Finance Minister Ken Ofori-Atta said Development Bank Ghana (DBG) must manage its affairs carefully and raise its own funds based on its track record in the international capital market.
“So it requires the board and management to work hard to get an international rating for the bank as soon as possible,” he said last week at the DBG launch in Accra.
DBG is a development finance institution and wholesale bank whose mandate is to provide long-term loans to commercial banks for on-lending to small and medium enterprises.
With a capital of nearly 800 million dollars, the shareholders of DGB are the government of Ghana, which contributes 250 million dollars; KFW, for €48.5 million; the World Bank, which provided $225 million; the European Investment Bank, up to 170 million euros and the ADB, up to 40 million dollars.
Mr. Ofori-Atta said that development banks had been powerful instruments of economic transformation and growth in several countries.
“There are many countries where development banks have failed to live up to expectations, and so when setting up DBG, we looked at all of those experiences, including our experiences in Ghana, and it’s clear to us that the big differentiator of success is the governance of the institution and the professionalism with which they are run,” he said.
The finance minister said DBG was designed to be financially sustainable and would focus primarily on economic transformation, particularly industrialization and value addition in agriculture.
“It will also support companies in the areas of technology, tourism and high value-added services. The aim will be to focus on SMEs and relatively large Ghanaian companies in these sectors to help transform the economy and create jobs,” he said.
He said the President’s vision for Ghana’s economic transformation required long-term investments led by the private sector, hence the need to provide the private sector with access to competitive long-term financial rates.
“Currently, in our country, this is not readily available, especially for Ghanaian SMEs. For example, evidence from the feasibility study conducted for the establishment of DBG showed that only 11 percent of bank credit is more than five years. In addition, less than 8% of credit goes to manufacturing and less than 4% to agriculture, two of the sectors critical to economic transformation. It is this gap that DBG has created,” he explained.
Mr. Ofori-Atta hinted that the DBG will transform the economy by “providing long-term finance to economic units operating in the productive sectors of the economy at competitive interest rates, providing for up to 15 years, lending funds to participating financial institutions for on-lending to SMEs, operating a partial guarantee window, operating a digital platform to facilitate invoice factoring by SMEs.
The Minister of Finance revealed that to ensure the growth and success of the DBG, the government, in conjunction with the BoG, has established a task force comprised of senior experts from the public and private sectors to provide advice on the establishment of the bank, including the supervision of the feasibility study conducted by PwC, which was selected following an international competitive process.
The guidelines, he said, were that “DBG should be a wholesale non-deposit bank, it should not lend to individuals or direct businesses, it should provide funds to existing commercial banks and other eligible financial institutions in the capital market to provide long-term loans. – term loans and other innovative products which are currently lacking in the system.
“The DBG should complement and strengthen the operations of existing financial institutions by making available adequate long-term funding, this should be regulated,” he added.