Ghana Export Import Bank, GEXIM is preparing to begin issuing corporate bonds as a sustainable source of financing its below market rate lending activities which have become key for Ghana’s industrialization agenda. This was revealed to Goldstreet Business by the bank’s CEO, Lawrence Agyinsam. Already the bank is far advanced with its plans to issue US$100 million in bonds from international investors later this year. The bank aims to use bond issuance to raise financing for its medium to long term lending programme and also to diversify its financing sources. Currently the bank obtains its financing from a proportion of government’s import duties income, direct financial assistance from government and from international development partners through their respective import export banks and through reinvestment of its own operational cash flows.
However while this adds up to substantial operating cashflow, it falls short of what it needed to maximize the impact of its financing on deserving enterprises with regards to non-traditional exports and import substitution on domestic markets. So far, Geximbank has provided financing for 84 projects across its ten identified priority areas which include cassava, shea butter, pineapples, mangoes, creative arts, oil palm, garment and textiles and pharmaceuticals, where it is assisting local drug producers to become compliant with the World Health Organization’s Good Manufacturing Practices certification.
The bank is playing the most crucial role in the financing of government’s flagship industrialization programme, the one district one factory programme. Crucially, the bank providing financing at well below market interest rates of between five and 12 percent per annum (the rates are currently being reviewed). But it is now seeking to raise financing on the strength of its own balance sheet, rather than leveraging on government’s own borrowing capacity through contingent liability instruments such as sovereign guarantees.
Here, Gexim bank’s financial solidity in terms of its balance sheet size will be a major plus as will its asset quality – the bank lends medium to long term with repayment moratoriums and so its loan repayment record so far has been outstanding. While the bank inherited significant legacy problem debts from its component state owned institutions that were merged to create Gexim itself – The Export Development and Agricultural Investment fund, Export Finance Company and Eximguaranty Company – these have since been restructured by the management of Gexim upon their assumption of office in early 2017.
However, the bank’s management is now facing the complex task of raising financing on commercial terms but still being able to lend at below market rates to ensure the cost competitiveness of its client companies on both local and international markets.
Instructively Geximbank is the leading financier of Ghana’s export and import substitution driven industrialization drive. For instance it was the sole financier of Ekumfi Fruit Drinks, in the Central Region, the first company to be commissioned under the 1D1F programme, back in August 2017, and which has been producing fruit drinks since November 2019. Since then the state owned, specialized development bank has financed 83 other enterprises do date, ranging from Wonumi Farms, which produces maize as crucial feedstock for local poultry industry; through Casa De Ropa, which is to produce orange flesh sweet potato, used in a range of food products and which will commencr production effective from this month; to Akuapim Gold Agro-Processing which is into avocado processing and which is currently 80 percent complete.
Importantly some 15 pharmaceutical manufacturers have received Geximbank’s support to where it is making them GMP certified and thus globally competitive in terms of product quality.
Bond issuances from Geximbank will provide excellent portfolio additions to both domestic and foreign investors, particularly those seeking long term growth over current income.
Discussion about this post