Abstract
Understanding the factors that influence the financial performance of the rural banking industry is imperative due to its importance to rural poverty alleviation in most developing countries. Using panel data analysis, this paper investigates the factors that influence the profitability of rural banking industry in Ghana. We find that performance of rural bank is positively related to deposit and liquidity. Performance of rural bank, however, is negatively related to asset quality, bank size, and oil prices but not inflation and cocoa prices. The results of the bank-specific factors are robust to the inclusion of macroeconomic measures. The macroeconomic variables slightly improve the explanatory power of our model. This is the first study of its kind in the rural banking sector, particularly within Sub-Saharan Africa.
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