As rural and community banks enter a new financial year shaped by easing interest rates and shrinking investment yields, a rural banking expert is urging the sector to rethink how it measures success and plans for growth.
He warns that strong headline profits recorded in recent years may offer little protection against a tougher operating environment ahead.
According to the Executive Director of Proven Trusted Solutions, Joseph Akossey, many RCBs have performed impressively on traditional financial metrics such as deposit mobilisation, asset growth, profitability, cost-to-income ratios and capital adequacy, with some posting their highest profits since inception.
However, he cautioned that these outcomes largely reflect past conditions and should not be mistaken for indicators of future resilience, arguing that banks must now shift attention from historical performance to forward-looking drivers of sustainable growth.
In his assessment of the rural banking sector, Akossey noted that while the recent performance of many RCBs has been commendable, there is a growing tendency for boards and management to become overly-enthused by results posted in 2024 and 2025.
“These are lagging indicators in finance -they reflect what has already happened,” he said in an interview with B&FT.
“The focus must now move to 2026 and beyond. That is where the leading indicators matter.”
Looking ahead, he projected that the year will be challenging for income generation as banks are forced to operate in a reduced-yield environment.
According to him, returns from government securities are no longer as attractive as they once were, while competition within the banking sector is intensifying.
He explained that although macroeconomic stability remains a priority, the Ministry of Finance is pursuing measures aimed at reducing the cost of borrowing in order to improve fiscal balances.
At the same time, lending rates are beginning to trend downward following a reduction in the policy rate and its transmission through reference rates set by universal banks.
To remain competitive, Akossey said rural and community banks will be compelled to lower their own lending rates – further compressing margins.
“The Bank of Ghana (BoG), particularly the Governor and other key stakeholders, are championing a reduction in interest rates. All these developments will continue to push lending rates down,” he observed.
Against this backdrop, he urged RCBs to re-strategise to survive what he described as a complex and increasingly volatile banking terrain.
“The era of generating profits effortlessly through heavy investment in government Treasury bills is over,” he said.
Cedi ends third week of January trading at GH¢10.87 to $1.
“Rural banks must return to real banking by focusing on their core mandate of mobilising deposits and lending to support economic activity and job creation within their catchment areas.”
This, he stressed, will require a fundamental shift away from what he termed “Treasury bill banking” toward more disciplined and well-structured lending.
To make that transition successfully, Akossey said RCBs must strengthen their credit administration systems – beginning with targetted capacity building for credit officers.
He recommended that banks allocate a significant portion of their budgets to building robust and well-resourced credit departments.
“Since the emphasis this year will be on lending, investment in the credit function is no longer optional,” he said.
He further advised banks to streamline loan approval and disbursement processes to make credit delivery more efficient and customer-friendly, while also developing new, tailor-made loan products to address unmet demand in local markets.
At the governance level, Akossey cautioned boards against placing undue pressure on management to deliver unrealistic profit targets in a low-interest-rate environment.
“When management is pushed to achieve an artificial bottom line, it can encourage reckless lending and unethical practices that undermine long-term survival,” he warned.
Instead, he urged boards to prioritise sustainability over short-term profitability, noting that success in banking should be assessed holistically. “Profitability is important, but it is not the only measure of success,” he said.
“Boards should also pay close attention to liquidity, asset quality, cost-to-income ratios and capital adequacy.”
He added that management teams must proactively educate boards on changing dynamics of the banking industry, including the impact of technology, regulatory shifts, economic conditions and demographic changes.
According to him, only banks that invest in proper forecasting, scenario planning and strategic adaptation will remain competitive and resilient in the years ahead.
