An evaluation of rural lending: a case of Bonzali Rural Bank limited in Northern Ghana

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Undoubtedly, financial services, savings and credit services to support the Socio economic conditions of rural people are increasingly being recognized. Rural micro finance interventions can make capital available and raise the income of the rural entrepreneurs. This could enable them invest in productive activities and expand their existing businesses. It may often be more effective to link the rural people up with established banks. The study evaluates the sustainability, the outreach and the impact registered by rural micro finance schemes using the Bonzali Rural Bank credit with education programme, which is one of the oldest microfinance schemes in the Northern Region of Ghana as a case study. Data was gathered from primary and secondary sources. The existing literature on microfinancing, the management of Bonzali Rural Bank and the beneficiary clients served as useful sources to that effect. Using amount of savings, repayment rates, loan utilization and operating self-sufficiency as proxies for self-sustainability. Also, number of female clients, and average loan balance are used as proxies for total client outreach. Equally, the proxies used for the impact assessment are assets ownership, access to health care and enhanced access to education of the dependants of the beneficiary clients. The Z- Normal Distribution and Chi- Square were used in the hypotheses testing. On the basis of the available data, the results indicated among others that Bonzali Rural Bank is performing well in its rural micro finance in terms of sustainability of the programme, total client outreach and the socio-economic impact registered. However it was noticed that the bank has poor operating self- sufficiency (OSS) as compared to its peers in the Northern sector. On the basis of other sustainability indicators, it concludes that, over time this ratio will be improved. The study recommended that it might be more appropriate and effective if the programme could be merged with the normal commercial banking wing of the bank since the clients of Credit With Education programme share the same socio-economic characteristics and it also has adequate data management systems to track performance and customer details. Bonzali Rural Bank should do well to increase the individual loan size so as to improve the average loan size; improve on the operating self-sufficiency by increasing its operating returns and reducing operating cost; the need to account for education services which could put the performance of Bonzali Rural Bank into proper perspective and the institution should establish a well-defined Management Information System that can facilitate reporting, monitoring and evaluation. The stakeholders should make readily available market for the client's products and services to maximize their sales and returns; similar rural banking model can be used for irrigation based farming activities to increase agricultural food production.
A thesis submitted to the School of Business Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirement for the degree of Master of Business Administration, 2008