Addressing the funding gap for small and medium sized enterprises (SMEs), the Development Bank Ghana (DBG) is prepared – based on an innovative model – to provide competitively priced loans through partner financial institutions for on-lending, Chief Executive Officer (CEO) of the Development Bank Ghana (DBG), Kwamina Duker, has said.
This will allow DBG to be the catalyst in supporting businesses which form the core of Ghana’s economy, and providing access to funding that is currently not available.
In a media briefing ahead of the Development Bank Ghana’s (DBG) official launch, Mr. Duker said: “DBG has been designed to address this gap by using an innovative model, including providing competitively priced loans to partner financial institutions who will then lend to the small and medium-sized enterprises.
“Through this model, we aim to catalyse growth in the private sector. We are putting entrepreneurs and business first,” he added.
SMEs make a significant contribution to the national economy, employing about 80 percent of the workforce and generating some 70 percent of GDP. However, this enormous contribution is well underserved when it comes to long-term loans. The funding gap stood at about 13 percent of GDP, equivalent to US$6.1 billion, in 2017.
Based on available data from the World Bank, it is also evident that 67 percent of loans in Ghana’s banking sector are short-term in nature (less than three years), while just 33 percent of loans typically had tenors over three years.
Currently, the Bank has a capital structure of nearly US$800million – equivalent to GH¢1.2billion – sourced from government, World Bank, European Investment Bank (EIB), African Development Bank (AfDB), and KfW.
The Bank has received funds in excess of US$700million from its shareholders and partners for on-lending to PFIs and providing capacity building.
The Bank intends to develop strong partnerships with the Development Finance Institutions (DFIs) and Participating Financial Institutions (PFIs), especially commercial banks and other groups, to provide business development services for SMEs to help them secure these loans and use them to grow their businesses.
“The gap in the manufacturing sector for SMEs alone is about GH¢150million. It will be extremely difficult for any one institution to fill that gap. This is why DBG is mandated to do the difficult things first, which is to build collaborative unions with the banking sector to ensure that, together, we amplify our ability to leverage Bank. So, we act as a catalyst by working with some of the banks,” Mr. Duker said.
“If our SMEs grow and thrive, our banks can grow and thrive; they will then repay the loans the DBG has given them; we will then have a good story to tell our stakeholders and shareholders, and then we will get replenished,” he said
The CEO mentioned that efforts are being made to promote excellence within the PFIs and businesses they support in terms of Environmental, Social and Governance (ESG). “In these early stages of DBG, it is essential that we pay particular note to the governance aspect of ESG. We have set our expectations and our standards high both for ourselves and our partners.”
Established in accordance with the Development Finance Act, 2020, DBG has been designed to help relieve critical bottlenecks that have hindered the availability of long-term, competitively priced loans to small and medium-sized enterprises in industry sectors which have potential to transform the economy: namely agribusiness, manufacturing, ICT and high-value services.
DBG has a catalytic role to perform, supporting the people and businesses which form the core of Ghana’s economy and providing access to funding that is currently not available.