Liquidity management in rural banking: a case study of some selected rural banks in Ghana.
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Date
2016-08
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KNUST
Abstract
The importance of rural banks as providers of financial services to ensure growth in the predominantly agro-based economy cannot be over emphasized. Rural banks have been established to mobilize rural funds and assist the rural folks with credit facilities mainly in their productive activities. The sheer size and complexity of the modern economy increases the importance of liquidity crises and this is all the more reason it needs to be carefully considered. This study was therefore conducted to assess the liquidity management practices of some selected rural banks in Ghana. The study utilized primary data and secondary data to answer the research questions. Questionnaires and interviews were the main instrument used to gather primary data. Secondary data were obtained from the financial statements and reports of the selected rural banks. The findings showed that the various mechanisms adopted by rural banks in preventing liquidity crises were short term investments, active deposit mobilization, high transaction deposits, interbank liquidity management using the markets risk framework and reducing capital tied up in inventory. The study recommended that a contingency funding plan (CFP) should be instituted that clearly sets out the strategies for addressing liquidity shortfalls in emergency situations. A CFP should outline policies to manage a range of stress environments, establish clear lines of responsibility, include clear invocation and escalation procedures and be regularly tested and updated to ensure that it is operationally robust.
Description
A Thesis Submitted To Department Of Accounting And Finance In Partial Fulfilment Of The Requirements For The Degree Of Master Of Business Administration (Finance- Option).