The World Bank is to provide the Government of Ghana with crucial technical support to ensure that the proposed state owned development finance institution – Development Bank of Ghana – becomes reality in the shortest possible time even as at least two foreign development finance institutions have committed to co-financing the project. While the World Bank is expected to provide the new development bank with its principal line of credit, the European Investment Bank, which is the lending arm of the European Union, and KIW Development Bank (owned by the German State) have also agreed to be co-financiers of the DBG. Government is also hoping to get support from the African Development Bank at some stage as well.
Ministry of Finance officials decline to venture specific timelines for its establishment but claim that it is a major priority project for government.
Indeed, it is now on the front burner, having been incorporated as a project component into a Ghana Development Finance Project to be rolled out in collaboration with the World Bank. This project is designed to provide three complementary interventions to increase access to finance by small and medium sized enterprises in Ghana. These are: the establishment of the Development Bank of Ghana (DBG) to offer medium to long term financing through participating financial institutions; the establishment of a universal Partial Credit Guarantee and digital platform to crowd-in private sector financing; and the establishment of capital markets to provide long term financing.
The DBG will serve as a primary intermediary and will provide lines of credit and partial risk guarantees to eligible financial institutions willing to participate in the overall long-term financing scheme. Those institutions will in turn do onward lending to registered and trust worthy SMEs and small corporations operating nationwide across key sectors, particularly agriculture and manufacturing that are crucial to government’s economic diversification agenda.
The plan is for the project to serve as a lever for securing a line of credit to the DBG that it would use to offer lines to commercial lenders in Ghana who in turn would on-lend the funds to credit worthy selected enterprises operated in select sectors and business sectors. The DBG will also provide technical assistance and credit guarantees in addition to long term financing of tenors beyond three years. The proposed bank will also offer refinancing facilities for long term loans taken by sectors such as agribusiness, manufacturing, IT enabled technology services and high value services. Add to all these the deployment of an online debt factoring platform to be used by commercial financial intermediaries and other key stakeholders.
The Ministry of Finance is expected to support the DBG at the initial stage of establishment until it meets the World Bank’s fiduciary requirements at which time it will establish a line of credit for the new bank.
The DBG will be licensed under the new Development Finance Act which is currently under preparation.