ON INNOVATIONS IN ADDRESSING RURAL FINANCE CHALLENGES IN AFRICA PRESENTED BY KWAKU A. ABABIO FINANCE MANAGER,ARB APEX

1. ON INNOVATIONS IN ADDRESSING RURAL FINANCE CHALLENGES IN AFRICA PRESENTED BY KWAKU A. ABABIO FINANCE MANAGER,ARB APEX BANK LTD AT THE WEST AFRICAN ENGLISH SPEAKING SUB-REGIONAL WORKSHOP HELD IN BANJUL, GAMBIA MARCH 31 – APRIL 2, 2008 A PAPER

2. INNOVATION Africa has a lot of resources. Yet the continent is poor, WHY? Peter Drucker, said that, ‘There is no such thing as a ‘resource’ until man finds a use for something in nature and thus endows it with economic value. Until then: ‘every plant is a weed and every mineral just another rock’. Africa’s resources are mere raw materials without any economic value. The missing link lies in INNOVATION.

3. INNOVATION Innovation has been defined variously as; • The act of introducing something new. • A new idea method or device. • The process of translating new ideas into tangible societal impact. Innovation is typically understood as the successful introduction of something ‘new’ and ‘useful’.

4. PRODUCT DEVELOPMENT New Product Development is the term used to describe the complete process of bringing a new product or service to the market.

5. THE INNOVATION IN CREATING THE ARB APEX BANK LIMITED

6. Establishment of the ARB Apex Bank Limited The ARB Apex Bank Limited which was established following the agreement between the Government of Ghana and Donors, is a public limited liability company incorporated under the Companies Code, 1963 (Act 179).

7. Establishment of the ARB Apex Bank Limited…cont’d It has been licensed by the Bank of Ghana to provide banking and non-banking services to the rural and community banks (RCBs) with the aim of improving their operational efficiency thereby transforming them into efficient financial institutions which can address the banking needs of the communities within which they operate.

8. Establishment of the ARB Apex Bank Limited…cont’d It was an innovation built on the model of the Rabobank in the Nethelands that has proved very successful. What makes it unique is the fact that even though it is registered as a commercial bank performing the functions of a commercial bank to the RCBs it also acts as a regulator over the activities of the rural and community banks.

9. Functions of the ARB Apex Bank Limited The functions of the Bank are as follows: • Provide cheque clearing services to address the constraints of delays in cheque clearing through the big commercial banks. • Handle specie movement and funds management services to ensure the effective and efficient management of cash of the RCBs.

10. Functions of the ARB Apex Bank Limited…cont’d • Develop new and innovative banking products to enable more rural dwellers to have access to banking products designed to meet their financial needs. • Provide Information Technology (IT) support to RCBs to ensure efficient handling of data/information. • Source funds for on-lending to the RCBs.

11. Functions of the ARB Apex Bank Limited…cont’d • Provide both on-site and off-site inspection services. • Provide training for both staff and Directors of RCBs.

12. The Vision of the Bank The vision of the Apex Bank is to accelerate development of the rural economy by the provision of cost-effective ICT-based banking services through the Rural and Community Banks and Microfinance Institutions by the year 2015.

13. Mission Statement The mission of the Apex Bank is to provide banking and non-banking support services to the RCBs with the aim of improving their operational efficiency and thereby transforming them into efficient financial institutions which can effectively address the banking needs of the communities in which they operate.

14. The Star Product of the Bank - The Apex Link Domestic Transfer • The bank launched its maiden product, the Apex Link Domestic Transfer on the 26th June, 2003. It is a domestic funds transfer developed by the bank for all the rural and community banks to fill the huge vacuum in the payment system in the rural and semi-urban areas of Ghana.

15. The Star Product of the Bank - The Apex Link Domestic Transfer Every transfer has its own unique number that is used in identifying it, a security code is generated from a telecommunication test keys established between the rural banks. Senders or recipients of funds need not necessarily be customers of the bank.

16. The Star Product of the Bank - The Apex Link Domestic Transfer In some communities of the rural areas the staff of rural banks who know the beneficiaries go to their homes to inform them of their transfers to facilitate early collection.

