KUMASI TECHNICAL UNIVERSITY

SCHOOL OF BUSINESS AND MANAGEMENT STUDIES

DEPARTMENT OF ACCOUNTANCY AND ACCOUNTING INFORMATION

SYSTEMS

PROJECT TOPIC:

THE ROLE OF RURAL BANKING INDUSTRY IN THE DEVEPLOMENT OF SMALL

AND MICRO ENTERPRISE: A CASE STUDY OF EJISU-JUABEN MUNICIPAL
DISTRICT

(Ashanti Region)

A PROJECT WORK SUBMITTED IN PARTIAL FULFILLIMENT OF THE

REQUIREMENT FOR THE AWARD OF HIGHER NATIONAL DIPLOMA (HND) IN
ACCOUNTING WITH COMPUTING

BY

MARFO BENJAMIN HAC051701130

MARY MENSAH ABRAMPAH HAC051701133

KUSI GRACE HAC051701129

KUMAH GEORGE HAC051701128

The role of rural bank in the development of SME’s | 1

 JUNE 2020

STUDENTS’ DECLARATION

We declare that this project work is our own and it contains no other material except, where the

acknowledgment is duly given. Also, this work has not been presented for the award of a higher

national diploma in this institution or elsewhere.

STUDENT NAME SIGNATURE

MARFO BENJAMIN ………………..

MARY MENSAH ABRAMPAH ………………..

KUSI GRACE ………………..

KUMAH GEORGE ………………..

SUPERVISOR’S DECLARATION
I certify that I have supervised the student in undertaking the study submitted here under the guidelines

of project supervision in the Institution.

……………………………. ………………..

MR. ERIC KWAKU ATEFAH DATE

     (SUPERVISOR)

HOD’S CERTIFICATION

I certify that copy of this project work has been submitted to be kept in this Institution records.

……………………………………. ……………….

DR. THOMAS OBENG ASARE DATE

The role of rural bank in the development of SME’s | 2

   (HEAD OF DEPARTMENT)

ACKNOWLEGEMENT

Firstly, we would like to show our sincere gratitude to the most-high God for bringing us this far and

seeing us through this work by granting us the wisdom, knowledge, understanding, and the power for

writing this project work. We would like to express our sincere gratitude to Mr. Eric Kwaku Atefah,

our project supervisor whose directions, criticism, and suggestions have to lead us to the success of this

project. Besides, his generosity, co-operation, and time spent in reading through the script are very

much appreciated.

We also express our sincere gratitude to all the people who gave us information to be able to compute

this work and those who never gave up on us especially our lecturers. To our families through whose

effort and unflinching support we have made this accomplishment, we say thank you.

God bless you all.

The role of rural bank in the development of SME’s | 3

 DEDICATION
We dedicate this work to the Lord God Almighty, our supervisor Mr. Eric Kwaku Atefah. May God

richly bless you.

The role of rural bank in the development of SME’s | 4

 ABSTRACT
The existence of rural banks has made banking available to the ordinary Ghanaian and nullified the

perception that it is an organization for the educated and privilege few. This has stimulated banking

operation and led to increase in the growth of SME sector. This study examined the role of rural

banking on SME’s (small micro-enterprise in Ghana). The Purposive sampling procedure was used to

select ten members of staff of Juaben Rural bank to form the sample. Data were collected from both

primary and secondary sources of data collection and questionnaire served as the main primary data

collection instrument. From the analysis it was clear that the role of rural banking on SME’s has been

tremendous. The bank has monitoring measures in place to ensure that the rate of default is minimized.

The bank also provides business advisory services to the business operators. Occasional default by

some clients, insufficient funds to meet demand for advances and lack of logistics for ensuring effective

monitoring of the loan scheme are the main challenges that the bank encounters with the loan facility. It

is therefore important for the rural banks to put in place the necessary educational programmes for all

the customers to understand the operation of the loan facility and Minimize loan repayment default.

The role of rural bank in the development of SME’s | 5

 Table of Contents
STUDENTS’ DECLARATION…………………………………………………………………………............. 2
SUPERVISOR’S DECLARATION………………………...…………………………………………………… 2
HOD’S CERTIFICATION…………………………………………………………...………………………….. 2
ACKNOWLEGEMENT…………………………………………………………………………………………. 3
DEDICATION……………………………………………………..…………………………………………….. 4
ABSTRACT………………………………………………...……………………………………………………. 5

CHAPTER ONE.......................................................................................................................................9

INTRODUCTION....................................................................................................................................9

1.1 BACGROUND OF THE STUDY................................................................................................9

1.2 STATEMENT OF PROBLEMS................................................................................................10

1.3 OBJECTIVE OF THE STUDY.................................................................................................11

1.5 SIGNIFICANACE OF THE STUDY........................................................................................12

1.6 SCOPE OF THE STUDY...........................................................................................................12

CHAPTER TWO....................................................................................................................................13

LITERATURE REVIEW......................................................................................................................13

2.0 INTRODUCTION............................................................................................................................13

2.1 STRUCTURE AND PERFORMANCE OF RURAL BANK AND MICRO FINANCE

INDUSTRY.............................................................................................................................................13

2.2 THE ESTABLISHMENT OF RURAL BANKS PRIOR TO THE RURAL FINANCE IN

GHANA...................................................................................................................................................14

2.3 RURAL AND COMMUNITY BANKS..........................................................................................16

2.4 RURAL BANK OPERATIONS......................................................................................................17

2.5 NATURE AND DEFINITIONS OF MICRO ENTERPRISES...................................................18

2.6 THE IMPACT OF SME BANKING..............................................................................................20

2.7 CHALLENGES BANKS FACE IN SUPPLYING SERVICES TO SMEs.................................20

The role of rural bank in the development of SME’s | 6

2.8 RELEVANCE OF SME SECTOR.................................................................................................23

2.9 THE ROLE OF RURAL BANKS IN ECONOMIC GROWTH AND DEVELOPMENT.......23

CHAPTER THREE...............................................................................................................................25

METHODOLOGY.................................................................................................................................25

3.0 INTRODUCTION............................................................................................................................25

3.1 THE RESEARCH DESIGN............................................................................................................25

3.2 POPULATION.................................................................................................................................25

3.3 SAMPLE AND SAMPLING PROCEDURE.................................................................................25

3.4 DATA SOURCES.............................................................................................................................26

3.5 INSTRUMENTATION....................................................................................................................26

3.6 DATA COLLECTION PROCEDURE..........................................................................................27

3.7 DATA ANALYSIS...........................................................................................................................27

CHAPTER FOUR..................................................................................................................................28

4.1 DATA ANALYSIS AND PRESENTATION OF RESULTS.......................................................28

4.1 DEMOGRAPHIC DATA OF CREDIT STAFF...........................................................................28

4.2 RESPONSES FROM STAFF..........................................................................................................32

4.3 FUNDS MOBILIZATION..............................................................................................................33

