Rural bank credit and rural development: benefit incidence analysis (A case study of Amenfiman rural bank)

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May, 2016
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The rural parts of Ghana face seemingly intractable socio-economic challenges. One of these challenges is the access to little or no institutional credit which makes it difficult for the rural dwellers to adopt modern technologies in order to expand their various economic activities. They are left to seek credit from non-institutional sources like relatives and friends. This credit market is small and as such not able to meet their needs. A rural credit department was then established at the Bank of Ghana to alleviate this problem with rural banks being established subsequently in the rural areas. However, anecdotal evidence suggested that salary earners are the major beneficiaries of rural bank credit. This study was then conducted to seek empirical evidence to do a benefit incidence analysis to find out the category of rural dwellers who receive more of rural bank credit using Amenfiman Rural Bank (ARB) as the case study and 144 sample beneficiaries. The researcher used bar graphs and percentages to analyse the data thematically. The results from the study showed that between salary earners and farmers, the main beneficiaries of the credit provided by ARB are the former with the latter being the least beneficiaries. This assertion was deduced from the data collected from the bank displaying the total amount of loans disbursed in the year 2012 through to 2014. Within those three years, a total amount of GH¢1,805,870 was disbursed as loan and whilst salary earners received 25.2% of this amount, only 14.4% went to farmers. 10.1% and 50.3% of the total amount disbursed went traders and other business respectively. Furthermore, for farmers alone, a total of GH¢103,000 was received and only 16.5% of this amount went to the poor farmers whose monthly income was estimated to be below GHc100 whilst the rich farmers (earning above GH¢1000) received 36.9% of this amount. The same pattern was recorded for all the other occupational categories considered in the study. This shows that the rural poor (low-income earners) in general benefited less from the credit provided by ARB which also emphasizes that rural banks tend to give the bulk of their loan facility to the rural non-poor (high-income earners).
A dissertation submitted to the Department of Economics, Kwame Nkrumah University of Science and Technology in partial fulfillment for the award of a Master of Science Degree (MSc) in Economics,