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Ofori-Atta: Development Bank Ghana to address failures in credit markets

The Minister for Finance says the DBG will provide investment finance to small and medium-sized enterprises (SMEs) to encourage investment in new and promising economic activity

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  • The Minister for Finance says the DBG will provide investment finance to small and medium-sized enterprises (SMEs) to encourage investment in new and promising economic activity

Ken Ofori-Atta, the Minister for Finance, says the establishment of the Development Bank Ghana will address failures in the Ghanaian credit markets and increase the availability of medium- and long-term finance.

The bank will focus on agribusiness with special attention for off-farm value-chain activities, manufacturing, ICT, software and allied services, tourism and homeownership mortgage finance to enable Ghanaian businesses to facilitate economic transformation and job creation.

Ofori-Atta made these comments in Accra at the Association of Ghana Industries (AGI) Corporate Forum, which brought together CEOs of large corporations to discuss the government’s vision with captains of industry.

The minister said the bank, as a wholesale and non-deposit-taking bank, required no branch network and a very small staff. The greenfield approach had the potential to attract more private entities, he said, particularly foreign and institutional capital.

“We are aiming to establish the bank by the end of 2021 with an initial capitalisation of around US$250 million from the government (US$200 million paid as of May 2021).

“World Bank plans to support with $250 million, EIB plans €170 million, German Development Bank plans €46.5 million (tier 2 capital) and technical assistance of €3 million, while France plans AFD [Agence Française de Développement] initial support through partnership on guarantees,” Ofori-Atta said.

Financially sustainable

The Finance Minister said despite the unsuccessful experience in Ghana and many other African countries, development banks were instrumental in driving economic transformation by providing investment finance to small and medium-sized enterprises to encourage investment in new and promising but risky economic activity.

The minister mentioned the Development Bank of Japan, Korea Development Bank, Development Bank of Singapore, Brazilian Development Bank and Development Bank of Germany as examples of transformational development banks.

Ofori-Atta said that in Ghana learning from the best, the German government, through its development bank, was investing in the new DBG and providing technical assistance for the bank’s set-up and initial running.

The ownership, governance and operational structures, the minister said, have been carefully designed to ensure that the bank is able to manage carry out its economic transformation mandate professionally and successfully, remaining financially sustainable all the while.

The robust design features of the bank will be reinforced by the new Development Finance Institutions Act 2020 (Act 1032), which empowers the Bank of Ghana (BoG) to be a strong regulatory and supervisory body.

The Finance Minister said difficulties with the cost of borrowing and interest will be addressed when all the requisite regulatory and administrative plans are in place.

Steady response

Dr Yaw Adu Gyamfi, the president of AGI, welcomed the government’s decision to establish the Development Bank Ghana and said AGI is waiting patiently for all the necessary arrangements to work with it as an operational entity.

“We will work to ensure the bank survives for businesses to thrive, especially in the manufacturing and industry sector,” Gyamfi said.

Business is improving steadily but slowly in response to the government recovery package, he said. He hoped that the situation would become steadily better.

Some participants called for the establishment of an Industrial Manufacturing Competitiveness Council to encourage the manufacturing sector in Ghana and work to improve the 50% rate for benchmarking.

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Source
GNA
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