Accra: As rural and community banks (RCBs) navigate an evolving financial landscape characterized by decreasing interest rates and diminishing investment yields, a rural banking expert is calling for a strategic reevaluation of success metrics and growth planning within the sector. The aim is to prepare for a more challenging operating environment, despite recent strong profits.
According to Ghana Web, Joseph Akossey, the Executive Director of Proven Trusted Solutions, highlighted that many RCBs have shown commendable performance in traditional financial areas such as deposit mobilization, asset growth, profitability, and capital adequacy. However, he warned that these metrics largely reflect past conditions and should not be assumed as indicators of future resilience. Banks must focus on forward-looking strategies for sustainable growth.
Akossey expressed concern over a growing trend among boards and management to become overly focused on impressive results from 2024 and 2025, which he described as lagging indicators. He emphasized the importance of shifting focus to 2026 and beyond, where leading indicators will be crucial. The coming year is expected to pose challenges for income generation as banks operate in a reduced-yield environment, with less attractive returns from government securities and increasing competition within the banking sector.
He explained that while macroeconomic stability is prioritized, the Ministry of Finance is implementing measures to reduce borrowing costs to improve fiscal balances. Meanwhile, lending rates are trending downward due to a reduction in the policy rate and its transmission through reference rates set by universal banks. This situation compels rural and community banks to lower their lending rates, further compressing profit margins.
Akossey urged RCBs to re-strategize to survive the complex and volatile banking environment. He stressed the need for banks to return to their core mandate of mobilizing deposits and lending to support economic activity and job creation within their communities. This transition requires moving away from 'Treasury bill banking' toward disciplined and structured lending.
To facilitate this shift, Akossey recommended strengthening credit administration systems by investing in capacity building for credit officers and allocating significant budget portions to robust credit departments. He advised streamlining loan approval and disbursement processes to enhance credit delivery efficiency and developing new loan products to meet local market demand.
At the governance level, Akossey cautioned against unrealistic profit targets in a low-interest-rate environment, warning that it might lead to reckless lending and unethical practices. He urged boards to prioritize sustainability over short-term profitability and assess success holistically, taking into account liquidity, asset quality, cost-to-income ratios, and capital adequacy.
He concluded by emphasizing the need for management teams to educate boards on the changing dynamics of the banking industry, including technological impacts, regulatory shifts, economic conditions, and demographic changes. Only banks that invest in proper forecasting, scenario planning, and strategic adaptation will remain competitive and resilient in the coming years.