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Boost for SMEs as Development Bank Ghana takes off

BY: Chris Nunoo
President Akufo-Addo
President Akufo-Addo

The Development Bank Ghana (DBG) has begun operations with an initial government equity investment of $250 million.

Apart from the government’s initial investment, the bank has also enjoyed some investment from the European Investment Bank, which has provided €170 million; the World Bank, which has given the DBG $225 million, and the African Development Bank (AfDB), which has given a grant of $40-million to the DBG.

The coming on board of the DBG is in fulfilment of the government’s plan of increasing the number of banks that will support small and medium-scale enterprises (SMEs).

The bank’s primary focus will be to support enterprises in agribusiness, information and communications technology (ICT), manufacturing and those businesses that offer high-value services to scale up.

President’s charge

Setting the operations of the bank in motion at a ceremony yesterday, President Nana Addo Dankwa Akufo-Addo charged the new bank to work to transform SMEs into well-functioning, formal and strong corporates.

He said the DBG should be the bedrock for a renewed commitment of the country to develop its private sector and, through the transformation of SMEs, create the potential to increase gross domestic product (GDP), employ more people and also enhance Ghana’s tax efforts.

“We have made considerable progress by creating an enabling ecosystem that should make the private sector stronger than it had been in the past. The DBG will support all banks in the economy to have access to long-term funds, including the National Investment Bank (NIB), the Agricultural Development Bank (ADB) and the Ghana EXIM Bank,” he said.

“It will also support private equity funds and other capital market firms to have access to our bond markets to facilitate equity financing for SMEs,” he added.

Partnerships

While urging the DBG to partner research institutions to undertake sector research, support innovation centres and business accelerators, President Akufo-Addo also asked it to partner the private sector, including the Association of Ghana Industries (AGI), the Private Enterprises Foundation (PEF), the Ghana Employers Association, the Pharmaceutical Industry Association of
Ghana, the Federation of Association of Ghanaian Exporters, the Ghana Security Industry Association and the Ghana Association of Bankers.

He said the bank must work with those institutions to provide access to long-term funds, access to markets, both domestic and foreign, as well as the development of skills.

That, he explained, would ensure that the requisite capital was directed towards ideas with the most potential for growth and job creation under the financial services ecosystem.

“With a strong balance sheet, independence and vision, we expect that the bank will tap into the international capital market, develop the domestic debt market and design products to attract Diasporan funds into crucial sectors of the economy.

“I have no doubt the bank will work strictly within the guidelines and regulations of the Bank of Ghana,” President Akufo-Addo stressed.

The Board

The DBG, to be headquartered in Accra, has a 10-member board, chaired by Dr Yaw Ansu, an economist, with Kwamena Duker as the first Chief Executive Officer (CEO).

President Akufo-Addo assured the board that the government would not interfere in its decision-making process to guarantee its independence of operation and enable it to work professionally and efficiently in the larger interest of its overarching objective of helping to drive private sector led growth of the national economy.

He said the overriding objective for setting up the DBG was to make long-term funding available to the private sector and develop the ecosystem from market access, technology and innovation and help transform the key sectors of the economy over a period of time by supporting all institutions that were essential for SME transformation.

The Development Bank

Based on the approval of the 2017 budget, President Akufo-Addo said, the government commissioned a feasibility study led by Pricewaterhouse Coopers, which showed that in the banking sector, only 11 per cent of loans were medium-to-long term, with most of them benefitting large corporate and state-owned enterprises.

The report, according to the him, also showed that the capital market remained shallow and incapable of supporting the availability of medium-to-long term capital, unless a deliberate intervention was made to support those institutions, especially for private equity funds and corporate bond issues on the Ghana Fixed Income Market.

“It is this detailed analysis that reaffirmed the government’s commitment to set up the DBG, leveraging the experience of very successful banks such as KFB in Germany, the German State of Investment and Development Bank, the European Investment Bank, the World Bank and the AfDB,” he said.

The total committed capital to the bank, both debt and equity, President Akufo-Addo indicated, was currently some $750 million.

Expanding the sector

The Governor of the Bank of Ghana, Dr Ernest Addison, said the role of development banks had expanded to include finance for infrastructure expansion, environmentally green projects, as well as a wide range of other development objectives.

To that end, he said, the presence of the DBG was not to compete with the banks and other financial institutions but complement one another to ensure long-term finance to firms.

Dr Addison expressed the hope that the DBG and other institutions that would be licensed would help address market failures in the country’s credit markets by supporting businesses to invest long-term and promote growth and job creation.

The Minister of Finance, Ken Ofori- Atta, also said it was the expectation that the DBG would provide funds for the existing commercial banks and other qualifying financial institutions in the capital market to provide long-term lending and other innovative products that were presently lacking in the system.

He said the rigorous processes in establishing the DBG had put in place strong corporate governance and a top-class management.