4.4 INTEREST RATE ON MONIES BORROWED..........................................................................33

4.5 LOANS PROVIDED BY RURAL BANKS...................................................................................34

4.6 BANK MONITORING MEASURES.............................................................................................35

4.7 REASONS FOR DECLINING LOAN APPLICATION..............................................................35

4.8 CHALLENGES THAT THE BANK ENCOUNTERS IN PROVIDING LOAN FACILITIES

..................................................................................................................................................................35

4.9 RESOLVING THE CHALLENGES OF THE BANK.................................................................36

CHAPTER FIVE....................................................................................................................................37

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS........................................................37

5.0 INTRODUCTION............................................................................................................................37

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5.1 SUMMARY OF FINDINGS...........................................................................................................37

5.2 CONCLUSION.................................................................................................................................38

5.3 RECOMMENDATIONS.................................................................................................................38

REFERENCES.......................................................................................................................................39

The role of rural bank in the development of SME’s | 8

 CHAPTER ONE

INTRODUCTION

1.1 BACGROUND OF THE STUDY

The 1192 constitution of the Republic of Ghana makes a commitment to rural development as part of a

national strategy to improve the living conditions in rural areas. In spite of the name, rural banks are

found in both rural and urban settings. They are supervised by both the central bank and the ARB Apex

bank which is the umbrella bank for all rural banks. In recent times they have integrated into the

payments and banking systems in the country though it is believed that they have existed informally for

a very long time. The existence of rural banks has made banking available to the ordinary Ghanaian and

has made it less frightening. Their operations include credit and deposit services for relatively poor

clients. The generally expected roles of Union rural bank on Small and Micro Enterprise in Ghana are

to:

i. Mobilize savings from micro-enterprise in Ghana.

ii. Accept cash and cheques from the crediting of current and savings accounts.

iii. Ensure a proper and accurate handling of all money transactions entrusted to the union rural

bank.

iv. Provide trustworthy and sound accounting to their customers (micro-enterprises) and accept

securities for safe custody.

v. Engage in any activities that will promote social and economic development of the community

(World Bank – Africa Region, 1999).

The Small and Micro-Enterprises (SME’s) are often described as efficient and prolific job creators, the

seeds of big businesses and the fuel of national economic engines. Even in the developed industrial

economies, micro-enterprise’s sector is the largest employer of workers. SME’s are also believed to

The role of rural bank in the development of SME’s | 9

contribute about 80% to Ghana’s Gross Domestic Product (GPD) and account for about 93% of

businesses in Ghana. It has also formed the subject of discussion in so many seminars and workshops

both locally and internationally. Union rural bank had formulated policies aimed at facilitating and

empowering the growth, development and performance of the micro-enterprise. Some of the efforts

related to focus on assisting the SME’s to grow through soft loans, managerial training and other fiscal

incentives through support from international agencies and organizations like world bank.

1.2 STATEMENT OF PROBLEMS

In spite of the positive influence that the rural banks have on the small and micro-enterprises (SME’s)

as compared with other financial institutions, they have not played the expected vital role in the

economic growth and the development of Ghana. Small and Micro Enterprises (SMEs) are believed to

contribute about 70% of Ghana‘s GDP and account for about 92% of businesses in the country (Abor

Joshua and Peter Quartey, 2010). This situation has been of great concern to the government, citizenry,

operators, the organized private sector group. It is within this context that this study sought to

investigate the contribution of Rural Banks, henceforth the Rural Banks are a network of 127

independent banks in Ghana (Nair and Fissha, 2010).

Interest in the role of SMEs in the development process continues to be at the forefront of policy

debates in most countries (Steel and Webster, 1989). Thus, governments at all levels have undertaken

initiatives to promote the growth of SMEs (Feeney and Riding, 1997). Capital, as a result of access to

credit, also enhances the level of household‘s productive and physical assets and raise expenditure that

leads to improvement in the consumption of the rural poor (Mensah, 2004).Olajide (1980) identifies

two sources of credits for SMEs and classified them as internal and external. While the internal funds

arise from net flow as a result of entrepreneurial activities, the external funds arise from loans extended

by micro finance providers, and equity introduced by new proprietors.

The role of rural bank in the development of SME’s | 10

Thus, before the establishment of rural banks in the late 1970s and the subsequent expansion of other

service providers into rural areas, access to institutional credit for farm and nonfarm activities was

scarce, and the main sources of credit were moneylenders and traders that charged very high interest

rates (Nair and Fissha, 2010). In many rural communities, secure, safe and convenient savings and

payment facilities hardly existed (Nair and Fissha, 2010). Many rural dwellers had to travel long

distances to receive payments (such as salaries and pension deposits), transfer funds, and cash check

payment for their agricultural produce (Nair and Fissha, 2010). The Government of Ghana (GOG) has

taken several measures to increase access to credit in rural areas (Nair and Fissha, 2010). Most Small

and Micro-enterprises in Ghana do have problems in dealing with the rural bank. Some of these

problems includes,

i. The Preparing viable business proposals

ii. Providing collateral securities that the banks do demand

iii. The interest rate or bank charges (it is very difficult these days for the micro-enterprises to

borrow money from the rural banks because of the high interest rates charged by the universal

banks as well as saving and loans companies are killing businesses in the country, especially the

micro-enterprises

1.3 OBJECTIVE OF THE STUDY

The aim of the study is to

i. Find out service provided by rural banks to SME’s

ii. Assess the contribution the rural bank provides to the SME’s towards the growth of the sector in

Ghana.

iii. Provide recommendation regarding how rural banks can give maximum support in the

development of SME’s.

The role of rural bank in the development of SME’s | 11

1.4 RESEARCH QUESTION

The following questions are meant to assist the researcher to focus on the objective of the study

i. What products are offered by rural bank to SME’s?

ii. What challenges are faced by SME’s in obtaining desired assistance from rural banks?

iii. In What ways can the challenges faced by the SME’s in assessing bank loans from rural bank

can be solved?

1.5 SIGNIFICANACE OF THE STUDY

This research was carried out to assess the role of rural banking on SME’s and also make appropriate

recommendations. The findings of the study would help rural bank see the need to support the micro-

enterprises. It would also help in addressing some of the challenges the micro-enterprise faces in

assessing bank loans from rural bank.

1.6 SCOPE OF THE STUDY

The study focused on the Ejisu-Juaben Municipal District, one of the rural districts in the Ashanti

Region of Ghana. The district also has Micro Finance Schemes operating by the rural banks and other

Micro Finance Institutions (MFIs). The research is also familiar with the area. Within the context of

this study, the focus is on contribution of rural banks to micro enterprise development because they

dominate in the rural districts. In the light of the important role that micro and small scale industries do

and could play in local development in Ghana, and the problems they face in the three interrelated areas

The role of rural bank in the development of SME’s | 12

of supply, production, and marketing, it is important to have an in depth study into the role of rural

banks in supporting them.

CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION

This chapter reviews relevant literature and studies conducted by other researchers on similar topics.

The chapter has been arranged in sub-topics in relation to the variables under study. The chapter also

analyses literature on Development, the nature and definition of Micro Enterprises, and challenges

associated with credit delivery to these enterprises.

2.1 STRUCTURE AND PERFORMANCE OF RURAL BANK AND MICRO FINANCE

INDUSTRY

The financial system in Ghana falls into three main categories; formal, semi-formal and informal:

i. Formal financial institutions: are those incorporated under the Companies Code 1963 and

licensed by the Bank of Ghana (BOG)under either the Banking Law 1989 or the Financial

Institutions (Non-Banking) Law 1993 (NBFI Law) to provide financial services under Bank of

Ghana regulation. Rural and Community Banks (RCBs) operate as commercial banks under the

Banking Law, except that they cannot undertake foreign exchange operations, their clientele is

drawn from their local catchments area, and their minimum capital requirement is significantly

lower. Among the nine specified categories of non-bank financial institutions (NBFIs), the

Savings and Loans Companies (S&Ls), which are restricted to a limited range of services, are

The role of rural bank in the development of SME’s | 13

 most active in micro and small-scale financial intermediation using microfinance

methodologies.

ii. Non-Governmental Organizations (NGOs) and Credit Unions (CUs) are considered to be semi-

formal – legally registered but not licensed by the Bank of Ghana. NGOs are incorporated as

companies limited by guarantee (not for profit) under the Companies Code. Their poverty focus

leads most of them to provide multiple services to poor clients, including micro credit, though

mostly on a limited scale. They are not licensed to take deposits from the public and hence have

to use external (usually donor) funds for micro credit. Credit Unions are registered by the

Department of Cooperatives as cooperative thrift societies that can accept deposits from and

give loans to their members. Although credit unions are nominally included in the NBFI Law,

BOG has allowed the apex body Ghana Cooperative Credit Union Association to continue to

regulate the societies pending the introduction of a new Credit Union Law.

iii. The informal financial system covers a range of activities known as susu including individual

savings collectors, rotating savings and credit associations, and savings and credit “clubs” run

by an operator. It also includes moneylenders, trade creditors, self-help groups, and personal

loans from friends and relatives. Moneylenders are supposed to be licensed by the police under

the Moneylenders Ordinance 1957. The commercial banking system is dominated by a few

major banks (among the 17 total) and reaches only about 5% of households, most of which are

excluded by high minimum deposit requirements. With 60% of the money supply outside the

commercial banking system, the RCBs, S&Ls, and the semi-formal and informal financial

systems play a particularly important role in Ghana’s private sector development and poverty

reduction strategies. The assets of RCBs are nearly 4% of those of the commercial banking

system, with S&Ls and CUs adding another 2%. While “RMFIs” is used to refer collectively to

the full range of these institutions, they use different methodologies to reach different (albeit

The role of rural bank in the development of SME’s | 14

 overlapping) clientele among farmers, rural households, the poor, and micro enterprises, and

hence different regulatory and supervisory instruments may be appropriate.

2.2 THE ESTABLISHMENT OF RURAL BANKS PRIOR TO THE RURAL FINANCE IN

GHANA

Before the establishment of rural banks in Ghana in the late 1970s and the subsequent expansion of

other service providers, such as NGOs into rural areas, access to institutional credit for farm and

nonfarm activities was scarce (Aghion and Bolton 1997). The main sources of credit were

moneylenders and traders that charged very high interest rates (Nair and Fissha, 2010). In many rural

areas, secure, safe, and convenient savings and payment facilities hardly existed (Aghion and Bolton

1997). Many rural dwellers had to travel long distances to receive payments (such as salary and pension

deposits), transfer funds, and cash check payments for their agricultural produce (Nair and Fissha,

2010). This situation led the Government of Ghana (GOG) to take several measures to increase access

to credit in rural areas (Nair and Fissha, 2010). After establishing an agricultural lending requirement

for commercial banks and creating a publicly owned agricultural development bank, the GOG

facilitated the establishment of rural banks (Nair and Fissha, 2010).Before the establishment of the first

rural bank in 1976, the availability of formal credit in rural communities predominantly made up of

small farmers and traders was extremely limited (Nair and Fissha, 2010). The main sources of credit

were moneylenders and traders charging exorbitant interest rates (Nair and Fissha, 2010). The

Government of Ghana had to take some policy measures to improve access to finance in rural areas.

These measures included a requirement that commercial banks lend at least 20 percent of their portfolio

for agricultural uses and the establishment of the Agricultural Development Bank (ADB) in 1965 with

an exclusive mandate of lending for agriculture and allied industries in rural Ghana (Andah and Steel

2003). Subsequently, commercial banks and the ADB opened branches especially in cocoa growing

rural areas (Nair and Fissha, 2010). Nevertheless, lending to the rural sector remained low; the

The role of rural bank in the development of SME’s | 15

commercial banks used their rural branches primarily to make payments to cocoa farmers and collect

deposits for lending in urban areas (Nair and Fissha, 2010). Other Banking services, such as credit,

were not provided as initially envisioned (Nair and Fissha, 2010). Commercial banks demanded higher

deposit accounts and stronger collateral requirements to provide loans to rural areas (Osei-Bonsu,

1998). Many small farmers and traders did not have deposit accounts in commercial banks, and the

collateral they had available was not satisfactory for commercial lending (Andah and Steel 2003).

Mensah (1993) and Ranade (1994) indicate that, the ADB‘s credit provision and coverage were limited.

According to them, only 27 percent of the Bank‘s branches were in rural areas, and lending to

smallholder farmers made up only about 15 percent of its total portfolio. In view of that situation, the

Government of Ghana (GOG) considered supporting the establishment to rural banks in rural areas that

would be dedicated to providing financial services in those areas (GOG, 2002). In that regard, the bank

of Ghana (BOG) was asked to send a delegation to the Philippines to study the rural banking system

there and afterward decided to facilitate the opening of banks in rural farming and trading communities

(Nair and Fissha, 2010)

2.3 RURAL AND COMMUNITY BANKS

RCBS are unit banks owned by members of the rural community through purchase of shares and are

licensed to provide financial intermediation. They were first initiated in 1976 to expand savings

mobilization and credit services in rural areas not served by commercial and development banks. The

number expanded rapidly in the early 1980s, mainly to service the government’s introduction of special

checks instead of cash payment to cocoa farmers – though with adverse consequences for their financial

performance (Nissanke and Aryeetey 1998). Through a combination of rapid inflation, currency

depreciation, economic decline, mismanagement of funds and natural disasters, combined with weak

supervision, only 23 of the 123 RCBs qualified as “satisfactory” in 1992. The obvious need for re-

capitalization and capacity-building was addressed during 1990-94 under the World Bank’s Rural

The role of rural bank in the development of SME’s | 16

Finance Project, with half of them achieving “satisfactory” status by 1996. The combination of very

high (62%) primary and secondary reserve requirements imposed by BOG in 1996 and high Treasury

bill rates helped to reduce the risk assets and increase net worth, further improving their financial

performance. The number of RCBs reached a peak of 133 in 1998, but fell to 111 in 1999 with the

closure of 23 distressed banks and the commissioning of one new bank. These closures sent a strong

signal to the remaining rural banks to maintain or improve their operations in order to achieve

satisfactory status. Between 1999 and 2001 there was 64% increase in the number of satisfactory banks.

