Exploring development funding commitments by political parties; focusing on development banking in Ghana


By Hayford DANSO

As Ghana gears up for another election season, the two major political parties have made competing pledges to establish new development banks. The opposition NDC promised a Women’s Development Bank to support female entrepreneurs, whereas the incumbent NPP vowed to create a Minerals Development Bank to finance the mining sector.

While these proposals tap into real financing gaps that hinder development in key segments, they risk inefficient resource allocation by proliferating new disconnected institutions. From an economic development perspective, Ghana should avoid fragmented efforts that lead to duplicated costs, a lack of coordination, and the spread of limited fiscal resources. Rather than setting up multiple sector-specific banks from scratch, political parties should articulate plans for optimizing the recently established Development Bank Ghana (DBG) and ensure more efficient bank growth.

By housing targeted funding vehicles and interventions within this prominent national development finance institution, DBG, Ghana, can capture significant economies of scale and strategic cohesion. This maximizes the catalytic impact while prudently husbanding public resources. The DBG, adequately capitalized and steered by overarching industrial policies, represents a more sustainable path to financing Ghana’s inclusive economic development in the long term.

This article seeks to rationalize Ghana’s development finance architecture by optimizing the existing DBG platform, instead of creating new fragmented institutions, positioning the DBG as the nation’s preeminent catalytic engine for long-term transformative investment.

Promises of New Sector-Specific Development Banks

As the campaign trail heats up ahead of Ghana’s upcoming general elections, both major political parties have sought to court specific sectors and constituencies by dangling the prospect of dedicated development finance institutions. The incumbent New Patriotic Party (NPP) has planned to establish a Minerals Development Bank to address the financing woes that plague Ghana’s mining industry.

Pointing to the sector’s significant but underperforming prospects, the NPP argues that a specialized bank can provide adequate capital and tailored financial services to support mineral exploration, mine development, and value-addition activities. Not to be outdone, the opposition National Democratic Congress (NDC) has countered with a proposal to set up a Women Development Bank. Touting it as a vehicle for women’s economic empowerment, the NDC aims to channel low-cost financing to female entrepreneurs, who continue to face disproportionate hurdles in accessing credit from traditional financial institutions.

This dueling promises to tap into genuine pain points, blighting key economic segments. Ghana’s mining sector, though a major source of export revenue and foreign exchange, has seen production stagnation and investment dwindle in recent years because of funding shortages. Similarly, while women make up the bulk of operators in sectors such as agriculture, trading, and services, prevailing sociocultural norms and institutional biases impede their ability to obtain adequate financing to launch or scale their businesses. By putting forward these tangible financing commitments, both the NDC and NPP are likely to seek to galvanize support from constituencies that could prove pivotal in the impending electoral contest. Better financing options for these underserved segments hold an immense appeal.

Risks of Duplicating Efforts

While proposals from the NDC and NPP to establish dedicated sectoral development banks address real financing gaps, they risk duplicating efforts in an inefficient and economically suboptimal manner. From a public finance perspective, setting up multiple new institutions from scratch entails significant fiscal costs, which may undermine fiscal sustainability.

The upfront capital outlays required to adequately capitalize new banks, coupled with the recurring administrative overheads of maintaining separate governance structures, premises, and staffing, place an unnecessary burden on the government’s already constrained budget and fiscal space. This financial toll is amplified when accounting for the gestation period that most new institutions face before they achieve operational effectiveness and sustainability.

Moreover, the creation of disconnected, vertically siloed institutions goes against sound economic advice, emphasizing coherent market-oriented financial sector policies. Uncoordinated interventions risk breeding distortions, market fragmentation, and regulatory arbitrage, which impede efficient capital allocations. The proliferation of public banks could also crowd out productive private-sector activities by soaking up scarce financial resources and human capital.

