructural arrangements, as well as security arrangements made by the applicant and (b) that the applicant has complied with the terms and conditions stipulated in the provisional approval. 8) Refusal of license The Bank of Ghana may refuse an application for a license to carry on banking business if the Bank of Ghana is not satisfied with the merits of the application or in view of prevailing conditions in the banking sector or in keeping with its banking policy. An applicant reserves the right of an appeal to the Minister of Finance. 9) Time limit for decision on application The Bank of Ghana shall communicate its decision on an application for a banking license within three months from receipt of complete information. 10) Processing Fee and Licensing Fee Non-refundable processing fees which shall accompany each application and licensing fees shall be paid before the final issuance of the banking license, are indicated below:

Type of Fee Amount Processing fee ¢1.0million Licensing Fee ¢5.0million

A.2.4 Investigations and Consumer Reporting Office (ICRO) Objectives: 1. To receive customers’ complaints, petitions and grievances for redress, including mediation amongst players in the banking industry, aimed at sustaining customer confidence and promoting a harmonious working relationship. 2. To serve as the main watchdog body in the banking industry responsible for guaranteeing high quality services by banks and other financial institutions to their customers. 3. To protect the rights of customers and to serve as an advisory body for educating customers on their rights and responsibilities, including answering customer questions about banking practices in general. 4. To instill price and monetary discipline in the general public through enforcement of the Central Bank’s monetary policy directives and notices to ensure public compliance. 5. To receive and review fraud and defalcation reports from banks for the sake of determining the sophistry, nature and scope of bank/financial frauds, the frequency of 31 these frauds and culprits involved - the degree of staff complicity. The essence is to keep a Reference Databank of financial frauds for alerting the industry through circularization and for the attention of the security agencies. 6. To investigate all forms of complaints and alleged irregularities between and amongst parties in the banking industry, especially between banks and their customers. 7. To maintain a databank of ex-banks staff who were either dismissed or were made to resign for fraudulent purposes to prevent their recycling in the industry. 8. To enforce special directives of Top Executive Management on banks to ensure compliance. 9. To maintain surveillance mechanism to facilitate prompt response to crises in the banking industry.

32 A. 3 - Overview of ARB Apex Bank Background - Why the need for the apex bank? 9 Rural banks were facing problems. Examples are: • Lack of trained human resources • Lack of effective internal controls inefficient operational systems • Weak capital base • Lack of public confidence 9 Bank of Ghana’s withdrawal of technical services in 1994 9 Rural Banks relying on Commercial Banks (their competitors) for technical support services 9 Rapid deterioration in the conditions of the Rural Banks • A number of rural banks were closed by the Central Bank

The establishment of the Apex Bank 9 Feasibility studies and business plans recommended the viability of the Apex Bank project. 9 The Rural Financial Services Project (RFSP) was set up by the GOG with funding from GOG, IFAD, IDA, & AfDB to holistically address problems of rural financial intermediation, that is:- • the informal institutions capacity building • the rural banks capacity building • the institutional building of the apex bank to support the rural banks • supervision capacity building of bank of Ghana and oversight capacity building of the micro finance unit of the ministry of finance and economic planning 9 Apex bank was incorporated in 2000, as a public limited liability company with the rural banks as shareholders. 9 Apex bank was granted banking licence in 2001 and commenced business operations in July 2002. 9 In November 2006, a legislative instrument on the ARB apex bank regulations was passed by parliament to give legal effects to the bank’s operations.

Mission of the Apex Bank 9 To offer banking and non-banking support services to the rural banks so as to transform them into efficient and viable financial institutions, which would continue to serve the community in which they operate.

Functions of the Apex Bank 9 Cheque clearing services to rural banks 9 Account maintenance services 9 Investment services 9 Funds transfer services 9 Supply of cash to rural banks 9 Guarantee support for rural banks’ own cheques 33 9 Product development 9 Credit facilities to rural banks 9 Special support to distressed or marginal rural banks 9 Training of staff and directors of rural banks 9 Computerising the rural banks 9 Inspecting of rural banks 9 Supervising the rural banks

Achievements of the Apex Bank 9 Cash delivery service which has improved and expanded rural banks’ customer service. 9 Introduction of new products. 9 Training of Directors and staff for efficient performance. 9 Computerisation of the rural banks. 9 Establishing of a clearing system which has:- • Enabled full integration of the rural banks into the national payment system. • Provided the platform to network the rural banks. 9 Developed mechanism to ensure timely investment of excess rural banks funds. 9 Branch network to deliver services to Rural Banks close to their areas of operation.

Number of Rural Banks Offices 2001 - 2006

2001 2006 REGION No of Banks No of No of Banks No. of in the Region Agencies in the Region Agencies

ASHANTI 22 103 22 111

GROWTH OF THE RURAL BANKS (1) FINANCIAL INDICATORS OF RCBs Narration YEAR %TAGE 2001 2002 2003 2004 2005 2006 INCREASE ¢’BN ¢’BN ¢’BN ¢’BN ¢’BN ¢’BN 2001 - 2006 Total Assets 518.19 863.79 1,275.37 1,798.28 2,260.83 2,987.54 476.53 Total 381.27 667.04 949.19 1,363.33 1,688.02 Deposits 2,264.61 493.96 Total Loans 144.88 225.59 348.43 567.68 775.23 1,148.86 692.97 Investments 247.31 383.22 524.66 719.57 830.64 In Gov’t Securities 846.90 242.44 Networth 73.33 107.71 120.36 240.88 320.89 384.28 424.04 Stated 9.58 14.06 22.26 35.18 54.12 Capital 93.51 876.10

FINANCIAL INDICATORS OF RCBs CONT’D

FINANCIAL INDICATORS OF RCBs

3,500.00 Total Assets

] 3,000.00 N 2,500.00 Total Deposits 2,000.00

T [¢' B Total Loans 1,500.00 Investments In 1,000.00 Gov’t Securities AMOUN 500.00 Networth 0.00 Stated Capital 01 0 002 003 005 006 2 2 2 YEAR2004 2 2

(2) OUTREACH OF RCBs

YEAR %AGE GROWTH NARRATION B/N 2001 & 2005 2001 2002 2003 2004 2005

No. of Depositors 1,129,316 1,187,366 1,456,987 1,720,731 2,116,428 87.41 No. of Borrowers 139,325 148,271 194,804 221,818 293,499 110.66 OUTREACH OF RCBs BY GENDER

NO. OF DEPOSITORS % OF No. OF % OF FEMALE BORROWERS FEMALE YEAR Male Female DEPOSITORS Male Female BORROWERS

2001 621,124 508,192 45 83,595 55,730 40 2002 692,744 494,622 42 91,843 56,428 38 2003 890,518 566,469 39 116,831 77,973 40 2004 1,023,632 697,099 41 122,926 98,892 45 2005 1,124,907 991,521 47 172,809 120,690 41

3) MARKET SHARE OF RCBs IN THE BANKING SECTOR (%)

2001 2002 2003 2004 2005 Assets 3.46 4.86 4.91 5.00 5.83

Shareholder’s 4.16 4.80 5.41 7.00 6.74 Funds

Deposits 4.06 5.45 8.53 9.00 9.68

Loans 2.25 3.18 3.81 5.00 4.65

Investments 6.86 6.09 9.15 7.00 7.74 Cheque - - 2.00 2.50 3.00 Clearing

Challenges and the way forward for the Apex Bank 9 Computerisation project: • Has not progressed as desired due to resource constraints. • Additional funds provided under the millennium challenge account to enable completion within 4 years. 9 inspection of rural banks: • An expensive activity – apex bank unable to fund it. • Has approached government/bank of Ghana for support. 9 sustainability of the apex bank • Inadequate capital from the rural banks - ¢2.1million. 36 • Cost not fully recovered from rural banks. • Declining interest rates and increasing operating expenses resulting in declining profits.

CHALLENGES AND THE WAY FORWARD CONT’D

YEAR 2002 2003 2004 2005 2006

TOTAL INCOME [¢’B] 7.19 32.27 37.64 45.60 53.68

TOTAL EXPENSES [¢’B] 3.37 13.97 24.64 38.73 50.95

PROFIT 3.82 18.30 13.00 6.87 2.73

TOTAL DEPOSITS [¢’B] 50.81 96.63 187.47 283.17 341.58 TOTAL ASSETS 85.65 144.72 252.95 369.98 474.29

NUMBER OF STAFF 42 70 108 149 148

TREASURY BILL RATES 22.8 25.73 16.56 14.74 10.04 91-DAY [%]

Expected Solution 9 Injection of additional capital. 9 New business lines to diversity income stream.

Conclusion 9 Apex Bank’s experiment has proved useful. 9 Main challenge is its sustainability.

A. 4 – Inter-Institutional Strengthening/Collaboration ARB Apex Bank and RFSP work in collaboration with the government supported Microfinance Services Center and the Ghana Microfinance Institutions Network (GHAMFIN).

A.4.1 - Microfinance Services Center (MFSC)/Microfinance and the Small Loan Scheme (MASLOC): Profile: The combined effort of banks and MFIs though appreciable, is however, insignificant compared with the astronomical dimensions of the demand which may take a long time bridge through their resources. Since access to sustainable financial services is almost 37 indispensable in any poverty reduction program, GoG was persuaded under the circumstances to establish a scheme so as to partly cover the huge credit gap and simultaneously enhance the development of a sound and sustainable micro financial system in the country. MASLOC was established as an attempt by the Government of Ghana to provide funding and an institutional anchorage for boosting the Microfinance sector as a strategic thrust of Ghana’s Growths and Poverty Reduction Strategy (2nd cycle PRSP). To this end, the Government of Ghana mobilised a fund of US$ 50 m, to be used mainly for direct credit lines to MFIs (about 90%), the associated administrative functions (4.7%) and capacity strengthening. In addition to an interest rate of 3% on its loans, it is funded by replenishments. The scheme is managed by the Microfinance and Small Loans Centre (MASLOC). MASLOC is an executive agency under the presidency, reporting to the cabinet, although it operates in liaison with the Ministry of Finance and provides input to microfinance policy development. MASLOC’s operations seem only loosely connected to the efforts by the Central Bank, ARB Apex Bank and their development partners to develop supportive policies, institutions and capacities to strengthen the financial sector that apparently start yielding viable results in terms of an increased accessibility of financial services for rural poor and agricultural investments. MFSC was established to work through MASLOC with the Ghana Poverty Reduction Strategy (now Growth and Poverty Reduction Strategy) to collaborate and complement the activities of the ARB Apex Bank and RFSP. MASLOC was established for 9 For prudent and judicious management of government/Development Partners microfinance funds intended for the scheme; and 9 To promote or facilitate the emrgence, development and growth of sustainable and decentralized microfinancial services

Objective: To undertake sound and judicious administration, on fiduciary basis, of government and/or DP funds for micro and small-scale credit program and also serve as an apex body of the Microfinace subsecor. Credit/Loan Targets: 9 Productive poor 9 Women 9 Youth 9 People with disabilities Products: 9 Microcredit 9 Small loans

A.4.2 - Ghana Microfinance Institutions Network (GHAMFIN) GHAFIN is a network of five categories of microfinance institutions, namely the Rural and Community Banks (RCBs), Savings and Loans Companies (S&Ls), Credit Unions (CUs), Financial NGOs (FNGOs), and Susu (daily itinerant savings) Collectors (SCs). GHAMFIN after an earlier relationship with Calmeadow until Calmeadow dropped out, got engaged with Microfinance Information eXchange (MIX) to develop performance monitoring benchmarking system in Ghana. 38 Ghamfin evolved in 2000 from a reserach project, based on its recognition as a useful forum for MF practitioners, with the objective to backstop RCBs, Savings/Loans Corporatives, CUs, NGOs to Susu Collectors with support in designing the best credit products for their clients. It’s members include the Financial Service Providers such as ARB Apex bank and CUA, as well as associate members (research institutes, training institutions…). There is also a possibility for honorary memberships. The network’s activities reach from studies, conferences, a social investment fund, an information centre a web-site etc. to policy advocacy related to Micro Finance.

