Evaluation of Financial Performance of Rural Banks in Ghana. A Case Study of Nzema Manle Rural Bank Limited

Abstract

Though rural banks remain a major backbone of the developing economies' financial sector, their performance and ability to meet their mandates have been debated among policymakers and the general public. Thus, this study assesses the financial performance of rural banks in Ghana, focusing on Nzema Manle Rural Bank Limited. Specifically, this study examines the effect of the liquidity position of the bank, annual loans, non-performing loans, and bank size on financial performance. The research follows the positivist research paradigm with an explanatory research design and a quantitative approach. The data were analysed using both descriptive and inferential statistics, specifically ordinary least square (OLS) regression. The results show that the liquidity position of the bank influences financial performance positively, while non-performing loans and bank size negatively influence bank's financial performance. Annual loans, however, had an elastic but statistically insignificant positive effect on financial performance. It can be concluded that Nzema Manle Rural Bank Limited's liquidity position has a statistically significant beneficial impact on its financial performance. The study recommends that the bank should improve its liquidity position to obtain benefits from the investment in short-term assets. Also, the bank should enhance its credit risk management system, specifically the screening and monitoring of loan applications and credit facilities granted to its clients, to reduce the effect of non-performing loans.