Addressing the perceived risk to operations of the Development Bank Ghana, President Nana Akufo-Addo has assured that government will not interfere in the Bank’s decision-making process, so as to guarantee its operational independence.
“I want to assure the board of the Bank that government will not interfere in its decision-making process, so as to guarantee its independence of operation and enable it to work professionally and efficiently in the larger interest overarching objective of helping drive private sector-led growth of the national economy,” the president said at the Bank’s launch in Accra.
“The board has been tasked, based on the Bank’s resource envelope, to drive the country’s economic transformation agenda. This portends bright prospects for Ghana’s future,” the president added.
According to research by ODI based on econometric analysis measuring the specific impact of political influence on governance – and the financial performance of banks, most African National Development Banks (NDBs) have traditional corporate governance structures and political appointments are prevalent. This is based on evidence from NDBs in Africa, made up of 33 banks in 21 countries over the period 2014 to 2019.
DBG’s contribution to SMEs
“Development Bank Ghana will support all banks in the economy in gaining access to long-term funds: including the National Investment Bank (NIB), ABD Bank Ghana and the Ghana Exim Bank. It will also support private equity funds and other capital market funds which have access to our bond market to facilitate equity financing for SMEs.
“We will ensure that the requisite capital is directed toward business ideas with the most potential for growth and job creation in the financial services ecosystems,” the president added.
DBG has been designed to be a catalyst in supporting businesses which form the core of the Ghanaian economy, and provide access to funding that is currently not available.
Small and Medium Enterprises (SMEs) – found across all sectors of the economy – play a major role in Ghana’s economy and have been major contributors to the reduction of poverty. SMEs represent about 80 percent of private-sector businesses and contribute about 70 percent to the country’s Gross Domestic Product (GDP). The funding gap stood at about 13 percent of GDP, equivalent to US$6.1billion in 2017.
Notwithstanding their contribution to the country’s growth, SMEs in Ghana face higher credit constraints than large firms, as banks lend to a limited number of firms – prioritising large borrowers and being cautious of SMEs which are perceived to be riskier.
Government expects the DBG will use its strong financial position to support growth of private sector companies to help create high-quality jobs and enable Ghana’s private sector to compete more favourably within the AfCFTA framework.
Currently, the Bank has a capital structure of nearly US$800million – equivalent to GH¢1.2billion – sourced from the Ghana 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 provide capacity building.