Garu Rural Bank - Northern Ghana

The Garu Rural Bank was set up in 1983 under Ghana's Rural Banking legislation. The legislation aimed to create banks which would serve populations otherwise cut off from financial services and is allowed to operate in a radius of about 20 miles. However, the Banks have experienced a range of problems which led to only 23 out of a total of 123 being classified as operating satisfactorily in 1992 (Onumah, 1995).

In 1991 the Garu Bank was near to collapse as a result of embezzlement and bad loans. The local people of Garu persuaded a member of their own community who was working in Accra to come back to the area and become the manager. Under the legislation the Bank is a unit bank and operates relatively autonomously. Share capital of the Bank is owned by the local community, the Catholic Mission, the local Agricultural Station and a Disabled Rehabilitation Centre. Alongside an additional capital injection of $30,000 received from overseas donors via the Catholic Mission in 1992 he has managed to turn the bank around and expected to turn in a profit in 1995 for the first time.

The bank has a range of clients including local salaried workers such as teachers and government employees. These people are good business for the Bank since they take loans which are easily recoverable as deductions can be made from their salaries at source.

Alongside these customers, the Bank provides services to some 300 farmers groups. Some of these groups were originally formed by the local Agricultural Station and the Catholic Mission and bought shares in the Bank when it was set up and have been on the books of the bank for a long time. The manager describes how he first went out to meet the groups, discuss with them and understand them. He has developed his own approach to them. He stresses that they should be about working together and not just obtaining credit. He has set up his own criteria for lending to the groups: savings balances of at least 10% of the loan amount; regularity of savings as an indicator of group cohesion, and that the group should have been operating for at least 6 months. Repayment of the loan on time results in almost automatic qualification for a new loan the following year although he had refused a number of groups the previous year due to poor performance.

(Extracted from "Microfinance and Poverty Reduction" by Susan Johnson and Ben Rogaly, published by Oxfam in collaboration with ACTIONAID and obtainable via

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