From the perspective of economic competitiveness, the duplication of financing vehicles dilutes Ghana’s ability to harness economies of scale and scope in developmental finance. Larger consolidated institutions can exploit cost advantages, diversify risk exposures more effectively, and attract top-tier expertise. This enhances their ability to undertake transformative projects and extend suitable financing solutions to multiple sectors.

Rather than putting fiscal resources towards competing new institutions, political parties should prioritize optimizing the impact and reach of Ghana’s existing development banks – the well-capitalized but underutilized Development Bank Ghana (DBG), National Investment Bank (NIB), Agricultural Development Bank (ADB), Consolidated Bank Ghana (CBG), EximBank Ghana, and GCBBank Ghana. Strengthening these established platforms provides a more prudent path to bolstering financial sector development and shepherding long-term economic transformation, rather than outpromising the nation on starting a new financial institution.

The Mandate of Development Bank of Ghana (DBG)

Launched in 2022 with up to $1 billion in seed funding, the Development Bank Ghana (DBG) was established as a well-capitalized and strategically mandated development finance institution. This significant capitalization imbues DBG with a vital economic role, serving as a catalytic provider of long-term financing to sectors and projects that are systemically under-served by commercial banks and capital markets.

The DBG mandate covers the agriculture, manufacturing, ICT, and high-value services industries, which are widely acknowledged as lynchpins driving economic diversification, export sophistication, and productivity-led growth in Ghana. By channeling affordable long-term credit to viable businesses in these priority areas, DBG can help unlock investment, catalyze innovation, and nurture the drivers of structural transformation.

From an economic development perspective, DBG’s focus aligns with widely accepted policies for promoting sustainable and inclusive development. Targeted interventions in agriculture can boost food security, rural income, and upstream agro-industrialization. Financing manufacturing fosters vital linkages, economies of scale, technology absorption, and upgrading of Ghana’s export baskets.

Likewise, funding ICT and high-value services positions Ghana to capitalize on the opportunities of digital and knowledge-based economies. Is there a need for a new financing vehicle for women’s groups and mining from scratch? I believe that we have enough institutions to develop strategies with people. The DBG’s billion-dollar capitalization gives it sizeable financial firepower relative to Ghana’s level of economic development. Its ample capital base allows for substantial leverage and crowding-in of private capital through instruments, such as credit guarantees, co-investing, and market-making activities. This catalytic potential enables DBG to have an economic impact well beyond its balance sheet.

Furthermore, the DBG’s strategy of partnering with international finance institutions, such as the World Bank, and other Commercial Banks operating in Ghana, positions it as an effective conduit for channeling global capital towards productive investment within Ghana. The ability to “recycle” foreign savings into domestic economic development projects generates wider economic benefits from enhanced investment, employment, and economic complexity. By optimizing the existing capital, focus, and capabilities vested in the DBG, Ghana can strategically deploy long-term development finance as a policy tool to accelerate economic transformation in line with its long-term vision.

Leveraging DBG for Focused Financing

Rather than proliferating new sector-specific institutions, Ghana’s political parties should articulate strategies for leveraging the broad existing mandate and capabilities of Development Bank Ghana (DBG) to catalyze financing across priority areas and segments. From an economic rationale, this approach to consolidating multiple policy objectives and financing tools under a single overarching vehicle generates substantial efficiency gains.

For instance, the DBG could establish ring-fenced funding windows or specialized financing vehicles to tackle specific sectoral bottlenecks, such as mineral exploration and mine development, addressing the concerns raised by the NPP’s proposed Minerals Development Bank. By housing such targeted interventions within its existing structure, the DBG can avoid duplicating the governance, risk management, and operational layers. This economizes administrative overheads while facilitating vital institutional learning and the cross-pollination of expertise.

Similarly, the DBG already possesses the core competencies to structure tailored financial products and services for underserved groups, such as women entrepreneurs, as envisioned by the NDC’s Women Development Bank proposal. It could collaborate with public and private sector partners and other local banks to capitalize on innovative investment vehicles catering to this segment, such as gender-lens investment funds, while retaining the back-office synergies of a centralized platform.

