The role of rural banks in credit creation and poverty reduction in Ghana: a case study of Nwabiagya Rural Bank, Ashanti region

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The study is about Rural and Community banks credit creation and poverty reduction in rural areas for rural development. One of the objectives for the establishment of rural and community banks were of provide credit to farmers, traders, craftsmen and cottage industries in rural areas for rural development. The main purpose of the study is to establish link between funds mobilization, credit facility, credit creation and poverty reduction in rural areas for rural banks (as Ghana Commercial Bank, Agriculture development bank, National investment bank and cooperative bank) and other cooperatives associations were mandated to provide credit to farmers, craftsmen and cottage industrial in rural areas for rural development. These financial institutions started providing credit facilities to the above groups, for rural and community development. This was successful at the initial states but for few years, explaining the high cost of administering a large number of small credits spread through out the country, coupled with high default rate and non provision of collateral security for loans. The agricultural development bank which was created for the sector, especially the rural sector in particular, however, eventually, began concentrating on urban based banking activities ignoring the rural sector. This led to the establishment of rural community banks. Rural and community banks were to mobilized funds and give credit facility to the community for rural development. The emphasis of the study has been comparing the link between rural and community banks credit creation and poverty reduction in rural areas. In conclusion, the research confirms that the effectiveness of Ghana’s rural credit program through rural and community banks indicates that the impact of Nwabiagya rural bank on credit creation and poverty reduction was minimal. Nwabiagya rural bank credit recipients (Agriculture and craftsmen) did not experience any improvement in their livelihood as compared with other economically active people.
A thesis submitted to the Department of Banking and finance, Kwame Nkrumah University of Science and Technology of Master of Executive Business Administration, KNUST School of Business, 2008