A.4.3 Ghana Co-operative Credit Unions Association Ltd (CUA) The first Credit Unions in Ghana were established by missionaries in the north, to provide communities with saving services, based on the belief that poor people need to be able to manage their own capital as a precondition to create wealth. As such the mission helped to establish offices with book-keepers to allow communities to save together and raise awareness on their expenditure patterns. While the CUs are regulated by the Department of Co-operatives, the Apex’ main function is to provide training to its constituency, which includes about 140 credit unions, with about 10,000 members. Training contents include book-keeping, financial management, as well as use of funds etc. CUA was initially funded by donors exclusively. Progressive reduction in donor funding resulted in a current rate of 10% of its budget, while the remaining 90% are being paid by the users.

CUA is also backstopping performance management of the CUAs through audits, and performance monitoring with a view to identifying weaknesses and constraints. These functions are supported by specifically designed software solutions for CUA members. In addition, the CUA entertains a Central Finance Facility, based on contributions from CUs which allocate 5% of their revenues to secure a minimum reserve of 15%. To minimise risks linked to repayments, CUA reinsures repayments in case of borrowers’ death as well as assistance for their family members.

Following CUA’s goal to provide the entire range of banking services to its clients, CUA’s bank facility has a current volume of 40 billion Cedis.

A.4.4 Ghana Co-op Susu Collectors Association (GCSCA): Twelve (12) years after its establishment, the GCSCA unifies about registered 1100 Susu collectors, who mobilized a saving amount of 360 billion Cedis in 2006 from about 270,000 clients.

Despite the service charge of one payment out of 31, the Susu system is very popular, particularly among little-income clients, for whom the transaction costs (and time constraints) make it difficult to access rural banks. It provides a certain degree of security against theft, enforces a saving discipline, and often the informal relationship with the Susu collectors results in consultation regarding financial management for resource poor savers. Also, the system is

39 characterized by an enormous degree of flexibility, as the saved funds can be withdrawn at any time.

GCSCA’s mission is to sensitize clients on the ground with regard to saving, as well as to oversee the clarity of arrangements between Susu collectors and their clients, to protect the funds mobilized by registering Susu Collectors and issuing ID cards as well as reinsuring their operations. This is particularly important in view of the possibility of fraud in the traditional informal system, although most of the Susu collectors are well established and trusted members of the communities they serve, both registered as well as non-registered agents.

In view of the fact that about 70% of Ghana’s rural population is among the clients of this traditional form of saving, commonly practiced also beyond Ghana’s boundaries, the association has offices in all 10 regions of the country, and undertakes to increase its membership in view of the >3500 susu collectors who are yet to be registered.

Falling under the regulation by the Department of Corporatives, registered Susu collectors have to pay income tax, while their incentive to join the GCSCA may lie in the increased professionalism as certified members of the association, with a greater degree of confidence among their clients.

A. 4 – Information and Communications Technology

Mandate One of the vital functions of the ARB Apex Bank is to offer Information and Communication Technology assistance to the rural and community banks in Ghana for improved efficiency and better service.

Among the defined project objectives to fulfill this function is to z computerize the ARB Apex Bank and the rural banks’ operations on a common integrated banking application software z link the automated sites in a Virtual Private Network (VPN) on a Wide Area Network (WAN) for real time transaction processing and reporting z Link to Bank of Ghana on the WAN for data transfer

Implementation was limited to head quarters 115 rural banks.

Head Office and 5 branches of the ARB Apex Bank

Objectives z To implement and maintain Management Information Systems (MIS) for the ARB Apex Bank and the Rural & Community Banks to achieve: – Timeliness – Accuracy 40 – Efficiency

z To deliver services in cost effective manner and beneficial to the banks.

Functions z Banking application software identification, procurement based on the operational needs.

z Preparation of sites for the computerization of Apex Offices and the Rural & Community Banks. These include:

– Installation of Local Area Network (LAN). – Refurbishment of installation sites. – Extending electrical power points. – Procurement and installation of secondary power for backup. – Identification and procurement of hardware needs of Apex Bank and Rural & Community Banks. – Deployment of the software at the Apex Bank and Rural & Community Banks. – Link all computerized sites on Wide Area Network for transaction processing and voice communication. – Support all computerised sites to ensure 99% uptime. – To liaise with users to plan effective ICT service delivery to meet business needs and priorities. – Training of users on Information and Communication Technology.

What Has Been Done

z Requirement specification, preparation and selection of Integrated Banking Application software for Apex Bank and Rural & Community Banks through ICB - Tender floated in last quarter of 2002. – 10 companies responded to the Tender. – TEMENOS Globus and eMerge software was proposed in January 2003. – Reference sites visited in March 2003, in Kenya, Netherlands, and United Kingdom. – Contract awarded in August 2003 to TEMENOS for the supply and support.

z Procurement of Hardware for the Apex Bank and Rural Banks. – There was the need to do a study to determine the hardware requirement to run the software. The necessary ICB procurement procedures were then employed to acquire the hardware equipment for the Apex Bank and Rural Banks.

z Wide Area Network (WAN) Design by Tata Infotech Ltd.

41 - In order to determine the appropriate design and technology that will best suit the rural areas, a consulting firm from India was engaged to carry out the design. The study was completed in August 2003. - 6 firms responded to the ICB

z Sensitization of RCBs about the Computerisation Project – A lot of effort was employed to sensitise the rural banks about the scope, design and the expected benefits of the project through site visits and various fora.

z Installation of LAN at Apex Bank offices and over 40 rural banks.

z Installation of various software applications for the Apex Bank. These include:

- Treasury Management application system - to manage the investment of rural banks with the Apex Bank - SWIFT – Interbank transactions like Clearing transactions, specie transactions, etc. - Ghana Interbank Settlement system (GIS) – Online account statement of the Apex Bank with the Central Bank. - Central Depository System (CSD) – managing the treasury bill purchases of rural banks. - MICR Cheque requisition – Processing of rural banks customers cheque book requests. - Various Internet based software for funds transfer products like Western Union, etc.

z Installation of Wide Area Network Satellite (VSAT) based communication linking all the 6 self-accounting branches of the Apex Bank to the Head Office. – the network offers 99% uptime – a software has been installed centrally to monitor the link availability

z Installation of Remote Access Service (RAS) to link the Clearing Centres to the Head Office for data transfer and internet connectivity.

z Implementation of TEMENOS Globus Banking application software at Apex Bank: – Before deployment, we conducted a Conference Room Pilot (CRP) to match the software functionalities to the business of the Bank. – Technical and Super User training for Core Implementation Team members. – Customised the required input screens for users. – Developed additional screens to meet business requirements. – Trained Users.

42 – Implementation was done without piloting because we ensured that we got User requirements right and data preparation was also done right. – Another reason for not running parallel was the time it requires for Users to work on two systems simultaneously and compare outputs which in most cases does not turn out good due to time and human resource constraints

The TEMENOS Globus software has been deployed and is accessible by all 6 branches on online real-time basis through the WAN infrastructure. - The system generates daily Balance Sheet and Profit and Loss statements for each branch. - The consolidated position of the Bank is also produced on daily basis. - The Apex Centres send daily transactions through the Remote Access Service (RAS) to the Head Office for upload into the Globus software. - RCBs’ daily account statements are spooled from the Head Office and printed online at all the branches and they are available to the rural banks every morning.

z Implementation of eMerge Software at the RCBs – The software has been deployed at 12 rural banks on a Local Area Network – Before deployment, CRP was conducted to match the functionalities of the software to the business processes – Customization done to meet the business requirements – Input screens developed – System Administrators employed/identified and trained to offer first hand support. – Users trained – No pilot implementation at any site because of efficient user requirement gathering, customization and adequate time spent on data capture and accounts balancing – Total computerization at Union Rural Bank on a Pilot – In order to demonstrate the operational efficiency of eMerge software on a WAN to the Millennium Challenge Account (MCA), the RFSP sponsored a total computerization of Union rural banks. – The software has been deployed at 5 offices of the bank – A WAN Satellite (VSAT) based communication has been installed to link the offices for real-time online access across the branches and a link to Apex Bank Head Office – The network provides for data and Voice (VoIP) transmission thereby eliminating telephone bills within their branches and the Apex bank Head Office – The Network implemented is a MESH topology having 64kbps dedicated bandwidth per site – Customers are able to transact business at any of the bank’s branches irrespective of where their accounts are domiciled and the transaction are real-time – Deployment of eMerge centrally accessible by all branches 43 – Completed within 4 months – Online support provide by the Apex bank through the use of the Link.

z Helpdesk – We provide helpdesk support to all the installed systems and sites 24/7 with dedicated staff – TEMENOS also provide 24/7 helpdesk support for the Globus and eMerge software – We pride ourselves and work towards ensuring that no site is down unnecessarily for too long to deprive customers service

Union Rural Bank Wan

Challenges and Strategies z Limited Financial and Human Resources.

– The size of the project requires huge capital to source for additional hands. – Though the computerisation of the Apex Bank has been completed successfully and on time, that of the rural banks is not progressing as expected due to human and financial constraints. – The few staff (10) are motivated and trained to carry out the assignment. – The implementation and support is being done by our staff – No Consultants. – We pride ourselves of building internal human capacity to execute the project to save cost. An eMerge expert cost $700 - $1,000 per day. – We have identified the human resource gap and included in t he MCA budget to complete the project.

z Delays in customer static data capture and accounts balancing. – We are in the process of engaging data capture personnel to assist rural banks in capturing data. Bankers will thereafter be sent to verify accounts balances.

z Low basic computer appreciation – Proposal underway to train all rural bank staff on the use computers.

z Difficulty of the rural banks to attract IT officers. – Apex Bank takes on board personnel, trains and recommends them for placement in the rural banks.

z System Administrator training – Regular training of Administrators on basic problem resolution.

z Lack of communication infrastructure for online problem resolution at the rural banks. – We have not been able to deploy the WAN due to financial constraints. The Apex Bank funded its WAN installation. – Travel time to rural banks to solve problems. – Under the MCA, funds are allocated for centralized system running on a WAN.

z Problems caused by users which need investigation and resolution. – Continuous User education.

WAN Backbone

B - Study Tour Participants Sharing their Country Microfinance Experiences

B.1 - Comprehensive Approach for Rural Development: The Sri Lanka Experience B.1.1 Step-In Approach Gemidiriya Community Development and Livelihood Improvement Project was designed to assist the implementation of the Sri Lankan government poverty alleviation strategy. The Gemidiriya model has been pilot tested successfully by the Village Self-Help Learning Initiative (VSHLI) for the past five years. It was launched by the World Bank in 1999 as a pilot program with the Japan Social Development Fund and Mahawell Restructuring and Rehabilitation Program. Its development objective was to formulate a more appropriate model for planning, implementing and maintaining rural development towards sustainability through community participation and empowerment and to implement it as a learning project of poverty reduction.

Gemidiriya Community Driven Development paves the way for rural communities to get together, organize formally, and plan village development by themselves with fifty (50) percentage women participation mobilizing self help and community contribution. The model focuses on livelihood improvement ensuring reinvestment of savings within the village economy 46 with the understanding that poverty alleviation is not possible unless the root causes of poverty are removed.

B.1.2 Institutional Model - Key Features: The most important organization in the overall institutional arrangement is the Village Organization. All activities converge at this level Autonomy to enforce ‘rules of engagement’ where teams and the village organization are independent and autonomous. Their functions are guided by a set of simple and clear rules of business which called ‘rules of engagement’. They are widely disseminated and consistently and transparently followed by members The institutional model clearly allows for participation of the village communities in activities of projects’ planning and implementation which ensures community ownership. There is also a total independence for the village communities in taking decisions and managing resource. The key feature is called ‘Community Ownership and Autonomy in Decision Making’.