From a broader economic perspective, this integrated approach aligns with contemporary development finance paradigms advocating a “whole-of-economy” perspective. By acting as a dynamic, centralized node for multiple financing tools and sectoral interventions, the DBG can better coordinate the deployment of both long- and short-term capital through the platforms of other commercial banks to coherently realize Ghana’s overarching economic priorities.

Moreover, consolidation within a single institution allows the DBG to develop deep intersectoral expertise and cultivate a holistic understanding of cross-cutting constraints, risks, and investment opportunities across the economy. This systemic view enhances the quality of financing decisions and assessments of the economic impact. This prevents the fragmented insights that may arise from operating in narrow sector-specific silos.

Ultimately, this versatile, multi-faceted national development bank model yields economic dividends by enabling targeted interventions without sacrificing coordination, economies of scale, and scope. This represents an evidenced-based path to efficiently catalyze long-term financing for Ghana’s economic transformation ambitions.

Advantages of Consolidating Under DBG

Consolidating and strengthening financing efforts under the existing Development Bank Ghana (DBG) offers compelling economic advantages over establishing multiple new sector-specific institutions. This centralized approach generates significant economies of scale and scope that enhance the efficiency and development impact.

From a fiscal perspective, housing various policy-financing tools within the DBG allows the government to avoid duplicating substantial fixed costs across disconnected institutions. Core operational areas, such as governance, risk management, IT systems, accounting, human resources, and physical infrastructure can be optimized and leveraged consistently across different financing windows. This economizes overhead expenditures and concentrates technical expertise on a critical mass.

The pooling of assets and risk exposures within a larger, diversified balance sheet in the DBG also yields economic benefits. A larger capital base provides an enhanced capacity to undertake transformative projects, withstand shocks, and assume a higher risk appetite that can crowd private investment. Portfolio diversification lowers exposure to idiosyncratic industry risk. Centralization at the DBG catalyzes the vital knowledge spillovers and cross-pollination of financing expertise across sectors. Staff can build multidisciplinary skills that bridge agriculture, manufacturing, services, and other priority areas, fostering integrated policy perspectives. This cross-pollination promotes economic complexity and the development of value chains.

A consolidated national development bank also wields stronger market power, deal-sourcing capabilities, and leveraging abilities with external financiers. DBG’s heft as an anchor investor and arranger can catalyze co-investment and crowd-in large private capital flows into productive sectors. This financing scaling addresses systemic economic constraints more decisively.

Furthermore, the DBG’s centralized structure reduces coordination failures, turf wars, and arbitrage across different public financing vehicles. Clear institutional delineation and harmonized operational policies minimize overlapping mandates, regulatory gaps, and opportunities for economic rent-seeking behavior.

From a strategic standpoint, having a prominent single counterpart in DBG simplifies the dialogue between policymakers and development financiers. It concentrates on accountability to achieve economic priorities and streamlines performance assessment. This focused principal-agent relationship aligns incentives more powerfully. The point is that consolidating efforts through the DBG positions Ghana’s long-term development financing strategy in an economically sustainable and impactful trajectory. It averts suboptimal resource deployment and leverages synergies to maximize transformative economic change.

A Call for Concrete Plans to Strengthen DBG

Rather than making lofty promises of setting up new sector-specific development banks, political parties should articulate robust, costly plans to capitalize on and strengthen the operational capabilities of the existing Development Bank Ghana (DBG). Economically, dedicating fiscal resources to optimizing this already established institution yields higher value-for-money and greater development impact.

Building on its solid capitalization, parties should outline strategies to further boost the DBG’s capital base to levels commensurate with its broad, multisectoral mandate. Additional equity injections from the government and strategic partners could be supplemented by initiatives to leverage the DBG’s strong capital position. Issuing bonds, securitizing assets, and catalyzing co-financing from development partners expand the DBG’s pool of deployable long-term funds. From an economic perspective, adequate capitalization is imperative, as it determines the DBG’s sustainable lending capacity and ability to undertake transformative investments.

