By Dr. Faith Ababio-Twi
Rural financial institutions, particularly community banks, play an essential role in supporting farmers, teachers, nurses, fishermen, fishmongers, drivers, and other workers in rural communities. These banks serve as the primary financial institutions for salary transactions, small business loans, and other banking services. However, the imposition of corporate tax on community banks limits their ability to expand and enhance their services, ultimately affecting the livelihoods of individuals who rely on them.
The Need for Community Banks in Rural Areas
Unlike urban centers where major banks operate extensively, rural communities often lack access to essential banking services. Small-scale farmers, fishermen, and fishmongers, who require loans ranging from Gh¢2,000 to Gh¢5,000, frequently struggle to secure financial assistance. In many cases, they must travel to regional capitals or even Accra, facing significant challenges such as transportation costs, loss of productivity, and security risks.
Similarly, teachers, nurses, drivers, and other government and private sector workers in rural areas depend on community banks for their salary. When banks are scarce, these workers have to travel long distances, sometimes spending the entire day to withdraw their earnings. This not only disrupts their professional responsibilities but also exposes them to the risks of road accidents and armed robbery.
The lack of banking facilities in rural areas has also led to a reluctance among teachers, nurses, and national service personnel to accept postings to these communities. Many professionals prefer to work in urban areas where they have easy access to banking services, allowing them to withdraw their salaries, take loans, and manage their finances conveniently. This has resulted in staffing shortages in essential sectors such as education and healthcare in rural areas, further deepening the development gap between urban and rural communities.
Community banks provide vital financial services such as savings accounts, loans for small businesses, and financial literacy programs that help rural communities manage their resources effectively. Their presence also encourages local economic growth, as small businesses, fishermen, farmers, and traders can access credit to expand their operations and improve productivity.
Reducing Corporate Tax Can Benefit Community Banks
Lowering the corporate tax imposed on rural financial institutions would empower these banks to expand their operations, leading to several economic and social benefits:
1. Expansion of Banking Services: Reduced taxation would allow community banks to reinvest their earnings into opening more branches in underserved areas. This expansion would bring banking services closer to farmers, fishermen, teachers, nurses, drivers, and other rural workers, eliminating the need for long and risky travels to access financial services.
2. Increased Access to Loans: With lower taxes, community banks would have more capital to allocate for lending. Farmers seeking small loans for fertilizers, storage facilities, and other agricultural needs, as well as fishermen and fishmongers needing funds for nets, boats, and cold storage, would have greater opportunities to improve their productivity. This would, in turn, boost food production, fisheries, and economic stability in rural communities.
3. Enhanced Security and Convenience: The presence of more community bank branches would significantly reduce the need for individuals to carry large amounts of cash over long distances. This measure would mitigate security risks, protecting rural dwellers from potential robberies. More banking locations would also improve financial inclusion, making it easier for individuals to save and invest.
4. Improved Efficiency for Government and Private Sector Workers: Teachers and nurses would no longer need to travel from locations like Donkorkrom to Nkawkaw just to withdraw their salaries. Instead, they could complete their banking transactions within their local communities, even during lunch breaks, ensuring minimal disruption to their work. Similarly, drivers and traders who transport goods in rural areas could access financial services without taking time off work, improving their efficiency and income stability.
5. Boosting Local Economic Growth: Community banks play a crucial role in financing local enterprises, such as small-scale manufacturing, retail businesses, fisheries, and agro-processing ventures. By reducing corporate tax, these banks will have the ability to extend more loans to entrepreneurs, leading to job creation and higher incomes in rural communities.
6. Supporting President Mahama’s Women’s Development Bank Initiative: Lowering corporate tax on community banks would also align with and support President Mahama’s initiative to establish the Women’s Development Bank. By ensuring that rural financial institutions are strong and well-funded, women entrepreneurs, traders, and farmers in rural areas would gain greater access to credit facilities. This would further empower women economically and contribute to broader financial inclusion, reinforcing national development efforts.
Government’s Role in Strengthening Community Banks
For community banks to thrive, government intervention is crucial. Apart from reducing corporate tax, policymakers should also consider lowering the required deposit threshold for community banks. This would enable them to attract more customers and strengthen their financial stability.
Additionally, providing incentives such as tax breaks, funding for digital banking infrastructure, and capacity-building programs for rural financial institutions would further enhance their ability to serve the community. The government should also work with regulatory bodies to ensure that policies are in place to support rural banking, enabling these institutions to expand sustainably.
By implementing these measures, the government would not only support the banking sector but also promote rural development and economic empowerment. More accessible banking services would enhance productivity among farmers, fishermen, teachers, nurses, drivers, and fishmongers, ensuring the financial well-being of all rural workers and contributing to overall national growth.
Conclusion
Corporate tax policies have a direct impact on the operations of rural financial institutions. By lowering these taxes, community banks would be better positioned to expand, provide essential financial services, and support the economic activities of rural residents. With stronger financial institutions, farmers can invest in their agricultural endeavors, fishermen can improve their fishing operations, traders can expand their businesses, and government workers can access their salaries conveniently—fostering a more robust and secure rural economy.
The government must prioritize tax reforms that enable community banks to flourish, ensuring that essential banking services reach every corner of the nation. A thriving rural banking sector will not only improve financial access but also contribute significantly to the overall economic growth of the country. Furthermore, such reforms will complement the efforts of President Mahama’s Women’s Development Bank initiative by providing additional financial support to women in rural communities, fostering inclusive economic growth and sustainable development.
The Author, Dr. Faith Ababio-Twi is a Financial Consultant and CEO FAB CONSULT- USA