B.1.3 Business Enterprise Development and Linkages - Key Features: Develop business strategy and formulate policy and guidelines and provide support to the community, village organizations and federations Facility field operations in the implementation of the livelihood improvement strategies to communities, village organizations and other institutions

B.1.4 The Livelihood Support Fund - Key Features: Linking community members, especially poor women, unemployed youth and the vulnerable groups like widows, landless to employment and income generating opportunities Develop sustainable microfinance institutions at the community or village level to enable villagers to meet their needs for savings and credit services and to assist them in taking of a wide range of income generating activities

B.1.5 Unique Features of Gemidiriya Long Term Horizon - to build sustainable local level institutions Stage 1: Focus on empowerment and village institutions Stage 2: Focus on linkages with local authorities and private sector Stage 3: Focus on size and diversity of federations, business enterprises, convergence with other programs Devolving decision making power and resources to community organizations. Strengthening selected local governments which demonstrate responsiveness and accountability to rural communities. Working with federations of village organizations, the private sector and non- governmental organizations (NGOs) on economic empowerment to increase the size and diversity of livelihood options. Direct transfer of funds to the communities. 47 Community contribution up to thirty (30) percentage of capital cost. Simple and transparent rules of engagement which are non-negotiable. Independence and autonomy of the “guardian of principles.” Participatory targeting of the poor.

Structure of a Village Organization

Company Board of Directors

Savings and Credit Sub-committees Organization (VSCO)

Cluster

Small Groups Households

Structure of a Village Savings and Credit Organizations (VSCO)

Key C=Chairperson Bank T=Treasurer People’s Company Link- age

6 C + 2 Village Savings and Credit Committee (VSCO) Members of Company BOD Savings Group Cluster Committees Bank Link- age 6 C + 6 T 6 C + 6 T 6 C + 6 T C C C C T T C T C C C T C T T T T C T C C C C C T T T T T T

KEY FEATURE: BOTTOM UP GOVERNANCE STRUCTURE

Institutional Framework of Village Savings and Credit Organization

MAHA SABHA

Board of Directors of Village Association

B.1.6 Success of Village Savings and Credit Organizations Build confidence among members Build trust due to effective transparency and accountability Build ownership through grassroots’ decision making; savings are kept and maintained with them; no outsiders take money away; income from investment is accrued to members; flexible and easy operations within the village; and access to loans within small groups Encourage savings and build savings culture Invest in productive activities Help develop and maintain credit discipline Encourage village interactions with other market participants like banks and traders Help practice the 10 ‘Golden Rules’ Build confidence and help believe in self help Provide protection and safety net to the poorest of the poor Develop and provide leadership to women

B.2 The Role of Agricultural Credit Corporation in Agriculture Development in Jordan The Agricultural Credit Corporation was established in 1959 and commenced operations in 1960. As a legal entity with financial and administrative autonomy, its mandate is to provide

50 specialized finance to agriculture projects in order to develop it and increase production as well as to increase standard of living of farmers.

The Agricultural Credit Corporation was created out of three (3) merged institutions namely: Agriculture Bank of Jordan, the Construction Council and Cooperation Construction Department. The purpose of the merger was to consolidate credit sources because of no clear credit policy objectives and aims were virtually non existent; and lacked of special technical staff to coordinate operations.

The Bank issues various types of loans (seasonal and short-term loans; medium and long-term loans) which are granted for certain periods and according to specific terms to be utilized for agricultural purposes. It also contributes to the capital of agricultural shareholding companies (mainly processing industry) and purchase bonds issued by agricultural public shareholding companies. It provides technical assistance in managing agricultural projects. Its seasonal loans are repaid within (twelve) 12 months while its short-term loans are repaid within two (2) years. Medium term loans are repaid between three (3) years and ten (10) years whilst long-term loans are repaid between eleven (11) years and fifteen (15) years.

The Bank charges an interest rate structure that ranges between 6.5 percentages and 9 percentages. This structure forms one of the main general features of the credit policy which are based on two important principles. They are as follows:

1. The principle of breaking down interest rates according to the loan volume and term in favor of the small farmer group whose loans account for 85 percentage of the total value of loans and for an interest rate that does not exceed 6.5 percentage

2. The principle of calculating the simple interest rate

B.2.1 Loan Approval Criteria Technical dimension of the project Legal aspects of the project Financial scope of the project Social dimension Good historical record of the previous Guarantees (quality of collaterals)

Total Loans Granted For Period 1960 – 2006 in USD, Percentage Share Number of Borrowers: 189,000; Total Loans: USD 524 million

28% 19% 18% 21% 6% 8%

Land Reclamation in Rainfed Area (72)

Land Reclamation in Irrigated Area (67) LiveStock & Poultry (79) Agr. Mech. & Proccessing (30) Farm Buildings (22) Agr. Inputs (104)

52 Distribution of Loans According to the Size of Loans in 2006

12% 3%

85%

Up to $14,000 From $14,000 to $42,000 More than $43,000

Distribution of Loans According to the Approach (Islamic & Interest Rate) in 2006

28%

72%

Islamic Interest Rate

53 Distribution of Loans According to Target Groups in 2006

34%

66%

House hold family (1225) Unemployed Groups (624)

54 C - Field Trip – Group I Encounters

C.1 - Bawjaise Rural Bank Limited C.1.1 Profile: The Bank was founded in 1984 under the Banking Act with the purpose to develop access to credit at low cost to rural communities. The main activities are farming and agro-processing particularly cassava, sugar and corn processing, animal husbandry for trading and consumption. Other commercial activities include provision of credit for small local manufacturers and traders that are engage in farm produce. The bank also supports church schools providing education to the community including other religious groups, community water projects and orphanages.

C.1.2 Source and Application of Funds: The Bank has various sources of funding through various programs like DANIDA, CARE, CIDA, Ghana government and savings. Majority of its revenue (52%) derives from microfinance. Microcredits are usually short-term and require a series of efforts to meet the client needs which is costly.

C.1.3 Products and Financial Services: a) Demand Deposit 9 Individual Salary Worker: 20,000 cedis to open an account 9 Individual Non-Salary Worker: 15,000 cedis to open an account 9 Bank charge to open an account: 0.5% 9 No interest paid b) Regular Deposit 9 Minimum amount to open account: 500,000 cedis 9 Interest rate per quarter: 7.0 % c) Group Savings Scheme 9 Female petty traders and agro-producers 9 Farmers in forestry areas organized in groups 9 Purpose: to build capacity and institutional building for group and banking literacy d) Money Transfer: Funds can be transferred within two (2) hours from one rural bank to the other e) Loans: Up to 20 million cedis with repayment period of two (2) years and has to be approved by Bank of Ghana. Bank commission: 5% f) Customized Loans: Term is between 24 and 36 months; current default rate 3% - 4%. 9 Cassava Processor: up to 2 million cedis 9 Palm Oil Producer: up to 8 million cedis 9 Other micro credit: up to 5 million cedis (over this amount is macro credit)

C.1.2 Visit to Obrayeko Village (meaning “Life is War) A machine for cassava Processing: The Bawjiase Area Rural Bank provided a loan to a group consisting of nineteen (19) women and one (1) man to purchase a processing machine for cassava. The funds for this credit were 55 provided by the Ministry of Food and Agriculture through the bank. The total loan amount is twenty (25) million cedis out of which nine (9) million cedis have been paid after eight (8) months. The repayment period is thirty six (36) months and no collateral is required but the machine has been registered as a guarantee of the credit. Repayment Procedure: The group meets once a month to pay 5,000 cedis per person to repay the loan. Individuals who refuse to participate in the monthly meeting pay a fine of 10,000 cedis. It has been decided by the group that the loan should be repaid regularly in order to qualify for a new and larger loan amount in the future. The group recognizes and realizes that loans are appreciated to improve livelihoods. This emphasizes the fact that loans are demand- driven. Conditions of Machine Purchase: The machine was purchased in an open market quotation Machine Utilization: The group charges 5,000 cedis processing fee per bag of cassava. Members or non-members of the group pay the same processing fee per bag of cassava.

Profit Sharing and Retained Earnings: Accumulated savings are retained for future investments and profits are equally shared among members. In case one or two members of the group are not in the capacity to pay their capital contribution, the other members are willing to help. It is fundamentally important to keep solidarity and respect within the group.

C.2 - Union Rural Bank Limited, Winneba, Senya Beraku, Central Region C.2.1 Profile: The bank was established in the year 1999 and was granted a license by Bank of Ghana to operate as a bank. The bank started operations in April, 1999 and offered banking and other financial services to the people of Awutu-Efutu-Senya District and other customers from many parts of Ghana. In 2006, the bank provided scholarship and donations totaling 108 million cedis to the communities it serves. Out of the amount was the donation of a power generator set of over 10 million cedis to the Senya Health Centre. Beneficiaries include school pupils and students from first and second semesters and tertiary institutions as well as traditional councils and local authorities. The Bank has also launched its Jubilee Scholarship Fund providing seed money of 50 million cedis to provide support to deserving students who can not afford to pay their education in the district. The bank committed to contribute 5% of its annual profit to this scholarship fund. It is the first bank within the ARB Apex Bank’s network of rural banks to be computerized. The computerization program started in October 2006. By January 31, 2007, all the four branches of the bank has been computerized and networked.

C.2.2 Financial Highlights: Union Rural Bank’s total deposit increased from 3.3 billion cedis in 2002 to 17.04 billion cedis in 2006, an increase of 415 percent, while the profit before tax rose from 112.7 million cedis to 1.126 billion cedis, an increase of 899 percent in the same period. The bank advanced 14.09 56 billion cedis, up from 1.6 billion cedis, to 17,762 clients. Short-term investments rose from 1.27 billion cedis to 4.43 billion cedis, an increase of 246 percent while total assets increase by 427.3 percent, from 3.978 billion cedis to 20.976 billion cedis.

C.2.3 The Impact of Computerization 9 Reduction in Staff Overhead Costs: from twenty (20) million cedis to ten (10) million cedis 9 Easy Access to Accounts: ability of bank’s customers to access their accounts at any of the its branches 9 Operational Efficiency: significant improvement in operational efficiency where managers of any of the branches can access customers’ account 9 Profit Maximization: increase the speed of processing transactions hence lowering staff overhead and work time. Profit increased from ninety (90) million cedis in December 2006 to one hundred eighty three (183) million cedis in January 2007 9 Financial Report Generation: All reports are now generated electronically reducing staff overhead and overtime cost 9 Reduction of Phone Cost: the telephone before full computerization was 8.5 million cedis (December 2006) vs. 6.0 million cedis at January 2007, a reduction of 30 percentage 9 Improvement in the Supervisory and Audit: Inputer-Authorisor System

C.2.4 Challenges of the Computerization 9 Ability to pay monthly satellite fee of $2,300 and monthly training fee of 183 million cedis which effecting the bank’s profitability and sustainability 9 Inability of the system to generate other required reports that will assist management to make appropriate business decisions

C.2.5 Primary Financial Products: 9 Current account 9 Savings account 9 Loans 9 Provision of overdraft facilities 9 Credit transfer and standing orders 9 Apex Link 9 Fixed deposit account 9 UEW credit package 9 Union-asset loan 9 Microfinance packages

C.2.6 Financial Services: 9 Cheque clearing 9 Cash supply 9 Product development 57 9 Treasury management 9 Information and communication support 9 Inspection 9 Training

C.3 - Christian Rural Aid Network (CRAN) C.3.1 Profile: CRAN is a rural development NGO established in 1993 under the Companies Code of 1963. It is also registered as NGO with the Department of Social Welfare. It is a member of Ghana Association of Private Volunteer Organizations in Development (GAPVOD); Ghana Microfinance Institutions Network (GHAMFIN); and Association of Microfinance NGOs.

