Abstract:
The study “sought to assess the role of rural banks in the provision of credit
facilities to the small business sector in the Ekumfi District. The purpose of
the study was achieved by considering Ekumfiman Rural Bank as a case. The
study employed descriptive statistics as the research design and quantitative
research approach. A sample of 218 respondents was considered under the
study. A questionnaire was used as the data collection instrument. The study
found out that collateral, creditworthiness, guarantors, profitability, borrowers
repayment history, the capacity of the bank to grant the loan, cash flow
statement, earnings, character were factors that determine lending decisions at
Ekumfiman Rural Bank. In relation to benefit of the provision of credit, the
study found out that loans ensure business expansion, help people better
manage financial distress, payment of fees, enhance or diminish consumer and
social welfare and lastly, help manage large debts. The study also analysed the
factors leading to credit default among clients of Ekumfiman Rural Bank.
These included customers' business failure, diversion of loans, loans for social
purposes, inadequate monitoring, inadequate security, inadequate
documentation, inadequate appraisal, staff influence, inadequate credit staff,
staff attitude. Lastly, the study also assessed the areas and criteria for an
appraisal done by rural banks before credit is given to customers. Also, areas
such as the character of the client, credit utilization experience, the extent of
involvement in the business, entrepreneurial quality, cash flow statement,
repayment history, distribution channel, size and strength of the existing
market were considered before credits are being advanced to customers. The
study recommended that proper and adequate monitoring teams must be
established to monitor what the customers use the loaned funds” for.
