RCBs deserve their GH¢500m lock-up funds

THE National Association of Rural Banks has served notice about its resolve to continue pressing the government to release the GH¢500 million locked-up funds from the financial sector clean-up.

The demand on the government to release the funds, the RCBs argue, is to improve their balance sheets and make them more solvent.

Many would have assumed that five years after the funds were locked up after the government's financial sector clean-up exercise, the RCBs would have written the debt off their books to start on a clean sheet.

However, the association, led by its president, has strongly indicated that a write-off is not an option, serving notice that the association will continue to pressure the government to make good its obligation in order to ensure that the RCBs have a stronger balance sheet to enable them to discharge their mandate to their shareholders and customers.

The Graphic Business wholly supports the call for the government to release funds to settle the RCBs.

This, to us, is crucial given the significant role the RCBs play in the economy.

We are aware from literature, how the RCBs support micro, small and medium-scale businesses in areas where the traditional banks will not dare.

For instance, through their services, RCBs play a crucial role in financial intermediation and have also caused millions of people to be employed directly or indirectly. 

Regarding employment, the Graphic Business believes that because the country’s unemployment rate stood at more than 14.5% last year, according to the Ghana Statistical Service (GSS), there is every reason for the RCBs to be strong financially and liquid to support micro and small businesses and also help address the teething unemployment problems bedevilling the country.

It is a fact that most of the RCBs are posting profit after recovering from the shocks of the COVID-19 pandemic and the effects of the financial sector clean-up exercise. 

However, that alone should not be the reason the government would deny the RCBs what they legitimately are entitled to.

As the president of the association indicated, much as the RCBs are strong, liquid and returning profits, the locked-up funds are not for the banks but are depositors’ funds which must be paid.

The paper is learning that rural banks have had to cough up funds from their reserves to settle their depositors, a development which has created a gaping hole in their finances and impacted their balance sheets.

As a result, although the RCBs are posting profits, there are still lingering issues which call for urgent action in order not to unnecessarily affect the operations of the RCBs.

The Graphic Business is also aware that the RCBs are being charged to fully automate their services, expand into many more areas where the unbanked population is high, acquire bullion vans to safely transport funds from one point to another among others.

All these demand a lot of funds and, therefore, we believe that without having enough, such capital expenditures cannot be carried out easily by the RCBs.

In all these, however, we are also aware of the precarious financial situation of the government for which reason it will not be able to honour many of such obligations. 

Against this background, the paper trusts that the government can sit with the RCBs to come up with an appropriate timeline by which the funds will be released.

The paper believes that such a move will help the RBCs to plan, while the government will also not feel the impact because it has a lot more such obligations to honour.

In this case, there must be strong negotiations between the two parties to ensure a win-win situation so that in the end, the RCBs will be in better stead to discharge their obligations of deepening financial intermediation, better support MSMEs and help to create more employment opportunities in the rural areas of the country.