C.3.1 Main Objectives: The first objective is to contribute towards social and economic development and improvement of quality of life for the poor households and communities with emphasis on women and children within CRAN’s geographical operations. The second is to promote and provide access to qualify basic education for children within deprived rural communities and by contributing to bridge the urban-rural gaps in basic education in Ghana and provide long-term means of poverty reduction.

C.3.2 Financial Highlights: CRAN’s net advanced was 5.78 billion cedis, up from 2.48 billion cedis for 2 financial years ending December 2006, to 2,619 clients. The organization recorded a net loss after depreciation and grants in the amount of 184.4 million cedis in 2006 vs. a net loss of 2.334 billion in 2005, a significant improvement or a decrease of 1,165.7 percent. Customer based rose to 11,898 from 7,439 in the same period and loan recovery rate significantly improved from 70 percent to 98 percent. Percentage of women clientele to total number of clientele is 68 percent while percentage of loans made to women to percentage to total number of loans granted is 82 percent.

C.3.3 Main Programs: 1. Social Development 9 Promotion of basic education 9 Promotion of vocational & entrepreneurial training for rural households especially women towards self-employable skills acquisition 9 Promotion of village microfinance through the combination of appropriate technologies, training and microfinance 9 Provide HIV/AIDS prevention education & support for direct and indirect victims of the pandemic 9 Provide relief programs for refuges 9 Support for village churches as agent of rural community development

2. Microfinance for Development 58 9 Provides rural and other informal sector microfinance 9 Extends microcredits to rural and peri-urban poor households to individuals and groups 9 Mobilizes rural savings schemes based on traditional “Susu” system 9 Establishes village banks and microcredit village agencies

3. Microfinance Products Short-Term Business Loans (STBL): Duration is six months and interest rate is 19% for six months and 38% per annum. Long-Term Business Loans (LTBL): Duration is 12 months and interest rate is 38% per annum Inventory Loans: These loans are for agricultural and agro-inputs. They have duration of 12 months with an interest rate of between 20% and 30% per annum.

4. Microfinance Services 9 Training and Business Advisory 9 Village Enterprises Development 9 Micro-Banking (Village/Community Bank Concept) 9 Voluntary Susu Savings Scheme

5. CRAN’s Main Challenges 9 Inadequate capitalization of the scheme posing threats to profitability and sustainability 9 Interest rates are not competitive due to high cost of capital 9 High cost of management due to microfinance labor intensiveness 9 Risk management due weak collateral system

C.4 - Village Entreprises Development Promotion Program (VEDPP) This program promotes increased value added production income generation and employment at the village level for poverty reduction and wealth creation.

C.4.1 Key Features of the Program: 9 Trains for self-employable and entrepreneurial skills acquisition and development 9 Facilitates access to appropriate rural technologies and technology transfer 9 Facilitates access to rural finance through microcredits extension and management

59 VEDPP Key Strategy

Appropriate rural technology transfer

Entrepreneurial and self-employable skills training Access to rural finance through microcredits extension

C.5 - Kakum Rural Bank Ltd, Elmina, Central Region C.5.1 Profile: The bank was established and given a license on February 9, 1980 by the Bank of Ghana. The bank activities cover 5 of the 12 districts in the central region and operate 10 agencies in 5 districts. The bank in located in Elmina which is a fishing village along the coast with a population of 21,021. It is about 12 miles from the Cape Coast. Being one of the busiest fishing communities in the country, Elmina attracts fish dealers from several regions of Ghana. Foreign and domestic tourists are attracted to the castle and fort of the city. Elmina was the first town in and around Cape Coast to have a rural bank. It is also a proud member of the prestigious Ghana Club 100 (equivalent of Fortune 500).

C.5.2 Financial Highlights: Kakum Rural Bank’s total deposit increased from 9.7 billion cedis in 2002 to 48.7 billion cedis in 2006, an increase of 402 percent, while the profit before tax rose from 220.5 million cedis to 2.354 billion cedis in the same period. The bank advanced 25.3 billion cedis, up from 4.2 billion cedis, to 6,274 clients. Short-term investments rose from 4.3 billion cedis to 8.81 billion cedis, an increase of 105 percent while total assets increase by 501.4 percent, from 9.6 billion cedis to 57.7 billion cedis. Portfolio at risk has been volatile in the last four years ending December 2006, from 10 percent in 2003 to 18 percent in 2005 and 23 percent in 2004 to 18 percent in 2006. Paid up capital rose by 700 percent, from 1.46 million cedis to 1.067 billion cedis in the same period being analyzed.

C.5.3 Financial Products Types of Deposits 9 Savings

60 9 Demand 9 Fixed or Term Deposit 9 Kakum Klassic (SMEs) 9 Mbofra Daama (Children) 9 Enyidado Susu (Mobile Banking) 9 Asormba Mountu (Faith Based) 9 Church Development Account (Faith Based)

Types of Loans and Advances 9 Short/Medium Term 9 Overdrafts 9 Salary loan 9 Susu Loan 9 Adom Bi Epue (Group loans for women)

Funds Transfer 9 International inward remittances 9 Domestic – Apex Link 9 Kakum Sika Link 9 Home Cash

Managed Funds 9 Sustainable Fisheries Livelihood Project 9 Social Fund Invest (SIF) 9 Food and Agric Budget Suspense (FABS) 9 Support Program for Enterprise Empowerment and Development (SPEED Ghana) 9 Elmina Salt Producer Association Fund (ESPA)

C.5.4 Other Products and Services 9 Micro insurance 9 Micro leasing 9 Consumer credit

C.5.5 Social and Environmental Responsibilities 1. Agriculture 9 Mpoben Fish Harbour Project: the bank provided funding to construct and to improve the harbour to increase productivity of artisanal fisheries 9 National Farmers Day which the bank committed to donate prizes for best farmers in the districts and at regional level. Last year 6 television sets were donated 2. Environmental and Sanitation Improvement 9 The bank teamed up with the District Assembly and other organizations to initiate a project called ‘Adopt a Highway Program’ which seeks to clean the Elmina Highway and JJ Rawlings High Street, Elmina 61 3. Education 9 The bank supports needy but deserving students by providing needed textbooks and exercise books, computers and other educational materials as well as donate prizes to award the best teacher for the year 4. Health 9 The bank has committed and adopted the Children’s Ward of Central Regional Hospital and provides them with medical equipment. The bank also supports programs like blood donation, immunization, mental health and Iodine Deficiency Disorders (IDD) 5. Sports 9 The bank has been supporting sports festivals and intramurals for schools in the catchments area 6. Poverty Reduction 9 The bank has been assisting women groups with loans to finance various sustainable projects under its microfinance scheme 7. Children Scheme 9 Two new products specifically designed for the welfare of children: Mbofra Daama and Kakum Sika Link have been launched

C.5.9 Challenges to Kakum’s Growth and Sustainability: Some of the challenges facing the bank are as follows: 9 Lack of establish credit bureaus in Ghana and continuous deterioration of their loan portfolio quality 9 Absence of an efficient retail infrastructure in the region makes it difficult to delivery financial service and higher transaction cost 9 Lack of technology and corporate visibility in the region it serves

C.6 - ARB Apex Bank Branch, Takoradi C.6.1 Profile: ARB Apex Bank Takoradi was initially opened as a cheque clearing centre in July 2002 and was upgraded into a branch on June 17, 2005. As a cheque clearing centre, it started with two (2) staff and the number increased to five (5) when Specie banking services was launched to its member rural banks in the region. It has now eleven (11) staff serving nine (9) rural banks in the Takoradi zone and nine (9) other banks in the Cape Coast Zone.

C.6.2 Its main business activities are as follows: Cheque Clearing Specie Services Fund Management Funds Transfer Others

C.6.3 Financial Highlights 62 Cheque Clearing 9 8,666 cheques valued at 111.4 billion cedis were cleared at 2003 on behalf of RCBs while in 2006 29,607 cheques valued at 543.0 billion cedis were cleared, an increase of 241% and 389% respectively 9 Delivered cash through Specie services in the amount of 260.0 billion cedis in 2003 vs. 520.2 billion cedis in 2006, an increase of 100% 9 Total investment funds mobilized and held for investment amount to 180.6 billion cedis 9 Total value of ACOD at Sept 2006 was 22.5 billion cedis

C.6.4 Impact of the Services Provided by the Regional ARB Apex Branch 9 RCBs cheques are now cleared on timely manner and become acceptable in any part of the country 9 The Bullion (Specie services) has made it possible for the RCBs to have easy and timely access to good cash (physically clean) for their customers 9 The RCBs are also able to manage their insured vault levels better since all excess cash or liquidity are easily transferred to the ARB Apex Bank branch for safekeeping 9 Though mailing services, internal and external information flow among Apex Banks and RCBs are shared in timely manner and has become easier to access 9 The RCBs are now enjoying public confidence as shown by the increased patronage of their efficient services

C.6.5 Challenges: Despite of the accrued impact, the regional branch still faces the following challenges: 9 Late submission of reports and returns due to pending computerization of some of the RCBs and agencies 9 Slower submission of return cheques due spiking increase in cheque clearing volume 9 Late response to banking correspondence due to high volume of transactions 9 Geographical location of some RCBs agencies due poor road conditions and lack of appropriate communication channels 9 Untimely Specie services requisition as required by the regional branch due to limited bullion system services

C.7 - Lower Pra Rural Bank Ltd, Shama, Western Region C.7.1 Profile: The Lower Pra Rural Bank Ltd was formerly known as the Essemaman Rural Bank Limited and was incorporated on January 20, 1983. It was licensed to operate its banking business on August 31, 1983 as the 66th rural bank in Ghana. The bank was created as an instrument for social and economic transformation especially in rural areas. It serves and provides banking services to the Shama Ahata East and the Mpohor Wassa East Districts of the Western Region of Ghana. At December 31, 2006, it has opened agencies and mobilization centres to bring financial and banking services to six (6) rural communities which are within its catchment area. The main industries it services are fishing, farming and cottage industry.

63 The Lower Pra Rural Bank Ltd has an authorized capital of five (5) million ordinary shares and one hundred twenty five (125) thousand preference shares of no par value. The ordinary shares are basically own by individuals in the bank’s catchment area while Bank of Ghana owns the preference shares. The total number of ordinary shares subscribed at December 31, 2006 was 3,611,000 with total value of 1,421,890,394 cedis. The price per share is 2,500 cedis. The Bank is computerized with Micro Master Banker which was developed by the BSL System, UK. The system was able to enhance the operational performance of the bank especially in the areas of report management and internal and accounting controls. The bank is in the process of connecting with the Globus system provided by ARB Apex Bank Ltd to modernize and improve its operations. They are now online with the Local Area Network (LAN) with all RCBs and ARB Apex Bank’s networks.

C.7.2 Financial Highlights: The total micro loans at December 31, 2006 were 35.9 billion cedis representing eighty seven (87) percentage of the total loan portfolio of the bank which is 41.3 billion cedis. The total groups benefited from the micro loans were seven hundred and fifty one (751) in the same period. The bank has 44,000 micro finance customer based made up of 18,000 males and 26,000 females. The total savings of these micro groups was thirty five (35) billion cedis representing sixty (60) percent of total savings of sixty (60) billion cedis. Total non-performing loans ending December 31, 2006 was 2.08 billion cedis. Default ratio for male is six nine (69) percent and thirty one (31) percent for female. There is low default ratio to group loans as compared with individual loans. The bank partnered with Freedom From Hunger (FFH) an NGO which established the Women in Development Project in 1992. The project established a credit line for education program in the catchment area and was purposely designed to empower rural women to tackle problems of poverty, hunger and malnutrition through educating women clients. Women interested in receiving credit should form a Credit and Savings Associations (CSA). The women invest their efforts and savings as well as loan proceeds in economic activities that they are already familiar with. As of December 31, 2006, the bank provided credit to one hundred twenty three (123) savings associations with twenty five (25) members of each association in forty (40) rural communities. Total savings and loan disbursed at December 31, 2006 were 614.1 million cedis and 1.03 billion cedis respectively.

