Limited access to bank credit by SMEs has been further exacerbated by the domestic debt exchange programme (DDEP), necessitating a focus on the impact investing approach by banks alongside their financial returns.
It is to this end that Dr. Richmond Odartey Lamptey, a private equity consultant and lecturer at the University of Greenwich, suggested that commercial banks need to change their approach to financing the private sector by setting up funds focused on impact investing, which would prove to be a great way to provide funding.
“Such funds can come from different opportunities and even from de-risking commercial banks’ loan portfolios.”
“Banks that focus on impact investment and collaborate with intermediaries to ensure effective allocation of funds are more likely to achieve positive financial results while making a meaningful impact,” Dr. Lamptey added.
The private equity consultant agreed that banks that take the lead in attracting such funds are likely to attract more capital and stimulate economic growth.
Dr. Lamptey empahsised that banks need to focus on the impact dimension of investment alongside the financial return aspect, and that governance mechanisms and intermediaries are essential to ensure the effective allocation of financial resources in the economy.
Similarly, Chairman of the International Chamber of Commerce-Ghana, Clifford Duke Mettle, said the implementation of the DDEP has caused some banks to suffer losses, resulting in a decrease in loans being granted to SMEs as just in 2022 alone, banks had incurred losses of approximately GH₵6.1billion due to the DDEP.
Mr. Mettle said impact investment funds can make commercial banks more finance-oriented, offer de-risking opportunities, and focus on a dual mission of achieving financial returns and social and developmental impact.
These funds are known for yielding positive financial returns and supporting the United Nations Sustainable Development Goals and SMEs in developing countries.
Both experts agree the banking industry must shift its approach to financial intermediation, given that banks that focus on impact investments and collaborate with intermediaries to allocate funds effectively are more likely to stimulate economic growth and achieve long-term sustainable results.