To truly become an engine for development finance, the DBG requires concrete plans to attract, develop, and retain multidisciplinary teams of skilled dealmakers, credit analysts, engineers, and sector specialists. Investment in human capital, compensation policies aligned with industry benchmarks, and robust technical assistance partnerships are vital for cultivating this invaluable expertise over the long run. Economically, the DBG’s ability to rigorously evaluate, structure, and manage investments across complex sectors is fundamental to sustainable returns and development additionality.

Political parties should also lay out proposals to enhance the DBG’s institutional governance, risk management frameworks, and operating policies/procedures in line with global best practices. This includes measures of transparency, environmental/social risk mitigation, integrity safeguards, and stakeholder accountability. From an economy-wide perspective, an exemplary governance setup at the DBG buttresses investor confidence, mitigates moral hazard, curbs rent-seeking behavior, and ensures judicious capital allocation for productive use.

Furthermore, comprehensive strategies are required for DBG to strategically deploy its balance sheet across priority sectors and market segments. These could encompass ring-fenced funding vehicles for high-impact areas, such as climate finance, innovation/VC funding, SME credit enhancement, infrastructure investment, and commercial agriculture value chains. Econometrically sound policies and targets should be instituted to proactively address the underserved market gaps and systemic investment constraints that impede economic transformation. All stakeholders, particularly the media, must play a role in checking the promises of political parties.

Economic wisdom also counsels that plans to bolster DBG should be accompanied by coherent sector-specific industrial policies that align capital allocation with broader national development objectives. Inconsistent strategies inevitably manifest in the haphazard financing of white-elephant projects that destroy economic value. Institutionalizing coordination with sector ministries, regulatory bodies, investment promotion agencies, and other public and private stakeholders is vital.

Ultimately, Ghana’s political class must resist populist impulses and exhibit economic prudence by proposing realistic, well-designed roadmaps for the Development Bank Ghana to become a world-class, catalytic development finance institution over the long term. Credible, actionable plans to optimize this key economic architecture hold the key to unlocking Ghana’s structural transformation and sustainable development.


In conclusion, as political parties put forward their platforms ahead of Ghana’s elections, promises to create new development banks tailored to specific sectors or groups emerged as major campaign proposals. However, establishing disconnected, segregationally inefficient institutions risks duplicating costs, fragmenting resources, and undermining strategic alignment with a nation’s long-term economic priorities.

Instead of fueling this institutional proliferation, political actors should articulate cohesive strategies to build the existing Development Bank Ghana (DBG) as a preeminent national vehicle for catalyzing transformative development finance. A well-capitalized institution such as the DBG can harness significant economies of scale and scope by consolidating funding tools, technical expertise, and investment platforms targeting areas from agriculture and manufacturing to women’s economic empowerment. This integrated model reflects global best practices, enables strategic coordination of financing, and generates fiscal efficiency by avoiding replicated fixed costs across disparate institutions.

To optimally position the DBG as Ghana’s engine for inclusive, sustainable economic transformation, political parties must put forward comprehensive multi-year roadmaps detailing the proposed capitalization pathways, talent acquisition/retention plans, governance enhancements, and frameworks for strategically deploying the DBG’s balance sheet across catalytic sectors. Fortifying institutional linkages between the DBG, policy planners, regulators, and public-private stakeholders is vital for harmonizing development finance with overarching industrial strategies.

Credible, well-designed proposals to empower the DBG as a versatile, world-class national development bank provide a pragmatic path forward versus creating more fractured sector-specific institutions in an already resource-constrained environment. Coalescing efforts to optimize this centralized financing architecture can sustainably catalyze long-term capital while maximizing economic additionality.

The writer is a Development Economist and Former Head, Public Sector,FBNBank Ghana Limited [email protected]

Phone: 575 463 3867

Leave a Reply