The bank also collaborates with the Western Regional Susu Collectors Association, a system for deposits mobilization. Total deposits mobilized at December 31, 2006 were 2.5 billion cedis. The bank received the best-operated Rural Bank Award in 1991, in recognition for its services and expansion to rural banking customers. This was awarded by the Chartered Institute of Marketing of Ghana. It was also awarded for positive contribution to the Civic Community in Ghana in 1996 under the National Good Corporate Citizen Award from the then President Jerry John Rawlings.

64 The bank has been a member of the Ghana Club 100 since the club started: 2002, 2003, 2004 and 2005. The bank was ranked third in Ghana in the area of corporate social responsibility by the Ghana Investment Promotion Council in 2005. The bank has provided a community library in Shama and its environs to encourage learning among the youth. The library for the Shama Secondary School was also provided with books and materials.

C.7.3 Banking and Financial Products Types of Deposits 9 Current Account 9 Savings Account 9 Fixed or Term Deposit 9 Call Account 9 Negotiable Certificate of Deposit (NCD) 9 Susu Deposit Scheme

Types of Loans and Advances 9 Salaried loans 9 Business Loans 9 Micro loans 9 Bank Overdraft 9 Consumer Loans 9 Enyidado Rice Package 9 Enyidado School Fees

65 D - Field Trip – Group II Encounters

D.1 The Akuapem Rural Bank Limited D.1.1 The Bank’s Profile: The Akuapem Rural Bank Ltd was officially commissioned on 29th August 1980. It is the 12th Rural Bank to be established in Ghana and the 3rd in the Eastern Region of Ghana. The Bank mobilizes savings from rural areas and on-lend these resources to customers in these areas for the improvement of their businesses and welfare. 9 Owners: The bank is owned by shareholders mostly from the community with ordinary share capital of ¢ 1,106,961,835 as at March 2007. 9 Catchment Area: The bank serves Akuapem, which is an area of over 300 square miles in the Eastern Region of Ghana. The head office is located at Mamfe – a central place in Akuapem. It is easily accessible from Accra-the national capital; Koforidua, the regional capital, and the Volta Basin, which borders Togo. The inhabitants of Akuapem live in 17 towns on the Akuapem Ridge and a number of villages on the hillsides and in the valleys. 9 Agencies/Mobilization Centres: The bank operates seven agencies in Akuapem, these are; Aburi,Adukrom, Adawso, Larteh, Nsawam, Okorase, and Konko. The agencies are designed to help with the bank’s resource mobilization efforts and also to bring banking services virtually to the doorsteps of Akuapems. 9 The Local Economy: Farming is the main occupation of the area. The Ridge, however does not lend itself to large-scale farming and the small farms on which staples are grown are dotted on the hillsides and in the valleys. However, many Akuapems work in secondary occupations as well. They are, for the most part, professionals such as school teachers and ministers of religion; wage and salary earners such as those employed by the local government system, the schools, the police, the hospitals and clinics; artisans such as carpenters, masons and way side mechanics; craftsmen such as wood carvers, and suppliers of services such as caterers, tailors, hairdressers, motor vehicle owners and women who process and trade in foodstuffs. 9 The Bank’s Mission: It is the mission of the Bank to mobilize local resources and to use them through the credit instrument and innovative financial services to respond to the essential developmental needs of Akuapem, at the same time that the Bank grows and profits are made for shareholders. 9 Administration/Governance • The Board of Directors: The Bank is controlled by 9-member Board of Directors all of whom are Akuapems and 2 of whom are women. The board meets at least once a month. Its work is facilitated through a number of committees. The members are from diverse professions such as Bankers, Lawyers, University Lecturers, Teachers and Traditional Rulers. • Management: The day-to-day running of the bank is undertaken by 57 staff members who include a General Manager assisted by a Manager, Deputy Manager, Assistant Manager, Project Officers, Accountant, Internal Auditors, a number of clerks and cashiers.

66 D.1.2 Financial highlights: The Akuapem Rural Bank belongs to 2758 share holders with a share capital of 1.1 billion cedis. This share capital is twice the minimum required by the Bank of Ghana for rural banks. There has been an impressive increase in the deposits and other financial indicators after implementation between 2001 and 2006. Over this period, total assets increased by 5.4%, growing from 8,633 million cedis in 2001 to 54,874.7 million cedis in 2006. The bank’s networth also grew by 4.3 % up from 1657.7 million cedis in 2001 to 8,817.0 million cedis in 2006. Similar growth trends have been observed for deposits, advances, investments, paid up capital, profit after tax, charges for bad and doubtful debts. Commensurate with the growing business volume are the operating expenses which have increased by 5.8% from 934.7 million cedis in 2001 to 6,339.7 million cedis in 2006. Of a total customer loan volume of 8.03 billion cedis in 2006, 56% went to female borrowers, 40% to male borrowers and 4 % to others. For a total deposit package of 38.64 billion cedis, 55% (21.3 billion) came from female depositors, 42% (16.23 billion cedis) came from male depositors and 3% (1.16 billion cedis) came from ‘other’ depositors. Out of a total of 27,303 depositors in 2006, 49% (13,381) were female, 46% (12,520) were male and 5% (1,402) were categorized as other depositors.

D.1.3 Accomplishments/Achievements: 9 The Rural Financial Services Project: With the coming into full operations of the ARB APEX bank in 2002, the bank has made a tremendous and remarkable performance which could be explained in the following areas; 9 Training: Staff and Directors have received both local and foreign training under the project, which have contributed to improved customer service. Some of the areas are • Productivity, Quality and Work Economics • Internal Controls and Audit • Interpretation of Financial Statements • Financial Literacy For Rural Women (TOT) • Boulder Microfinance Training among others. 9 Ghana Club 100 award recipient: The bank was adjudged the best Rural Bank in the year 1992 by the Ghana Institute of Marketing. It attained membership in prestigious Ghana Club 100 in 2002(when rural banks were first considered for inclusion in the Club) and maintained its membership in 2003 and 2005.

D.1.4 Financial Products, Development and Social Services: Banking Activities: The Bank provides a variety of banking services to the Akuapem Community. These include: 9 Savings, Current, 9 Fixed Deposits Accounts. 9 Loans cover Agriculture, Cottage Industry, Trading, Education, Transport as well as personal loans which cover the purchase of household goods, repairs and maintenance of buildings, medical bills, rent etc.

Special Activities: In addition to the normal services render, the bank is also involved in: 67 9 Cheque clearing: Cheque clearing which hitherto was taking a maximum of 21 days has now reduced to 5 days. 9 Specie Movement: The bank now receives specie at its convenience through the ARB APEX Bank. 9 Computerization: Through the project the bank’s head office was fully computerized in May 2006. However there are problems such as: • The system’s inability to classify loans into Ageing Analysis. • Loans in past due not effected by the system when lodgments are made • Fixed Deposit cannot be terminated. • The above notwithstanding, the project has enabled the bank to improve upon its services to enhance its corporate image and made some financial gains. Meanwhile the benefits of the computerization include: • Reduced Human Errors • Errors in operations which hitherto were causing ledger imbalances are now a thing of the past. • Accuracy in reporting • GL and PL Reports of previous day’s operations are generated first thing the next working day which are accurate and could be relied upon. • Customers have easy access to their statements of accounts. • Regular loans deduction • Improved customer relations • Enhanced corporate image • Reduced working hours • Reduced waiting period of customers 9 Banking on Wheels Program: This program whereby the bank moves around the villages to collect savings, is aimed at taking banking services to the doorsteps of the inhabitants who live in the valleys.

Products: The Bank has a number of products outside the normal Savings, Current and Fixed Deposits Accounts. These are: 9 Students Savings Scheme: This product with very low initial deposit is to encourage thrift among students so that on maturity they would have built confidence in the bank and banking in general. With the APEX link money transfer, parents are able to remit their wards which are credited to their accounts. Presently the bank covers about 85% (14 schools) of the second cycle institutions in Akuapem. The Teacher Training Colleges as well as the Akuapem Campus of The Presbyterian University are all covered under the scheme. The service will soon be extended to the remaining schools most of which are Day Schools. The total number of students under the scheme is 520 about 1.4.% of the Banks total depositors with a contribution of 0.25 % of the Bank’s total deposit as at February 2007 9 Akusika (Micro Savings and Credits) Scheme: The Scheme is dedicated to the industrious people of Akuapem particularly women. The Scheme is a three-in-one 68 package which encourages clients to save and become customers of the bank and enjoy loan facilities from the bank. This service is rendered at the doorsteps of clients. Total contributors under the scheme is 3,534. Their average contribution to the Banks total monthly mobilization is ¢1,328m. A total of ¢475.6m has been granted as micro credits to over 100 clients from January 2007 to date with amounts ranging between ¢1m to ¢20m to improve their businesses. 78% are female and 22% are males. 9 Micro Insurance: The bank in collaboration with the Gemini Life Insurance Co. (GLICO) operates a micro insurance scheme which is named ANIDASO (Hope) Insurance Policy. It is a policy that provides families with funeral benefits as well as an opportunity to accumulate investment income towards one’s retirement. This policy provides a funeral benefit of ¢5million for the policy holder. The premium is a minimum of ¢22,000. per month. 9 Funds transfer: The bank in collaboration with the Metropolitan and Allied Bank, the Express Funds foreign remittances are received for the benefit of relatives in Akuapem thereby saving them from traveling long distances to Accra or Koforidua. 9 APEX Link Transfer: The APEX Link transfer is a local transfer Product which enables one to transfer money to any part of the country. Since the rural banks are the most widely spread bank in the country, transfers can reach the remotest village through the APEX Link. It is very beneficial and citizens working elsewhere in the country have been remitting home through the transfer. An average of 110 inwards and 37 outwards transfers per month are received. This also generates income for the bank. On the average, ¢1m is received in a month on outward remittances.

D.1.5 Women-In-Development Program: In its development activities, the bank has embarked on a number of development programs all intended towards mobilization of resources for the overall improvement in the living standards of the people of Akuapem. This program is aimed at helping the Bank’s women customers make better use of its services. This program involves employment creation and poverty alleviation. A Revolving Fund has been established to enable graduates of vocational schools set themselves up. The Bank provides them with the needed equipment and working capital to enable them put their vocations into good use to be on their own. The program which started in 1998 with the Teenage Mothers Centre at Abiriw (now renamed Young and Wise Center) under the tutelage of Planned Parenthood Association of Ghana (PPAG) and just recently handed over to the Community has supported 6 women who are successfully operating on their own and thus assisting them escaping from the poverty cycle. Further, these women have been captured as customers of the bank.

The Young & Wise Center at Abiriw, Akropong District: The center started in 1993 and the premises were donated by the Presbyterian church of Ghana. It was originally meant for teenage mothers but currently the center caters for any young girl wanting to learn a vocation. The center offer classes in sewing, catering, in addition to some training on handicrafts. The center currently has 50 girls enrolled. The sewing program extends over 3 years while the catering program extends over 2 years. After completion of training, the girls sit for a national examination to get 69 certified. The center is entirely supported by the community with no contribution whatsoever from the Government. The Akuapem Rural Bank supported the center by extending funds for building and other activities, in addition to a special loan package for young girl graduates of the center to start their own businesses. Other donors also supported the Center like the Japanese Government and the Briggs Foundation in London. The Center charges fees to the trainees. In addition to classes, the center houses a hostel for those who need lodging and a clinic.

