Abstract:
Though rural banks remain a major backbone of the developing economies'
financial sector, their performance and ability to meet their mandates have
been debated among policymakers and the general public. Thus, this study
assesses the financial performance of rural banks in Ghana, focusing on
Nzema Manle Rural Bank Limited. Specifically, this study examines the
effect of the liquidity position of the bank, annual loans, non-performing
loans, and bank size on financial performance. The research follows the
positivist research paradigm with an explanatory research design and a
quantitative approach. The data were analysed using both descriptive and
inferential statistics, specifically ordinary least square (OLS) regression. The
results show that the liquidity position of the bank influences financial
performance positively, while non-performing loans and bank size negatively
influence bank's financial performance. Annual loans, however, had an elastic
but statistically insignificant positive effect on financial performance. It can
be concluded that Nzema Manle Rural Bank Limited's liquidity position has a
statistically significant beneficial impact on its financial performance. The
study recommends that the bank should improve its liquidity position to
obtain benefits from the investment in short-term assets. Also, the bank
should enhance its credit risk management system, specifically the screening
and monitoring of loan applications and credit facilities granted to its clients,
to reduce the effect of non-performing loans.
