The Role of Rural Banks in Micro Financing in Ghana

Abstract

The role played by rural banks in micro financing is very critical for the social and economic development of Ghana. The study therefore evaluates the roles of Rural Banks in micro-financing. Adopting a descriptive research design, a sample size of 700 customers and 200 staffs from Rural Banks are conveniently selected for this study. The Ordinary least square estimator is employed to establish the effect of micro financing activities on the standard of living, savings culture and business culture. The study reveals that manufacturing business, agricultural business and service business are the major activities financed by Rural Banks. In addition, the bank provides major funding such as funds for farming, startup capital, acquisition of raw materials and business expansion. The results show positive and significant effects of micro-financing activities (manufacturing activities, agriculture activities, personal activities, trading activities and service activities) on the standard of living, savings culture, and business expansion. It also emerged that misapplication of loans, insufficient funds and high default rate affects administration of loan at Rural Banks. The study therefore recommends that rural banks actualize the fleeting activity of micro-financing in a joint effort with accomplice establishments of the SMEs.  Rural Bank ought to lessen the quantity of collateral security and other qualification for access to microloans to guarantee appropriate considerations for customers applying for bank credits.

Keywords: rural banks, microfinancing, financing activities, business, micro-credit, poverty

DOI: 10.7176/RJFA/13-8-05

Publication date: April 30^th 2022