D.1.6 Social Responsibility: 9 Donations: The bank has been fulfilling its social obligations by donating to educational institutions, health institutions, the traditional councils especially during the annual festivals in the community. Quiz and football competitions are organized annually among the educational institutions to create awareness about the operations of the bank. Some of the items that have been donated include; • Benches and water storage facilities for the clinics • Medical equipment • Gas lamps • Electrification projects among others. 9 Disability Friendliness: In our quest to open our doors to all residents of Akuapem and beyond, the bank has restructured the frontage of its building as well as provided a wheel chair to provide easy accessibility to people living with disabilities. 9 Outreach Program: In order to always stay in close contact with the customers and the importance that is attached to their relationship, at least once every quarter, an outreach program is organized where a durbar is held in the community to create a forum to address any issues as well as educate them on new products.

D.1.7 Challenges facing the Akuapem Rural Bank Ltd.: 9 Competitors: The main competitor is the Ghana Commercial Bank Ltd which has 4 branches within the bank’s operational area. Others are the traditional “Susu” collectors and money lenders. 9 Macroeconomic Stability: This has resulted in reduced interest rates thus discouraging savings. 9 Illiteracy: High illiteracy rate among the rural folks impedes smooth financial transactions.

D.2 The Apex Bank Branch, Kumasi A presentation on activities at the Kumasi Branch of the ARB Apex Bank Ltd D.2.1 Profile: Customers 9 External customers (Rural/Community Banks - RCBS) 9 Internal customers 9 Others

Structure 70 9 Manager 9 Operations officer 9 Currency officer 9 2 Sub Officers 9 2 Clerks 9 3 Drivers 9 1 Cashboy/cleaner 9 2 Notecheckers 9 2 Contract staff

D.2.2 Financial Services Highlights 9 Cheque/Credit clearing • Cheques delivered/received on behalf of RCBS • Credit transfer vouchers delivered/received on behalf of RCBS

9 MICR Cheques • Receive and process requisitions on line • Receive/deliver cheque books to RCBS • Handle related queries

9 AKUAFO Cheque Operations • Process funds into RCBS accounts same day • Teleadvice RCBS of funds credited

9 Funds Management • Serves as liaison between RCBS and head office • Applications for investments are communicated to head office for same day processing

9 Cash Supply (Specie Operation) • Cash delivered at RCBS doorstep • Excess cash holding evacuation • Evacuation of mutilated notes

9 Statement/Balances • Printing of daily statements • Communication of daily balances

9 Funds Transfers: This branch handles funds transferred through : • Apex Link • Western Union • Money Systems 71 • Placid Express • Suri Change

9 Apex Link • Domestic funds transfer • Over 450 outlets pan Ghana • Spread through all corners of Ghana • 549 transfers valued at GHC 10.98 billion received & paid to beneficiaries • 642 transfers valued at GHC 2 billion sent

9 Foreign Funds Transfers • Started during 2nd quarter of 2006 • 1,327 transfers valued at GHC 4 billion

D.2.3 Other Support Services • Support to training dept. • Support to ict dept. • AGM attendance • Support RCBS recruitment processes • Preliminary investigations of complaints from RCB customers

D.2.4 Achievements: 9 Ghana Club 100 Awards • In 2004 8 banks from Ashanti received awards • In 2005 10 banks were honored

D.2.5 Challenges 9 Getting all RCBS on board 9 High operational costs

D.2.6 Way Forward 9 Reduction in operational cost 9 Growing the business 9 Building staff capacity to handle volumes 9 Rededication to duty 9 Support to management

D.3 St. Peter’s Credit Union, Kumasi D.3.1 Profile: Coverage: Established in 1969 for members of the Knights of St. John, a Society of St. Peter’s Cathedral Basilica, Kumasi, the St. Peter’s Cooperative Credit Union (SPCCU) is a financial institution now opened to all. In the Fiscal Year 2005/06, SPCCU had a membership of about 72 10,000. Its area of operation is 70 kilometers radius from Kumasi. SPCCU stands for quality and excellence.

Aim/Purpose: The aim of SPCCU is to provide the best financial services to its members at competitive rates and maintain the long term viability of the society. SPCCU encourages savings among its members and provides a source of credit at competitive rates to the members. The ultimate purpose is to raise the standards of living of members and their families and to improve the community in which the live.

Eligibility/Membership rights: 9 To be a member, one must be 18 and above. One must be of sound mind; one must not have been convicted of any criminal offence within the last five years; one must attend an education seminar at SPCCU. 9 Members may open an account for their wards/children below 18 years. 9 Savings: Members are required to save regularly. The current minimum requirement is 70,000 cedis. 9 Shares: Each member has to subscribe to share capital. The current minimum is 400,000 cedis. 9 Loans: A member may access loans after six months probation at admission. 9 Membership shall be by a 2/3 majority vote of the General Membership after meeting other preconditions. 9 Withdrawal: A membership may be withdrawn by serving a three month’s notice 9 Expulsion: Shall be effected by a 2/3 majority vote for behavior contrary to the interest of the society.

Structure of SPCCU: 9 Supreme Authority (Annual General Meeting – AGM) 9 Vetting Committee 9 Committee of Management 9 Supervisory Committee

D.3.2 Financial highlights Within the period 2001-2006, SPCCU experienced growth in financial and statistical operations presented in the following picture.

SPCCU made good progress, ending the 2005/06 financial year with a healthy profit before dividends of GHC 1.71 billion. This is about 50% increase over the previous rear’s activities and total assets grew at 455 in 2006. The table below consists of comparative figures for loans in 2006.

During 2005, men took 54% of the loans granted while women took 45%. The situation changed tremendously in 2006 where women folks took only 37% of the loans granted.

D.3.3 Products and Financial Services: SPCCU offers the following products to its membership – savings, loans, welfare and mutual health insurance schemes. 9 Savings: regular, special, youth and group savings 9 Notes on savings 9 Share account 9 Loans: self-secured, provident and agriculture loans (crop farming, backyard poultry, small scale processing ventures, trading, women in development-W.I.D. ), accountant- general department salaried workers’ loans, institutions or groups loans, emergency loans 74 9 Loan Protection Plan or Loan Insurance Scheme 9 Mutual Health Scheme (MHS) 9 C.U.A. Unique Insurance Company Loan Protection 9 Interest Graduation PlansGroup

D.3.4 Achievements: 9 An edifice put up as the SPCCU head office at Bompata 9 Receipts generated from the computer without using ledger cards

D.3.5 Challenges: 9 Competition has been very keen in the financial environment with some banks even going to extent of begging clients to join them. 9 Other credit unions are springing up in churches around and snatching SPCCU members in the name of faiths 9 Current loan delinquency rates are frightening, so this rate has to be reduced to the required level of 5% or less. 9 SPCCU to go online and be fully automated without software difficulties.

D.4 Atwima Kwanwoman Rural Bank Limited D.4.1 Profile: Backgrouund: Atwima Kwanwoma Rural Bank is the 68th to be established in Ghana. Can be located on the net at www.atwima-kwanwoma.com. It is the 13th to be established in Ashanti and commenced business on 6th September 1983. It operates under a rural and semi-urban environment and started with an initial capital of ¢500,000 by inhabitants. It had 125,000 preference shares by Bank of Ghana and had early turbulent years. It incurred losses for first three years but opened first agency in 1986. Presently the bank has five agencies to help reduce rural urban migration and poverty. In the year 2000, 40% of Ghanaians were living below the poverty line. That figure dropped to 35%in 2003. Within the same period rural-urban drift increased by 6%.This meant that the rural-urban drift was almost the same as the change in poverty reduction efforts. Rural –urban migration is unpreventable but the migration of the rural dweller does not automatically improve his or her economic status. Since most of the migrants cannot support themselves economically and mostly live in the slums, urban poverty reduction must be seriously considered. It is in this view that, Atwima Kwanwoma Rural Bank established four of its agencies at the outskirts of Kumasi to tackle urban poverty. Urban poverty reduction should not be left out if we are to get the rural areas economically empowered.

The local economy: • Location and Size - Located on the Kumasi – Obuasi highway. • It is 18 kilometers from Kumasi the capital of Ashanti Region • Pakyi No. 2 is the gateway to the Amansie West District of Ashanti. • The total land area of Pakyi No. 2 is about 566 acres square.

75 • Traditionally, Pakyi No. 2 is made up of 13 other villages, covering a total area of 23 square kilometers. • The total population of Pakyi No. 2 and its environs is about 10,000 people. • The main occupation is subsistence farming, agro marketing and petty trading • Crops produced include maize, cassava, plantain, cocoyam, yam, cocoa and vegetables.

Aims, Vision & Mission 9 Aims • To mobilize rural and sub urban savings • To extend credit to the poor to improve their living standards • To inculcate savings habit among the people • To initiate socio-economic development in the area • To provide tailored made financial services to the needs of the locality. 9 Vision: The bank vision is to be transformed from a rural bank into a fully hybridized community bank cum microfinance institution. 9 Mission: The bank’s mission is to be the market leaders of rural banks in Ghana, through the provision of efficient and reliable customer services, employing modern technology to increase the bank’s market share, by focusing on human resource development, improving upon existing products and services, increase deposits levels, enhance profitability and to assist the community better than our competitors.

Governance & Structures 9 A nine member board governs Atwima Kwanwoma Rural Bank. 9 Members of the Board are elected at the Annual General Meeting of shareholders 9 Organizational Structure

ATWIMA KWANWOMA RURAL BANK LTD. ORGANIZATIONAL STRUCTURE

Board of Directors

Chief Executive Officer

Operations Manager Administrative Manager Information Manager Manager Manager

Branch Internal Susu Administrative Head of Head Credit Research And Officers Analyst Officers Operations Auditors Monitors Assistant Accounts Microfinance

Field Finance Typist / Officers Driver Officers Receptionist

Office System Loan Security Assistant Administrators Monitors

76 9 Board exercises its oversight responsibilities through 8 committees 9 Loans committee 9 Finance committee 9 Strategic planning committee 9 Audit committee 9 Welfare committee 9 Marketing and deposit mobilization committee 9 Assets and liability management committee 9 Management committee: The bank is managed by a management team of 8 headed by the Chief Executive Officer. • The Chief Executive. • The Operations Manager • The Finance Manager • The Administrative Manager • The Credit and Advance Manager • The Business Development Manager • The Audit and inspection Manager • The Information Technology Manager

D.4.2 Financial highlights Active Borrowers (Male & Female) GENDER 2005 2006 No. of Value of Loans No. of Value of Loans Clients Clients MALE 3,083 ¢14,012,202,767.09 2,607 ¢27,956,108,694.33 FEMALE 3,924 ¢17,833,712,612.68 4,844 ¢51,918,487,575.19

TOTAL 7,007 ¢31,845,915,379.77 7,451 ¢79,874,596,269.52

Active Savers GENDER 2005 2006

No. of Value of Deposits No. of Value of Deposits Clients Clients MALE 30,845 ¢38,568,190,399.25 37,269 ¢41,894,201,112.1 2 FEMALE 34,781 ¢43,491,789,173.64 50,643 ¢77,803,516,351.0 9 TOTAL 65,626 ¢82,059,979,572.89 87,912 ¢119,697,717,463. 21

Financial Performance of the Bank before and after the Rural Financial Services Project (RFSP): It is interesting to know the prospects and challenges Atwima Kwanwoma Rural Bank faced before and after the Rural Financial Services Project which gave birth to the ARB Apex Bank.