2.4 RURAL BANK OPERATIONS

The Bank of Ghana has streamlined Rural Bank lending operations to ensure that Bank credit actually

benefits the small scale rural producer and the rural community. The Bank of Ghana has developed an

Operational Manual for all Rural Banks. Applications are accepted from individuals, groups,

associations, and companies. Recommendations to reject an application must be justified by specific

and clearly stated reasons and cannot be based on vague suspicions. Before granting a loan to a group,

the Bank requires that there be mutual trust and respect among members. In the case of a group loan

approval, members are held jointly and severally liable. The group cannot exceed 20 members, and the

group leader must have a clean loan record.

The Bank of Ghana has developed a mandatory sectorial allocation for Rural Bank loans. The

allocation ensures that the bulk of the resources go to agriculture, the priority sector in Rural Bank

lending. To ensure that resources assist small farmers, the Bank of Ghana requires that the maximum

acreage a loan-eligible farmer can cultivate is 10 acres for vegetables and 100 acres for staple crops.

The Rural Banks try to reduce the cash element in the loans to the minimum possible to prevent the

diversion of funds for purposes other than those for which they are granted. The Banks arrange for

The role of rural bank in the development of SME’s | 17

inputs to be made available in kind (raw materials, seeds, fertilizers, equipment and machinery, etc).

Loan repayment conditions are determined with reference to the borrower’s capacity to repay. A “grace

period” is allowed between the loan approval date and the time the borrower is expected to generate

sufficient income to repay the loan. During the “operation period” of the loan, the Bank’s Project

Officer monitors the borrower to ensure proper use of funds and punctual repayment.

Routine and emergency visits by the Project Officer are common during the operation period of the

loan. Rescheduling may be allowed if there are circumstances which the loans committee or board of

Directors accepts as “unforeseen developments.” If there is default on the loan, the case is sent to the

Bank’s lawyer(s) for action. By 1990, the Rural Banks were experiencing negative profitability

resulting in capital inadequacy and, in some cases, the inability to meet depositors’ withdrawal

demands. The Bank of Ghana ordered a restructuring of the Rural Banks. By December of 1991 all of

the Rural Banks had undergone diagnostic study conducted by outside consultants. The restructuring

was designed to determine financial strength, organizational capability, and management status in line

with existing statutory requirements.

The Banks updated and standardized accounts and procedures. The Banks introduced internal control

systems and management information systems. After the restructuring process, the number of Rural

Banks meeting the capital adequacy requirement increased from 2 to 55. The Bank of Ghana has

instituted measures to maintain public confidence in the remaining mediocre and distressed Rural

Banks (Bank of Ghana 1995). Today, the Rural Banks are still given the opportunity to determine who

should benefit from their credit resources. There is substantial anecdotal evidence of misdirection and

misapplication of rural credit by the Rural Banks and the rural people. Many rural banks appear to give

credit to people who do not fall into the Bank of Ghana target groups. It is not uncommon to see many

credit recipients spending borrowed credit on land litigation and funeral ceremonies instead of

productive ventures. The Bank of Ghana initiated the Rural Bank system with the hope that small-scale

The role of rural bank in the development of SME’s | 18

rural producers and small towns would benefit from the new credit resources. It is uncertain whether or

not the Rural Banks are fulfilling the basic functions for which they were created.

2.5 NATURE AND DEFINITIONS OF MICRO ENTERPRISES

The heterogeneity of micro enterprises, often referred to as Small-Scale Enterprise (SSE) sector,

complicates the problem of defining it (Dinye, 1991). Thus, the concept is defined in different ways,

depending on the purpose of classifying firms as micro, small, medium or large-size (Dinye, 1991). For

instance, The USAID (1989) defines Small-Scale Enterprises as firms with less than 50 employees and

at least half the output is sold while UNIDO (1986) refers to firms with employees ranging from 5 to 19

as Small Scale Enterprises in developing countries (Kayanula, 2000). Technologically, the sector is said

to use low-level inputs and skills, to have much greater labor intensity, to produce lower priced

products and to operate on a small-scale (Kayanula, 2000). It covered micro or small enterprises

operating at various levels along the formality–informality continuum (Kayanula, 2000). The "Private

Sector Diagnosis Survey" (USAID 1989) found that smallest enterprises in Kenya had fewer than 20

employees. In Ghana, various definitions of Micro or Small Scale Enterprises can be identified from

the literature. According to Kayanula (2000). The National Board for Small Scale Industries (NBSSI)

in Ghana applies to both the fixed asset and number of employee’s criteria. NBSSI defines Micro

industries as one with less than five employees, Small Scale Industries as one with not more than 9

workers, have plant and machinery including (excluding land, building and vehicles) not exceeding one

thousand Ghana cedi.

Micro Enterprises are defined as business undertakings employing less than 5 people, often family

members; value of assets excluding land, buildings and working capital is below Ush2,5 million;

annual turnover is below Ush10 million, which is the threshold for business related tax. Qualitative

Characteristics of micro enterprises are that they operate seasonally, usually they are not registered

The role of rural bank in the development of SME’s | 19

formally and hence have no access to formal services. They do not pay enterprise--‐related taxes and

their management is rather weak in terms of both education and administrative capabilities.

Micro Enterprises (Kayanula, 2000) and (Boapeah, 1992: 5) and it is this definition that has been

adopted in the course of this study. The employee criterion which has been considered in this study is

also similar to the definition of Small-Scale Enterprises adopted by the NBSSI. The rationale behind

this employee criterion is due to the fact that firms can easily be identified by their number of

employees and in part because the process of valuing fixed assets itself poses a problem since

continuous depreciation in the exchange rate often makes such definitions outdated.

Small enterprises: On the other hand, were defined as enterprises employing a maximum 50 people;

the value of assets excluding land, buildings and working capital is less than GH¢50 million; annual

turnover is between GH¢10–50 Million which is the tax bracket for 1% Business tax on annual

turnover. Other Qualitative characteristics of such enterprises are that they operate the whole year

round, are formally registered and taxed and owners/managers are educated and/or trained.”