17. APEX LINK DOMESTIC FUNDS TRANSFER UP TO DEC.31, 2007

18. Innovations in Micro Credit Administration Credit With Education (CWE) The concept starts with the formation and development of a group. There are two components to this innovation namely Non-Financial and Financial

19. Innovations in Micro Credit Administration Credit With Education (CWE) The non-financial aspect takes precedence over the financial concept in that it deals with issues that affect the entire livelihood of members in the group such as;

20. Innovations in Micro Credit Administration Credit With Education (CWE) • Environmental protection • Women’s right and their civic responsibilities • Malaria and guinea worm prevention and control

21. Innovations in Micro Credit Administration Credit With Education (CWE) • Child Care • Women health issue like female genital mutilation (practiced in parts of Northern Ghana) • Early and forced marriage of girls

22. Innovations in Micro Credit Administration Credit With Education (CWE) The group is assisted to design a simple but comprehensive constitution understood by all members.

23. Innovations in Micro Credit Administration Credit With Education (CWE) Where members’ individual contributions and dues can meet their credit needs eg; in the purchase of a corn mill or an extracting machine, their own resources is used to buy the equipment, this is referred to as the Self-Help Group.

24. Innovations in Micro Credit Administration Credit With Education (CWE) This approach has worked well in parts of the Savelugu Nanton District of the Northern Region in Ghana.

25. Innovations in Micro Credit Administration Credit With Education (CWE) Profit earned by the group has a multiple effect in that it has positively impacted on their general health, nutritional needs, education and women empowerment further enabling women support the education of their children.

26. Innovations in Micro Credit Administration Credit With Education (CWE) Under the Financial approach groups that cannot help themselves are assisted with credit by the rural and community banks at negotiated interest rates with group members jointly and severally guaranteeing the loan.

27. Challenges addressed by this concept The provision of non-financial information has gone a long way in enlightening the rural people especially women. It has helped in demystifying the age old fear rural people have about banks whilst providing an enabling environment to many of the rural poor.

28. Challenges addressed by this concept I must add that the former President of the World Bank Mr. Paul Wolfensen in his visit to Ghana in 2007 expressed amazement at the level of financial literacy exhibited by the rural folk of Apedwa, a farming community in the Eastern Region of Ghana that had benefited from the CWE methodology.

29. Challenges addressed by this concept • Recognizing the importance of CWE The ARB Apex Bank has further provided training to build the capacity of its Project and Credit Officers to undertake most of the roles performed under the non financial advocacy. • The methodology has also introduced the habit of savings amongst members of the group.

30. Community Based Rural Development Project (CBRDP) The Apex Bank has also been acting as fund managers for Government in respect of funds contracted from the World Bank under the Community Based Rural Development Project (CBRDP). The facility is structured in three layers. • Micro Credit • Learning Center • Trainees of Learning Centers

31. Micro Credit In this development the rural banks who participate in the project appraise selected customers seeking agricultural loans and make a request to the Apex Bank for disbursement. These funds are released to RCBs at a subsidized rate of 4.5% which in turn gives them out to these customers at commercial rate but with a matching grant component.

32. Micro Credit This basically means that a portion of the loan is regarded as a grant from the on-set and does not attract interest, it is only the remaining balance which then is subjected to interest rate computation. This helps to mitigate the risks associated with agric loans on the rural banks and the borrowers of the funds.

33. Learning Centers Under this concept owners of business ventures are encouraged to turn their business into learning centers for the recruitment of the youth to acquire skills and capacity building in: • Poultry farming • Beekeeping

34. Learning Centers • Grass cutter rearing • Kente weaving • The people who turn their businesses into training centers are supported with both loans and grant under the project.

35. Trainees of Learning Centers • After successfully completing their training the trainees are assisted with start-up capital to go into business. A percentage of the initial investment is, however, to be provided by them. • This form of credit has largely helped to address the issue of rural/urban migration and unemployment and childhood delinquency.

36. CONCLUSION The challenges of the 21st century have made it imperative for rapid changes in the provision of financial services in the rural areas to ensure a fair distribution of wealth. Technology is moving faster than the pace at which African countries are developing their economies, making it difficult to introduce innovative ICT products to the rural poor.

37. CONCLUSION Now is the time for us to rally behind each other to identify and introduce innovation in delivery of finance services to the rural poor of our respective countries. I hope that by the end of the day we can collectively identify one common innovative product that we can send back home to help deepen financial intermediation in the rural areas of Africa.

38. THANK YOU FOR THE ATTENTION AND MAY THE ALMIGHTY GOD BLESS US ALL