Growth trends before RFSP INDICATOR 1999 2000 2001 2002 YEAR Deposit 5.585billion 8.69billion 16.88billion 31.93billion Clients 20,835 25,489 34,487 44,423 Loans 1.14billion 1.56billion 3.43billion 7.3billion Assets 7.1billion 10.8billion 21.3billion 27.7billion Investment 3.8billion 7.05billion 13.0billion 16.1billion Profit 233.2million 759million 2.15billion 2.3billion Portfolio at 21% 24% 9% 5% Risk 78 • We shall be looking at the role the bank is playing in the development of its catchment area. • What have been the achievements of Atwima Kwanwoma Rural Bank? • What are the challenges facing the bank? • What are the products, services and microfinance activities of the bank? • Growth and financial profile of the bank before and after the R.F.S.P. • Social responsibility • The way forward. •

Growth trends after RFSP

2003 2004 2005 2006 INDICATOR / YEAR

¢ ¢ ¢ ¢

TOTAL DEPOSITS 53.01 billion 78.04 billion 82.059 119.697 billion billion NO. OF CLIENTS 50,538 64,373 66,498 86,553

LOANS & ADVANCES 14.428 billion 34.65 billion 36.64 79.8 billion billion TOTAL ASSETS 62.724 billion 97.48 billion 108.6 157.67 billion billion INVESTMENTS 32.326 billion 40.56 billion 44.56 38.4 billion billion ORDINARY SHARES 856 million 1.233 billion 2.785 2.9 billion billion PROFIT 3.625 billion 7.432 billion 7.641 7.9 billion billion PORTFOLIO AT RISK 6.3% 5.5% 4% 8.5%

The Rural Financial Services Project: In spite of the progress made by Atwima Kwanwoma Rural Bank there still existed problems which required attention. The problems included inefficient cheque clearing system; ineffective funds management; arrangements to address cash needs (specie); training of board, management and staff; and computerization of the bank with its support services. These problems gave birth to the ARB Apex Bank in 2002.

Improvements through the RFSP 9 Excellent customer service and increased outreach through the computerization 9 Number of clients increased from 50,538 in 2003 to 86,553 in 2006 9 The bank can now track it loans more than before. Growth in loans from ¢14.42 billion in 2003 to ¢79.8billion in 2006 9 Bank has designed specific loan products to meet needs of clients. Susu loan form 22% of our loan portfolio, while Group loans form 45.9% of total loan. 9 Specie Movements - With the introduction of bullion vans by the Apex Bank to supply cash. By telephone call, cash is supplied within hours 9 Training - Training programs by Apex to improve • Efficiency of operations • Improved lending operations • Loan recovery • Good governance • Liquidity management in the bank 9 Image Building - Through the printing of quality micro cheques which have improved the image of the bank. 9 Computerization: The project has assisted in the computerization of the banks operation. My bank was privileged to be one of the first pilot banks to be computerized. The computerization of the bank has helped increase efficiency in the bank’s operation. The turnaround time has improved and there have been improved customer services. 83

D.4.3 Products, Services and Microfinance Activities of the Bank. Bank believes microfinance is a powerful tool to transform and improve the lives of the poor. In the quest to develop products to assist the poor, the bank came out with the Susu Savings and Loans as well as the Dwetire Group Savings and Loans. ‘Susu’ in Ghanaian language means ‘measuring something small’ which translate to depositing bit-by-bit. ‘Dwetire’ in Akan means ‘capital’ therefore Dwetire Women Group Savings and Loans means ‘empowering women with capital’.

Products: The Bank has developed both Savings and Loan products and currently has 12 products namely: 9 Savings Account 9 Current Account 9 Fixed Deposit Account 9 Susu Deposit Account 9 Golden Deposit Account 9 Dwetire Group Saving Account 9 Susu Loans 9 Dwetire Group Loans 9 Salary Loan to workers 9 Institutional Loans 9 Church Development Scheme 9 Working Capital Loans

Susu Savings & Loans: 9 Bank access financial services especially savings and loans to low income people in both rural and sub urban areas so that they can have access to capital and generate wealth to provide basic needs like food, shelter, and education to improve their livelihood and quality of life. 9 The susu operation deals with the poor making daily contribution into an account either for savings or to have access to a loan from the bank. 9 The banks mobile banking staff markets these products to small clients who are not able to leave their homes and workplaces to save at the bank.

Dwetire Women’s Group Savings 9 Dwetire Group Loans is designed to enable organized women groups to access working capital for their businesses. 9 When women are financed, the whole family is transformed. 9 The group would be expected to save with the bank for eight (8) consecutive weeks to qualify them to access loan four (4) times their savings 9 The average loan size is between ¢3miilin and ¢10million 9 The interest rate on such loans ranges between 25% - 29%. 9 So far over 480 groups have been financed with a staff to group ratio of 40 84 9 Each Agency has three (3) credit officers with a total of 18 credit and field officers.

Microfinance Activities of the Bank 9 The Atwima Kwanwoma Rural Banks’ chunk of loans goes to groups. In addition to groups, individuals, sole proprietors, partnerships and companies also keep accounts with the bank and benefit from credit facilities. 9 The bank is involved in the formation and monitoring of the groups from the beginning to the gestation of the group. There are two (2) types of groups” 1. Church groups whose membership is drawn from the various church organization whose executives are very much involved in the lending process. 2. Societies and clubs, made up of members of the public in the catchment areas of the banks and guarantors are drawn from these communities and or neighborhood. • The Banks’ Credit Officers and mobile banking staff market its various products through outreach programs such as educating the public at fora (like funerals, church service or specially arranged meetings) on the advantage of forming groups to receive and access credit from the bank to expand their businesses. • The staff as part of the group animation exercise assist the groups to draw their constitution, bye-laws, teaching members basic book-keeping to enable them keep track of their finances, and the writing of group meeting minutes. • Each group has an executive committee which co-ordinates the group’s activities, articulates the members needs and liaises with the bank officials. • Most of the group members are individuals who engage in petty trading and the marketing or processing of agricultural produce. • The formation of each group is a process that takes a period of about 8 weeks to complete, though close contacts continue to be maintained by the credit officers. • The group lending process takes the further form of the individual members. Each individual member of the group is to open individual savings account with the bank. The individual loan request is channeled or disbursed through the savings account. The practice of making the individual group member operate a personal savings account is to inculcate savings habit in them. • Apart from the individual savings accounts, the group maintain group accounts through which the group build a weekly ‘Susu’ contribution from each member, the quantum of which is determined by the group and the size of the members own future loan requirements. • The ‘Susu’ contribution is a step in the lending process to enable the group members mobilize enough cash security for funds access. • The credit need of each group member is agreed with the group executives and an application made to the bank for the loan. • The loan is normally of between six (6) months and twelve (12) months with a two (2) weeks grace period. • Where a group defaults, the group is held liable for the member’s loan repayment, a persistently defaulting member is removed from the group by consensus for subsequent loan request. 85 • As part of the loan monitoring, a monitoring unit has been set up to track all loans.

Other Services of the Bank 9 Cheque Clearing - • Delays and frustration by major banks. • Cheques on collection • Cheque which used to be cleared in 21 days is now cleared within 5 days • Confidence now restored in rural banks’ cheques and have expanded banks outreach 9 Apex Link Transfer: The introduction of the Apex link transfer by the Apex has seen much transactions between us and other rural banks. This have even attracted some recipients coming to open account with us 9 Specie movement • Major Banks supply mutilated notes. • Supply lower cash denominations. • Supply of cash Apex bullion vans. • Cash supplied within hours by telephone.

D.4.4 Private sector development / managed funds: 9 Atwima Kwanwoma Rural Bank was considered under the Government of Ghana / United Nations Development Program after a successful institutional assessment. 9 The bank was to increase client outreach, reduce loan portfolio at risk, increase savings mobilization and to increase the number of loan clients. 9 The bank was to facilitate development of appropriate products for the low income entrepreneurs. The program identified that inadequate capitalization and management capacity are constrains in the expansion of the microfinance sector of the bank. The program identified the bank as being capital adequate and decided to assist the bank with capacity building to improve upon its operations. A lot of training programs were organized for the bank staff both internally and externally. • Micro-finance training program in Boulder (U S A) for the CEO. • Field visit by credit staff to Bangladesh and Ethiopia. • Training on governance for board members. • Loan tracking for credit officers

D.4.5 Chiransa Country Farms: An example of an outreach activity funded by an agriculture loan - The 158 acre country farms established in 1999 are 17 km away from The Atwima Kwanwoma Rural Bank headquarter. Chiransa consist of citrus, oil palm trees, food crops and vegetables farms; a 50-head duck farm, 2000 layer poultry, 16 livestock, a piggery of 185 pigs; 5 fish ponds, 20 bee stands; and is in the process of introducing grass cutter farming. This customer has been in relation with the bank for four years back through the bank’s outreach program. The Atwima Kwanwoma Rural Bank has financed the farm to purchase feed and to pay for labor on a third cycle loan as follows: 1. 20 million cedis – 1st Loan 2. 50 million cedis – 2nd Loan 86 3. 50 million cedis – 3rd Loan The bank is in the process of fully financing the farm to expand its activities in the non- traditional farming sector.

D.4.6 Small and micro enterprise promotion fund (SMEPF) This is also a Government intervention to expand the private sector. The project was co-finance with Speed Ghana. Funds were made available for loan for micro and small enterprises. The bank benefited a loan of ¢6.0billion for on-lending to the microfinance sector. Over one hundred women groups and two hundred susu customers benefited.

D.4.7 Impact of government interventions on Banks operations Through the intervention in the microfinance poverty reduction programs of the bank, the following sectors activities within the bank expanded: 9 Commerce, 9 Agric-livestock made up of small rearing, grass cutter rearing and poultry. 9 Cottage industries, comprising footwear manufacturers, carpentry and food joints / restaurants grew dramatically. 9 There was improvement in the service industry, made up of hair plaiting, hairdressing and transport.

D.4.8 Achievements / Social Responsibility 9 The Bank maintains a large budget for community developments to make a difference in the lives of the communities the bank operates in. 9 In the year 2000 the bank focused on the state of basic schools in the community. A total of ¢30million was spent on provision of furniture and renovation of school structures 9 In the year 2001, the banks’ attention was on orphanage and infirmary support. A total of ¢26million was spent. 9 In 2002 a total of ¢200million from the banks’ profit was allocated for community development. Attention was in areas like KVIP places of convenience, bore holes and school structures. 9 In 2003 the bank focused on areas where the bank had agencies. The total donation of ¢61million went to assist in Education Fund, Street light, Children’s Home Support. 9 In 2004 the assistance went to Education and health. 700 dual desks were distributed to 25 basic schools. A donation of ¢20million towards construction of nurses flats for the S.D.A. Hospital. 9 Since 2005 the bank has began the construction of a model Senior Secondary School for the community. So far ¢1.5billion have been spent. 9 The Bank launched a scholarship scheme in 1999 to assist wards of needy shareholders to enter the Senior Secondary School. Every year 30 students benefit from this scholarship scheme. So far 240 students have benefited with the bank spending over ¢200million. 9 The bank was admitted to the prestigious Ghana Club 100 in 2003. In 2005 the bank was rank the No. 1 in the banking industry and placed 10th in the overall Ghana Club 100 ranking. 87 9 The Bank was adjudged the best rural bank in the Ashanti Financial Services Award in 2004 and 2006.

D.4.9 Challenges 9 One major challenge is the increase in the portfolio at risk as the loan volume increases. A monitoring unit has been created to track all loans. 9 Despite the growth of the bank, the bank is faced with challenges associated with expansion 9 A new organogram is in place with new job functions and direction of responsibility. New positions have been created as well as new departments. 9 Effective service delivery and customer confidence 9 Coming out with more innovative products targeted at specific groups. 9 Collaboration and networking with other agencies to bring in more ideas and funds to expand the bank’s operations. 9 One challenge is to continue to come out with new products and to re-package old products to meet new demands of the public. Some of the rural folks continue to patronize the local ‘Susu’ with it exhorbitant interest charges. 9 One major challenge is the training of its human resource to handle the ever growing operations in the competitive environment. 9 The Apex Bank has been assisting but much is needed to be done. The idea of a training school by the Apex Bank should be pursued 9 A very important challenge is how to come out with a proper monitoring system to put checks in place as the institution grows. The bank has put in place an Internal Audit Department to handle the internal controls. The Apex Bank has also put in place a monitoring unit to do off-site monitoring of the banks. What needs to be done is the Apex putting in place a full inspection unit to do the on-site controls.

