On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), KfW Development Bank is set to provide debt financing in the form of a subordinated loan totaling €46.5million to the Development Bank Ghana (DBG).
This is to enable the Development Bank Ghana to provide longer-term financing for the private sector, particularly Small and Medium-sized Enterprises (SMEs). Also, it will aid SMEs to make productivity-enhancing investments in order to retain and create jobs for the teeming youth.
According to KfW, this is necessary especially when COVID-19 has affected many economies; becoming a toll on business activities and even employment situations.
“Ghana has great political weight due to its positive democratic and economic development, and is considered an anchor of stability in the region. It has managed to halve poverty within its population compared to 1990, but challenges remain; especially in the wake of the COVID pandemic, jobs must be created and secured – particularly for the young generation.
“For this, the private sector must be better provided with long-term and adequate credit. Currently, less than 15 percent of the loans granted by banks have a maturity of five years or longer, which makes it difficult for the private sector to invest in projects with a long maturity,” a KfW press statement announcing the signed loan agreement stated.
For his part, the Director of the KfW Office in Ghana, Arndt Wierheim said: “Like KfW, DBG will not provide retail or direct commercial loans, but will provide funding to existing commercial banks and other qualified financial institutions to offer long-term loans and other innovative products that are currently lacking in the market”.
Also, businesses in the agriculture, manufacturing, ICT, tourism and homeownership promotion sectors will be particularly targetted.
“Project DBG is embedded in Ghana’s ‘build back better’ efforts during and after the COVID-19 pandemic, and in the country’s national long-term economic strategy,” he noted.
He believes the move is a milestone in German-Ghanaian cooperation, and a new engine for the country’s economic transformation.
For the Finance Minister, Ken Ofori-Atta: “Through Development Bank Ghana, the Ghanaian government will be able to further strengthen its support for the private sector to drive economic growth and transformation”.
Government expects DBG to use its strong financial position to support the growth of private sector companies, create high-quality jobs, and enable Ghana’s private sector to compete more favourably within the AfCFTA framework.
DBG has become a key institution to promote private sector-led growth under the Ghana CARES Obaatanpa programme, which is an essential element for Ghana’s COVID-era economic transformation.