Medium enterprises: those with employees between 100 to 499, the EU definition recognizes that the

SME group is not homogenous, in the sense that distinctions are made between micro, small and

medium-size enterprises. According to Dinye (1991), micro or small-scale industries are defined as

manufacturing units employing not more than 30 persons. Therefore, a small enterprise can be

distinguished from a large one in respect of uncertainty, innovation and evolution (Dinye, 1991)

2.6 THE IMPACT OF SME BANKING

Banks have turned on a better leaf towards the SME sector. They render good services to the Small

MICRO Enterprises. Some banks with the SME Banking service use to have small SME portfolio but

with time these banks have increased their SME portfolio even though this increment is small relative

to the various banks overall business portfolio. The increment of their SME portfolio has had an

influence on the economy. In general, financial institutions increased lending from 0.3 percent to 1.8

The role of rural bank in the development of SME’s | 20

percent of real GDP between 2002 and 2006, a 500 percent increase. Again, at least three banks in

Ghana have partnered with financial institutions, enabling those institutions to obtain needed capital for

on lending (USAID)

2.7 CHALLENGES BANKS FACE IN SUPPLYING SERVICES TO SMEs

Despite the strong demand for finance from the small firms, banks may perceive lack of effective

demand by clients they consider credit worthy. Small firms have encountered problems when

approaching providers of finance for funds to support fixed capital for their operations. (Tucker and

Lean, 2003). Difficulties banks face in supplying financial services to SMEs include:

i. Information and Risk

Statistically, small firms tend to have high failure rates; hence, banks need to be selective. It is difficult

however to assess accurately the viability of small enterprises, the abilities of the entrepreneur, and the

likelihood that the client will repay which are the most important criteria of creditworthiness applied by

the banks. Banks are also faced with information asymmetry where SMEs provide incomplete

information. Stieglitz and Weiss (1981) refer to information asymmetry as the disparity between the

information available to the business seeking capital and suppliers of capital that are typically assumed

to be at an informational disadvantage with respect to the insider of the business.

ii. Collateral

Banks usually require collateral to force repayment, to offset losses in cases if default and to help

screen applicants. The result is that; smaller firms tend to get screened out since they are least likely to

be able to provide acceptable collateral. Even though, most SMEs may provide their owned property,

The role of rural bank in the development of SME’s | 21

the difficulty of proving legal, enforceable title to lend may render it unacceptable to banks as

collateral.

iii. Cost

Most SMEs lack financial accounts and may have difficulty filling out bank forms correctly. The cost

of processing and monitoring small loan exceeds that of loans to large enterprises on per loan basis.

Banks estimated that, it takes an average of 24 days to gather information and process an application

for small firms as against 16 days for large scale firms.

iv. Lack of Management Expertise and Effective Succession Plan

Many SMEs owners or managers lack managerial training and experience. The typical owner or

managers of small businesses develop their own approach to management, through a process of trial

and error. As a result, their management style is likely to be more intuitive than analytical, more

concerned with day to day operations than long term issues, and more opportunistic than strategic in its

concept (Hill,1987). Although this attitude is the key strength at the start up stage of the enterprise

because it provides the creativity needed, it may present problems when complex decisions have to be

made. A consequence of poor managerial ability is that SME owners are ill prepared to face changes in

the business environment and to plan appropriate changes in technology. Majority of those who run

SMEs are ordinary lot whose educational background is lacking. Hence they may not well be equipped

to carry out managerial routines for their enterprises (King and McGrath 2002). Succession planning is

a means by which an organization can operate as a going concern. Succession planning is to affect not

only top management but the whole organization. The absence of these often makes it difficult for

SMEs to profitably handle loans.

2.7 PRODUCTS AND SERVICES PROVIDED BY RURAL BANKS

The role of rural bank in the development of SME’s | 22

The basic mandate of rural banks is the mobilization of savings and the extension of credit to deserving

customers in their areas of operation. A lot of progress has been made since the first rural bank was

established in 1976 (Osei-Bonsu, 1998). Deposits have been mobilized, loans have been granted, the

habit of savings and thrift have been inculcated in the minds of our rural dwellers.

Savings product: Rural banks savings products include regular savings accounts, current accounts,

susu deposits, and fixed or time deposits (Nair and Fissha, 2010). The interest rate for regular savings is

low and is paid only once a balance reaches a certain amount (usually higher than the balances held by

most savers). Many rural clients have access to this type of account; unlike other commercial banks,

rural banks do not require a high balance to open an account (Nair and Fissha, 2010). Susu is the

second-largest account type (Nair and Fissha, 2010).

Credit: The credit products offered by rural banks include microfinance loans, personal loans, salary

loans, susu loans, and overdraft facilities. Rural bank loans are used for agriculture, cottage industries,

and trading.

2.8 RELEVANCE OF SME SECTOR

The importance of Micro-enterprises to social and economic development in Ghana and even Africa is

undisputed. Throughout the continent, Micro-enterprise promotion is a priority in the policy agenda of

most African countries as it is widely recognized. There is no doubt that Micro-enterprises constitute

the seed bed for the imminent generation of African entrepreneurs. According to United Nations

Industrial Development Organization (UNIDO), Micro-enterprises account for more than 80% of all

registered businesses in Africa. Small and medium rural and urban enterprises have been one of the

major concerns to many policy makers in an attempt to accelerate the rate of growth in an economy

such as ours. These enterprises have been identified as the engine through which the growth objective

of developing middle income countries like our nation can be achieved. Micro-enterprises provide

The role of rural bank in the development of SME’s | 23

employment and incomes to a large portion of urban labour force and area significant source of total

output (Aryeetey, 2001). Daniels, 1994 estimated that micro-enterprises employ about 22% of the adult

population in many developing countries. It is also estimated that micro-enterprises generate about 50%

of national output and provide about 60% employment to Ghanaians (Minister of Finance, Dr Kwabena

Dufour, reported by Business and Financial Times 13-07- 2009).

2.9 THE ROLE OF RURAL BANKS IN ECONOMIC GROWTH AND DEVELOPMENT

Generally, Microfinance is defined as the provision of thrift, credit and other non-financial services in

very small amount to the poor to empower them raise their income level and improve their standard of

living (Eluhaive, 2005). Arising from this definition, Microfinance Bank, according to the Central Bank

of Nigeria (CBN, 2009), is a company licensed to carry out the business of providing Microfinance

services such as savings, loans, insurance, money transfer and other financial services that are needed

by the economically poor, micro, Small and Micro Enterprises.

Economic growth: refers to the concerted and sustained effort to improve the standard of living of the

citizenry by means of improving the productive capacity of the economy (Njiforti, Adama & Kromiti,

2008). Economic growth policies, according to Obianuju (2012) involve multiple areas such as

mobilization of savings, accessibility to credit, employment generation, poverty reduction etc.