D.4.10 The way forward 9 Intensification of resource mobilization 9 Creating a complete microfinance desk within the bank’s structure 9 Review and intensification of Internal Controls and monitoring systems 9 Undertaking customer and market research to meet our customers expectation. 9 Effective service delivery and customer confidence. 9 Coming out with more innovative products targeted at specific groups. 9 Collaboration and networking with other agencies to bring in more ideas and funds to expand to bank operations.

D.4.11 Conclusion In conclusion, improvement in the growth of the bank in all areas as well as improvement in business income and success stories of some of our clients is an indication of the strides made in the fight against poverty.

88 D.5 Kwahu Praso Rural Bank Limited. D.5.1 Profile: The Bank was established in 1982 specifically in the month of October at Kwahu Parso. It was established to help alleviate the burden of cocoa farmers who had to walk all the way to Nkawkaw and Asankare before enjoying any banking service. The establishment of the bank was therefore timely and welcoming to the people of Kwahu Praso especially the farmers.

Vision: To develop the bank as the leading Rural Bank in terms of capital resources assets, quality staff and customer service.

D.5.2 Financial highlights: Growth: The bank really started well but for lack of consistent management, it suffered some setbacks. The bank has witnessed a steady growth over the past few years. In the year 2002, the bank made a net profit of 87.9 million cedis. In 2003, the profit went up to 111.8 million cedis, showing an increase of about 27.2 %. In 2004, the profit declined to 110.7 million cedis and in 2005, the profit declined further to 98.3 million cedis. The total asset base keeps rising from 2.4 billion cedis in 2002 to 5.3 billion cedis in 2005.

Investments: The investment trend also saw some growth. In 2002, total investment stood at 1.35 billion cedis. This went up to 2.48 billion cedis in 2003 and went to 2.84 billion cedis in 2004. Investment went down slightly to 2.7 billion cedis in 2005 as a result of decline in Treasury bill rates.

Deposits: Deposit trends have also progressed steadily over the years. Total deposits in 2002 were 2.24 billion cedis. This went up to 3.17 billion in 2003. In 2004, the deposit stood at 3.95 billion cedis and in 2005, we went up to 4.66 billion cedis.

Advances: Total loans granted in 2004 were 324.58 million cedis. This went up to 332.49 million cedis is 2003. In 2004, this went up to 620.18 million and in 2005, it shot up to 912.17 million cedis.

D.5.3 Staff Strength/Organogramme: Currently, we have staff strength of 22 people. This is made up of 15 regular staff and 7 night watchmen. The staff structure is made up of one manager, an assistant manager, five assistant accountants, six clerks, a driver and a messenger.

D.5.4 Movement: The bank started from Kwahu Praso and has now got six agencies. The agencies are located in Obo, Pra River, Kwahu Tafo, Nkawkaw, Nkwatia, and Suminakases. The distances of the agencies from head office are as follows: Nkawkaw – 10 kilometers (km), Obo – 23 km, Nkawtia – 22 km, and Pra River – 10 m.

D.5.5 Products and Financial Services: 89 Products: The existing products include 9 Regular Savings Account 9 Current account 9 Fixed Deposit 9 Ordinary Shares 9 Susu 9 Loan to traders 9 Funeral loans 9 Group Lending (microfinance) 9 Over Drafts 9 Domestic funds transfer (Apex Link), 9 Efie ne fie.

Micro Credit Scheme: This entails putting women who are in some form of economic activity and share a common interest together for some credit. The group is taken through a short training period of two months after which they are granted credit. During the training period, the group is asked to operate and maintain a group account. Besides, the members are also asked to own individual accounts where he/she can run an independent savings. At the end of the training period, members are given credit with the approval of all. In the first cycle, no single individual takes more than one million cedis. The interest is 20% for a cycle of six months and repayment is on a bi-weekly.

D.5.6 Achievements/Impact: 9 Basically, people no longer have to walk long distances before enjoying banking services. Farmers can now lodge and cash monies at places very close to their door steps. 9 With the coming of the domestic funds transfer, both students and parents now receive their remittances very close to their residences. 9 We are also able to serve divers salary workers ranging from teachers, fire officers, nurses, and other civil servants. 9 Community Senior Secondary students can now take payment orders from us without having to travel to big towns to take one from the orthodox bank. 9 Traders no longer carry monies on them when they are going market centers far removed from them. Their monies are transferred to sister rural banks that operate in the market centers. 9 Our checks are now accepted at all levels of transaction. This has actually added up to our credibility as a bank. 9 ARD Apex Bank has given training to staffs and directors. 9 People are now able to walk freely to any of our offices and seek any information regarding any banking services. 9 Savings culture has come to stay with the people although we need to do more.

D.5.7 Social responsibility: 9 We contribute regularly to the annual farmers’ day celebrations. 90 9 We are also contributing to the District’s best teacher award. 9 Another social contribution we intend to put in place is a scholarship scheme to students in our catchment area

D.5.8 Challenges: 9 The main challenge to the bank now is to computerize our system. This will help to reduce the waiting time of our clients. This will also increase our efficiency. 9 Another challenge to the bank is the inadequate paid up capital. As at now we have not yet made the required amount and we are intensifying our efforts along this direction. 9 Further increase of the client base 9 About 35% of their loans go to agriculture, and their has been difficulty with repayments in this sector. Farmers develop multiple excuses for underperformance and are reluctant to repay on time. This trend is exacerbated by buyers taking cash directly to the farmers rather than depositing in the bank.

D.5.9 Conclusion There was recognition of the need to develop a mechanism for diversifying risks to individual farmers. An example was given of the shift from cocoa (a seasonal crop) to cola (a continual harvest but lower value crop), due shocks to the market for the former crop several years earlier. Apparently the shift is now swinging back again, but the oscillation may have caused overall losses to agriculture in the district. Options discussed included encouraging groups of farmers to pool resources to undertake first stage processing, negotiate better prices, and share risk of shocks to the market. The bank wants to find ways to empower clients together with other local parters, and find borrowers ready to take risk (which is what entre preneurial skills are all about), and there was recognition of the need to train potential entrepreneurs and establish linkages withe larger buyers and the chain of custody more generally. However, it wasn't clear if this could be the role of the bank.

9. List of Participants

Outside Participants:

1. Mr. Essam AdelRahim Ali Microfinance Unit Central Bank of Sudan Khartoum, Sudan Tel: 249 1220 75963 Email: [email protected]

2. Dr. Ibrahim Mohammed Arabi National Coordinator Agri-Business Development, Project Coordinating Unit Federal Ministry of Agriculture & Water Resources Mabushi, Abuja, Nigeria Email: [email protected] Phone: 080 34491 496

3. Eng. Tawfiq z.n. Al jáafreh Director General Agricultural Credit Corporation P. O. Box 77 Amman – Post Code No. (11118 Jordan Fax: 5639389 Email: [email protected]

4. Eng. Salem Husein (Alhaj Bayer) Arabiat Assistant Director General for Credit Agricultural Credit Corporation P. O. Box 77 Amman – Post Code No. 11118 Jordan Email: [email protected]

5. Dr. Gamini Batuwitage Chief Executive Officer Community Development & Livelihood Improvement Project Ministry of Samurdhi and Poverty Alleviation 7A, Reid Avenue, Colombo 7, Sri Lanka 92 Tel. 94-11-268 9584, Fax 94-11-268 2391, 268 9634 Email: [email protected] 6. Mr. Ulac Demirag CPM, Africa I Division International Fund for Agricultural Development IFAD Via del Serafico, 107 00142 Rome, Italy Tel: 011-39-06-5459 2616 Fax: 39 06 5459 3616 Email: [email protected]

7. Mr. Mubarak Mohamed El-Dawi Department of International Cooperation Ministry of Finance and National Economy Juba, Sudan Tel: 249 9128 52234 Email: [email protected]

8. Mrs. Cherine Samir El Sayed Senior Manager International Cooperation Group Social Fund for Development 120 Mohei Edin Abul Ezz Str., Dokki Giza, Egypt Tel: 202-33 22000 Direct: 202-33 22 282 Fax: 202-33 61 854 Email: [email protected] or [email protected]

9. Mr. Shanmugalingam Giritharan Head – Financial Management Monitoring & Evaluation Sri Lanka Northeast Irrigated Agriculture Project Email: [email protected] Phone: 0094 26 4920 985

10. Mr. MWP Karunaratna Sr. Program Officer (Micro Finance) Community Development & Livelihood Improvement Project Ministry of Nation Building and Estate Infrastructure Development 7A, Reid Avenue, Colombo 7, Sri Lanka Tel. 94-11-268 9584, Fax 94-11-268 2391, 268 9634 Email: [email protected] 93

11. Ms. Christiane Kuhn PA, Western & Central Africa Division International Fund for Agricultural Development IFAD Via del Serafico, 107 00142 Rome, Italy Tel: 011-39-06-5459 2740 Fax: 39 06 5459 3740 Email: [email protected]

12. Mr. Medhat Massoud Senior Manager Human & Community Development Group Social Fund for Development Giza, Egypt Tel: 202 33 22 000; Fax: 202 761 5828 Email: [email protected]

13. Ms. Fumiko Nakai Country Program Manager Eastern and Southern Africa Division IFAD Via del Serafico, 107 00142 Rome, Italy Tel: 39-06-5459 2283 Fax: 39 06 5459 3383 Email: [email protected]

14. Alhaji Abubakar Ndaguye Community Development Officer Niger State Fadama Development Office, Minna Email: [email protected] Phone: 080 362 81703

15. Mrs. Yewande Olaopa Community Development Specialist, SFDO Second National Fadama Development Project Lagos, Nigeria Email: [email protected] Phone: 080 230 89618

16. Mr. Muhamad Fazlur Rahman 94 Managing Director Social Development Foundation Dacca, Bangladesh Email: [email protected] Phone: 880 2 987 3093 Fax: 880 2 987 3095

17. Mr. Hafijur Rahman Finance Manager Social Development Foundation Dacca, Bangladesh Email: [email protected] Phone: 880 2 987 3094 Fax: 880 2 987 3095

18. Ms. Poluri Rajeswari National Project Director Tamilnadu Empowerment & Poverty Reduction Program Email: [email protected]

World Bank Staff

19. Renate Kloeppinger-Todd Adviser, Rural Finance ARD World Bank HQ Email: [email protected]

20. Pierre Olivier Colleye Sr. Microfinance Specialist ECSSD World Bank HQ Email: [email protected]

21. Jonathan Agwe Research Analyst World Bank HQ Email: [email protected]

22. Sandra Broka Technical Specialist ECSSD World Bank HQ 95 Email: [email protected] 23. Alex Mwanakasale Agricultural Officer AFTS1 World Bank, Lusaka, Zambia Email: [email protected]

24. John W. Fraser Stewart Sr. Natural Resources and Biodiversity Specialist ECSSD World Bank, Kyiv, Ukraine Email: [email protected]

25. Houng-Giang Lucie Tran Operations Officer MNSSD World Bank HQ Email: [email protected]

26. Rufiz Vakhid Chirag Zade Sr. Operations Officer ECSSD World Bank, Baku, Azerbaijan Email: [email protected]

27. Romeo Esangga STC Consultant Rural Finance, Agriculture and Rural Development World Bank HQ Email: [email protected]