The Performance of Banks in Rural Financial Markets
Provides a framework for analysing the performance of rural banks and conceptualises the rural banks relationship with clients expressed through the financial services it provides. Financial viability of the bank lies in its profitability and capital position both of which can be read from the bank's financial statements. Three aspects that the bank itself can control are its organisational structure, method of operations, and services offered. The paper:
- Focuses on costs of financial intermediation for rural banks and how these costs relate to the banks' scale of operation;
- Shows that asking how rural banks can meet the needs of more rural households should be linked to attention to costs and that discussion of lending costs should be part of evaluation of existing bank services;
- Analyses the rural finance market by graphing the capacity of households to engage in financial transactions according to their income category, and stage of development, by both qualitative and quantitative dimensions.
The framework offered can be used by banks themselves and researchers to determine feasibility of new organisational structures and methods of operation aimed at reaching smaller rural clients and poorer groups, like creating two-tier financial organisations, mobile savings and credit units, mobile credit officers and more or less formal institutions that can operate at lower costs.
