FROM RURAL BANKS TO URBAN BANKS: WHY DO RURAL BANKS MOVE TO URBAN AREAS IN EMERGING ECONOMIES

Abstract

Rural banks in Ghana were originally establish to bring banking services to the door step of the rural communities and also provide financing support to rural industries. However most appear to have relocated to the urban areas and thus defeating their original mandate. This paper was set out to ascertain the reason for this apparent development in the banking sector of Ghana. We employed varied methods of data collection to concretely bring out the fact from all stakeholders. The responses from about 130 stakeholders showed that rural banks in Ghana are drifting to the urban agencies to mobilize funds to increase their capital base; to provide credit to the urban poor and also to mobilize enough profit to support their activities (social responsibility projects) in their rural catchment. Undoubtedly, the rural banks are trying to be innovative but, their inability to compete favourably with the universal banks in the urban areas can destabilize them.