Determinants of Financial Sustainability of Rural Banks in Ghana

Abstract

Rural banks play enormous role in ensuring socio economic development in Ghana. However, it has been observed that these rural banks face a number of challenges that affect their sustainability. This study examined the determinants of financial sustainability of the Rural Banks in Ghana. The cross sectional survey was used where questionnaires were designed to collect data. The selections of the respondents were done using the snow ball sampling procedures to locate the 150 customers of three rural banks. The results from the multiple regression analysis showed that the amount of loans significantly affect the financial sustainability of the Rural Banks. The findings further showed that a unit increase in loan interest would lead to 20.5 percent reduction in the number of years a customer had been with the bank thereby affecting their financial sustainability. It was obvious from the study that loans and advances were not in the best of qualit y. Since these have bearing on the sustainability of the banks, it is recommended that management of these banks put in place rigorous strategies to improve the credit appraisal systems and boost loan recovery.