Economic development on the other hand entails policies by which a nation improves the economic,

political, and social well-being of its citizens (Okunmadewa, 2001). Syrous and Laura (2007) define

economic development as a process by which an economy is transformed from one that is dominantly

rural and agricultural to one that is dominantly urban, industrial, and service in composition. In pursuit

of economic growth and development by all nations of the world, economists have developed a number

of theories to explain and facilitate the process. The theories or model include that of Keynesian

macroeconomic growth model, Harrod-Domar model, Leontif‘s input/output model and a host of

others. The centre piece of all the models is that economic growth and development is tied down to

The role of rural bank in the development of SME’s | 24

levels of savings, investment, employment generation and poverty reduction (Obianuju, 2012). Based

on theoretical propositions, countries have developed various measures to strengthen the banking sector

to play the intermediary role of mobilization of savings and allocating it to the productive sectors of the

economy for investment, employment generation and poverty reduction, especially in rural areas. In

Nigeria, the conventional banks provide financial services only to about 35% of the economically

active population while the remaining 65%, are excluded from access to financial services of the banks

(C.B.N, 2005). Microfinance according to C.B.N (2005) is about providing financial services to the

poor who largely constitute the 65% excluded from access to financial services of conventional banks.

According to Taiwo (2012) microfinance has worked successfully in many parts of the world-Africa,

Latin America, Europe and North America. Through microfinance the poor people in most countries

were able to have access to variety of financial services comprising savings, loans, money transfer and

insurance. The accessibility has resulted in employment generation, poverty reduction and consequently

economic growth and development (Taiwo, 2012).

CHAPTER THREE

METHODOLOGY

3.0 INTRODUCTION

This chapter discusses the research design, the population and sample. It also discusses the instruments

used in the data collection, the procedure for data collection and the method for data analysis.

3.1 THE RESEARCH DESIGN

The research design used is survey design. A research design is a systematic plan to study a scientific

problem. The design of a study defines the study type for example descriptive, correlational, semi-

experimental, experimental, review, or meta-analytic. The survey design involves the collection and

analysis of data, and finding out the answers concerning the current status of the subject. Also, it is a

The role of rural bank in the development of SME’s | 25

study of variables in their natural setting or under usual circumstances. This comprises observation of

facts, formulation of hypothesis, collection and classification of data, interpretation of data, formulation

of theories, application of facts and predictions. Since human behaviour is probabilistic and cannot be

predicted, it makes the results of the research at times not applicable to the whole population. However

the finding can be relied upon to make predictions within acceptable limits.

3.2 POPULATION

The target population is staffs of union rural bank Ejisu-Juaben District.

3.3 SAMPLE AND SAMPLING PROCEDURE

The Purposive sampling procedure was used to select ten members of staff for the survey. The

Purposive sampling method was used because it allowed the researcher to select sample members who

in her opinion can contribute effectively to the study. Purposive sampling is used primarily when there

are a limited number of people that have expertise in the area being researched. The ten members of

staff consisted of Accountants, Secretary, General Bank Manager, Tellers etc.

3.4 DATA SOURCES

Data for the study was obtained from two main sources, primary and secondary data.

Primary data:

Primary data consisted of data collected at the first hand purposely for the study. Questionnaires were

used to collect the primary data. Interviews were also used to seek additional information where

necessary.

Secondary data:

The role of rural bank in the development of SME’s | 26

The study also relied on secondary data from reports of rural banks and published information on the

topic of study.

3.5 INSTRUMENTATION

Questionnaire was the major instrument that was used to collect the data. Questionnaire was used in

order to get a standard form of answers or response. A questionnaire is a research instrument consisting

of a series of questions and other prompts for the purpose of gathering information from respondents.

Although they are often designed for statistical analysis of the responses, this is not always the case.

Questionnaires have advantages over some other types of surveys in that they are cheap, do not require

as much effort from the questioner as verbal or telephone surveys, and often have standardized answers

that make it simple to compile data. The questionnaire used consisted of both open-ended and close

ended questions. Interviews were also used to supplement the questionnaires. Secondary data were also

sourced from reports and from the internets.

3.6 DATA COLLECTION PROCEDURE

The questionnaire was distributed to the respondents to complete. Clarifications were sought through

interviews. Additional information was sought from reports on rural banking and annual reports of

Union Rural Bank. The internet also provided useful secondary information.

3.7 DATA ANALYSIS

The data collected has been analyzed using frequency table, percentages and bar charts to enable

inferences and deductions to be made to arrive at findings. The Microsoft excel was used for the

analysis.

The role of rural bank in the development of SME’s | 27

 CHAPTER FOUR

4.1 DATA ANALYSIS AND PRESENTATION OF RESULTS

This Chapter presents the data and the discussions of the results obtained from the study. These are

presented using descriptive statistical presentation tools such as frequency table, figures, graphs and

charts. The chapter discusses the data in terms of how they address the key issues that informed this

study. Other issues discussed in the chapter include the types of businesses ran by entrepreneurs,

sources of funding for business start-ups challenges micro-entrepreneurs and potentials for making

micro-enterprise development a vehicle for economic and socio-political empowerment of

entrepreneurs and also challenges faced by Rural banks in the district. The purposive sampling method

was used because it allowed the researcher to select sample members opinions can contribute

effectively to the study. In all, a total of 20 questionnaires were administered to the credit staff of the

Rural Banks. All the questionnaires from the credit staff were collected and this represents a total of

100% response rate.

4.1 DEMOGRAPHIC DATA OF CREDIT STAFF

Tables 4.1.1 Gender distribution of staff

GENDER NUMBER OF PERCENTAGE

DISTRIBUTION RESPONSES (%)
MALE 12 60

FEMALE 8 40

TOTAL 20 100
Source: Field Data, 2020

From Table 4.1.1 above show that, 60% of the staff was males, while 40% was females. Majority of

the staff were males.

The role of rural bank in the development of SME’s | 28

Tables 4.1.2 Age distribution of staff

AGE NUMBER OF PERCENTAGE

DISTRIBUTION RESPONSES (%)
20-30 6 30

31-40 9 45

41-50 5 25

ABOVE 50 - -

TOTAL 20 100
Source: Field Data, 2020

The Table shows that about 30% of the staff were between the ages of 20-30, 45% were between the

ages of 31-40 and 25% were between the ages of 41-50. The implication is that majority of the

respondents were mature n terms of age. Their responses would therefore have an influence on the

findings on the findings of the study.

Tables 4.1.3 Years of service of staff

NUMBER OF PERCENTAGE
YEARS
RESPONSES (%)
1-3 3 15

4-6 8 40

7-10 9 45

ABOVE 10 - -

TOTAL 20 100
Source: Field Data, 2020

The Table above shows that about 15% of the respondents had worked with the Rural Bank for

between 1-3 years, 40% of the respondents had worked for between 4-6 years. Whiles 45% of the

respondents had worked with the bank for more than 7 years but less than 10 years. The majority of the

The role of rural bank in the development of SME’s | 29

respondents therefore had worked with the bank for a period of years which puts them in a better

position to understand how the bank is operated and its influence on SME’s

Tables 4.1.4 Department of staff

NUMBER OF PERCENTAGE
DEPARTMENT
RESPONSES (%)
CREDIT 9 45

ACCOUNTS 6 30

CASHIER 5 25

OTHERS - -
TOTAL 20 100
Source: Field Data, 2020

From Table 4.1.4 above, 45% of the staff were in the credit department, 30% were also in the account

department and the remaining 25% were in the cashier department. This implies that majority who

answered the questionnaires were in the credit department and it puts them in a better position to assist

the researcher in matters relating to the role of rural banking on SME’s.

