Until the passage of the new Income Tax Act 2015, (Act 896) in 2015, rural and community banks were paying eight per cent tax on their annual income but the passage of this law saw it increased to 25 per cent.

Speaking in an interview with the Daily Graphic on the sidelines of the climax of the 8th Rural Banking Week Celebration, the Executive Director of the association, Mrs Comfort Owusu, said the hike in the corporate tax was suffocating the rural banks and hampering their development role in the provision of basic infrastructure, financial and material support to individuals and institutions.

She said the government should therefore reconsider a downward revision of the corporate tax rate for the RCBs to enable them to live up to their development responsibilities.

“If government wants rural and community banks to play the role they were set up to play, then government must reverse it to the eight per cent or at most peg it at 15 per cent and this must be done as soon as possible because it is really suffocating us,” she stated.

High operational costs

The Executive Director pointed out that RCBs spent so much money to operate in their catchment areas and that those were places that universal banks did not want to go and even if they did, they were only interested in doing business with a certain calibre of customers.

She said the RCBs went into the trenches through very difficult means, adding that it was more expensive to bring in the unbanked as well as petty traders and the poor farmers into their banking operations and so the government should consider those issues and reduce the tax as an incentive to them.

Mrs Owusu mentioned that these developments were compelling most of them to withdraw their community support and increasing their interest rate just to meet their operational cost and be able to pay good dividend to shareholders.

Appeal to lift non-dividend payment directive

Addressing participants in the climax of the week-long celebration, the Ag. President of the Association of Rural Banks, Mr Kwame Owusu Sekyere, also made an appeal to the Bank of Ghana (BoG) to reverse the non-payment of dividend directive.

He said that directive by the central bank had stalled the increase in the stated capital of some of the RCBs.

The National President also made an appeal to the government through the Bank of Ghana to intervene to retrieve locked-up funds of some RCBs with some defunct investment companies and especially with National Trust Holdings Company Limited (NTHC) which is adversely affecting their operational viability and could easily lead to a liquidity crunch.

Progress in the Banking Sector

The Head of Other Financial Institutions Supervision Department of the BoG, Mr Yaw Sapong, who delivered the keynote address on behalf of the Governor, said the country’s banking sector made a strong showing in spite of the threats posed by the COVID-19 pandemic.