Tables 4.1.5 Educational background of staff

The role of rural bank in the development of SME’s | 30

 NUMBER OF PERCENTAGE
DEPARTMENT
RESPONSES (%)
2ND DEGREE 7 35

1ST DEGREE 9 45
PROFESSIONAL
4 20
CERFICATE
DIPLOMA - -
COMMERCIAL
- -
CERIFICATE
TOTAL 20 100
Source: Field Data, 2020

Table 4.1.5 above which classifies the educational background of staff respondents revealed that whilst

35% of the bank staff had a second degree, 45% had first degree. However, one member of the staff

representing 20% of the staff was found to have a professional certificate or qualification. The staffs

were found to be knowledgeable and experienced in their job schedule. This implication is that the bank

has qualified staff for jobs assigned to them.

Table 4.1.6 Type of Industry

NUMBER OF PERCENTAGE
DEPARTMENT
RESPONSES (%)
Manufacturing 8 40

Agriculture 7 35

Service 5 25
TOTAL 20 100
Source: Field Data, 2020

The industries that were involved in the study were manufacturing, agriculture and service providers.

Out of the 20 respondents involved in the study, 8 of them representing 40% were manufacturing

industries, 7 respondents representing 35% were agriculture and 5 respondents representing 25% in the

view of service providers.

The role of rural bank in the development of SME’s | 31

4.2 RESPONSES FROM STAFF

PERIOD OF OPERATION- FINANCIAL SUPPORT (LOAN) TO SME’S

The study assessed the number of years that the bank has operated in providing financial support (loan).

The responses of staff are summarized in figure 4.2

PERIOD OF OPERATION
14

12

10

0
NUMBER OF RESPONSE
one to five six to ten Above 10

Source: Field Data, 2020

From the chart above all the staff respondents were unanimous in stating that the rural bank has

provided loan facility for between 6-10 years. This means that the staffs have acquired experiences in

the operations of the banks.

4.3 FUNDS MOBILIZATION

Table 4.3 below illustrates that funds for advances as loan facility come from the bank’s own operation

and design products. The research study also assessed the conditions necessary for a customer to

qualify for loan advance. Figure 4.2 below summarizes the finding of the assessment.

The role of rural bank in the development of SME’s | 32

 NUMBER OF PERCENTAGE
DEPARTMENT
RESPONSES (%)
Central Bank Loan - -

Bank Operation 20 100

Customers’ Savings - -
TOTAL 20 100
Source: Field Data, 2020

4.4 INTEREST RATE ON MONIES BORROWED

With respect to interest rates, 12 respondents representing 60% borrowed monies with an interest rate

of 20%, 2 respondents borrowed monies with an interest rate of 26% representing 10% and 6

respondents borrowed monies with an interest rate of 30% representing 30%. Table 4.4 below shows

the interest rates on loans taken by respondents.

Table 4.4 Interest Rates Charged on monies Borrowed.

NUMBER OF PERCENTAGE
RATE (%)
RESPONSES (%)
20 12 60

26 2 10

30 6 30
TOTAL 20 100

4.5 LOANS PROVIDED BY RURAL BANKS

Table 4.5 below shows the responses and percentages of entrepreneurs who have ever collected loans

from rural banks to enhance their businesses and respondents who did not collect loans for their micro

enterprises. An overwhelming 75% of the respondents have ever collected loans from rural banks to

promote their businesses in one way or the other in the study area. 25% of the respondents said they

never collected credit to promote their micro enterprises. The study results showed that over 75% of the

The role of rural bank in the development of SME’s | 33

respondents contracted loans from the banks to support the development of their businesses. This

finding depicts that, rural banks are actually supporting the growth and development of micro

enterprises in the district by lending to them even though it is a high-risk area due to the non-

availability of collateral and level of business expertise of the micro entrepreneurs.

Table 4.5 Loans received by respondents

NUMBER OF PERCENTAGE
LOANS
RESPONSES (%)
YES 15 75

NO 5 25
TOTAL 20 100
Source: Field Data, 2020

However, 60% of the respondents borrowed the money at an interest rate of 20% which was the lowest

rate from the findings and is considered to be very high. According to Asiedu-Mante (2011) who stated

that monies borrowed from banks for businesses at an interest rate above 15% is too high for the person

to make profit to repay the loan. This therefore brings to bare the main challenge currently faced by the

rural banks in terms of high default rate recorded in their microfinance sector of their loan portfolio.

4.6 BANK MONITORING MEASURES

Table 4.6 Bank monitoring measures

NUMBER OF PERCENTAGE
CATEGORY
RESPONSES (%)
YES 20 100

NO - -
TOTAL 20 100
Source: Field Data, 2020

The role of rural bank in the development of SME’s | 34

Table 4.6 shows that there are effective monitoring measures in place to ensure sustainability of loan

facilities. All the respondents confirmed that the bank has monitoring system in place. Among such

monitoring measures are:

1. Group guarantee recovery scheme.

2. Monitoring of operations quarterly

4.7 REASONS FOR DECLINING LOAN APPLICATION

The study investigated the cause for the decline of loan application. Among the reasons were,  Bad

credit history of customer

1. Insufficient information about application

2. Lack of proof of ability to amortize the loan which is being sought for.

4.8 CHALLENGES THAT THE BANK ENCOUNTERS IN PROVIDING LOAN FACILITIES

Some of the challenges that the bank encounter in the provision of loan facility are:

1. Occasional default by some clients

2. Insufficient funds to meet some sectors of loan application

3. Insufficient logistics for ensuring effective monitoring of the scheme

4.9 RESOLVING THE CHALLENGES OF THE BANK

In solving the challenges of the bank, the staff agreed that frequent monitoring was essential. Sourcing

for on – lending funds was also necessary to support insufficient funds to meet credit demand on the

bank. There was also the need for logistics support from Bank of Ghana to Rural financial services.

The role of rural bank in the development of SME’s | 35

 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.0 INTRODUCTION

This study examined the role of rural banking on SME’s (Small Micro-Enterprises in the Ejisu-Juaben

Municipal District). The study also examined the contribution the rural bank provides to the SME’s

towards the growth of the development in Ejisu-Juaben Municipal District in Ghana. The study was

conducted through the use of both primary and secondary data. Questionnaires were the main

instrument for collecting the data from the staff of Rural Bank in the Ejisu-Juaben Municipal District.

For the Secondary data, information was obtained from publication of Rural Bank, journals and the

internet.

5.1 SUMMARY OF FINDINGS

The following are the main finding of the study:

1. The Bank has monitoring measures in place to ensure that the rate of default is minimized. The

credit staff were of the view that having the monitoring measures in place ensures prompt

payment and enables the bank to get rid of the dishonest clients from the bank operation.

Having the monitoring measures in place does not only ensure efficiency and effectiveness in

the scheme but enables the bank to have wide customer coverage.

2. The bank offers business advisory service to the business operators. Besides, the bank’s policy

on group membership is vital in enhancing the teamwork skills of the business operators. The

Rural Bank has been very instrumental to the growth of the business since the provision of loan

facilities to the customers of the bank who are operating viable businesses have enabled them to

expand their businesses and enhance the quality of service offered by them.

The role of rural bank in the development of SME’s | 36

 3. Occasional default by some clients, insufficient funds to cover other areas and logistics for

ensuring effective monitoring of the scheme are the challenges that the bank encounters with the

loan facility. Even though the bank is doing everything within its capability to ensure that these

challenges are resolved, it is disheartening that the problem persists.

5.2 CONCLUSION

The impact of rural banking on the development of Small and Micro Enterprise cannot be under

estimated. Most SMEs in Ghana have developed as a result of their affiliation with rural banks. Even

though Rural Banks that are into loan provision occasionally have some loan defaulting customers, the

role of Rural Banks is still significant in enchaining SMEs in Ghana. It was clear that Rural Bank has

played tremendous role in enhancing Small Micro Enterprises in its catchment area despite the

challenges. Some of the notable impact has been the regular provision of medium and short-term credit

facilities to enable the business operators enhance their service and ensure expansion of their

businesses. Also, the banks business advisory services enable the customers to enhance the quality of

their products and services. Most of the SME operators lack business disciplines and that such technical

advice is vital to enhancing their knowledge and enabling them to create value from their businesses.

5.3 RECOMMENDATIONS

Based on the conclusions of this study, the following recommendations are suggested for the bank to

streamline its operations and offer financial support to its customers.

1. The Bank should have proper management logistics to enable them embark on effective

monitoring of the activities of SME operators who take the loan facility.

2. The Rural Bank should put in place the necessary educational programmers for all the

customers to understand the operation of the Bank.

The role of rural bank in the development of SME’s | 37

 3. The Bank should provide the necessary advisory services for all the customers who access the

banks credit to enhance their business operation.

REFERENCES

[1] Amonoo, E.(1997) A strategies for an integrated Rural Development in Ghana in Rural

Development in Ghana .Ghana Universities press, Accra, Ghana.

[2] Association of rural banks, (1992) “Annual Report “Unpublished report on file at the Association of

Rural Banks. The Bank of Ghana, Accra, Ghana.

[3] Bank of Ghana, (1976) “A rural banking system in Ghana “(unpublished paper) Bank of Ghana ,

1985 Bank of Ghana operational manual for rural bank. Jupiter Printing Press Ltd, Accra Ghana.

[4] Bank of Ghana, (1995) Restructuring of Rural Banks. The Bank of rural, Accra Ghana.

[5] Brown, C.K.(1986) “Urban Bias and Rural Development in Ghana ’’, in rural development special

No.15 Ghana. Ghana Universities press Accra, Ghana. [6] FAO, (1994) “Rural Poverty in the 1990’s,

in Rural Development special No.15 Ghana Universities Press Accra, Ghana.

[7] Rostow, W.W., (1961) Stages of Economics Growth. Cambridge Universities Press, London.

[8] World Bank, (1975) Rural Development sector Development Policy. Washington D.C

[9] Ayyagari, M., Demirguc Kunt, A. And Maksimovic, V. (2006), “Small vs Young Firms across the

World: Contribution to Employment, Job Creation, and Growth”, Policy Research Working Paper, No.

5631.

[10] Kwame Afrane, (2002) “Impact Assessment of Micro Finance Interventions in Ghana and South

Africa”.

The role of rural bank in the development of SME’s | 38

[11] African Development ank (2005). African Economic Outlook 2004/2005: Recent Economic

Trends in Africa and Prospects for 2006. African Development Bank, Abidjan Discussion Paper on line

at http://www.uneca.org/eca_resources/publications/books/era2006/chap1 Aghion, P. & Bolton, P.

(1997).

APPENDIX

KUMASI TECHNICAL UNIVERSAL

Questionnaires to identify the role of banking industry on the small and micro-enterprise in the Ejisu-

Juaben Municipal District in the Ashanti Region of Ghana.

A. DEMOGRAPHIC DATA OF CREDIT STAFF

You are required to tick your answer

1. Sex

i Male [ ]

ii Female [ ]

2. Age

i. 20-30 [ ]

ii. 31-40 [ ]

iii. 41-50 [ ]

iv. Above 50 [ ]

3. Years of service

i 1-3 [ ]

ii 4-6 [ ]

iii 7-10 [ ]

The role of rural bank in the development of SME’s | 39

 iv Above 10 [ ]

4. Current Department

i Credit [ ]

ii Accounts [ ]

iii Cashier [ ]

iv Others [ ]

5. Level of Education

i 1st Degree [ ]

ii 2nd Degree [ ]

iii Professional Certificate [ ]

iv Diploma [ ]

v Commercial Certificate [ ]

6. Type of Industry

i Manufacturing [ ]

ii Agriculture [ ]

iii Service [ ]

B. RESPONSE TO FINANCIAL SUPPORT TO SME’s

7. Period of operation

i 1-5 years [ ]

ii 6-10 years [ ]

iii Above 10years [ ]

8. Funds Mobilization

i Central Bank Loan [ ]

ii Bank Operation [ ]

iii Customers’ savings [ ]

The role of rural bank in the development of SME’s | 40

9. Interest rate charged on monies borrowed

i 20% [ ]

ii 26% [ ]

iii 30% [ ]

C. LOANS PROVIDED BY RURAL BANKS

10. Do the bank provides loan to the SME’s

i Yes [ ]

ii No [ ]

11. Does the bank have measures to monitor loans received by SME’s?

i Yes [ ]

ii No [ ]

12. What factors do you consider when giving loans?

i Borrower’s Income [ ]

ii Previous credit records [ ]

iii Savings deposit [ ]

13. What are your concerns for lending to Micro Industries?

i High default risks [ ]

ii Lack of collateral [ ]

iii Size of the enterprise [ ]

iv Other [ ]

14. Have you refuse a loan request from SME’s?

i Yes [ ]

ii No [ ]

The role of rural bank in the development of SME’s | 41

15. What is the average time frame between receiving application and disbursement?

i 1 week [ ]

ii 1-3 week [ ]

iii Less than 1 week [ ]

iv Above 3 week [ ]

The role of rural bank in the development of SME’s | 42