Soon to be launched Development Bank, Ghana (DBG) is expected to inject $1 billion into the Ghanaian economy in the next five years as part of government’s pragmatic measures to stimulate economic growth.
DBG will be launched in July 2021 with an initial government of Ghana equity contribution of $250 million of which US$200 million has already been paid by government and institutional investors.
Minister of Finance Mr Ken Ofori-Atta who announced this at a media briefing in Accra yesterday said this is part of the GH¢100 billion Ghana Cares “Obaatanpa” programme, that the Akufo-Addo administration is putting in place to revive the economy from the devastating effect of COVID-19 pandemic.
According to him, the DBG will help address two important constraints in the country’s financial system, namely the lack of long-term funding, and the lack of adequate funding to the productive sectors of the economy.
He said through the DBG, investment will be made in Agribusiness with a focus on off-farm value-chain activities manufacturing, ICT, software, and allied services, including business-process outsourcing, tourism and boosting homeownership through affordable and longer tenure mortgage finance.
“DBG is not similar to the existing commercial banks that we have in the country. It is a non-deposit taking Wholesale bank. DBG will neither give retail nor direct business loans, like the former Bank for Housing and Construction, NIB (National Investment Bank), ADB (Agricultural Development Bank), and the like.
“It will rather provide funds to the existing commercial banks and other qualifying financial institutions to provide long-term lending and other innovative products that are presently lacking in the system. The bank will therefore complement and strengthen the operations of existing financial institutions,” he added.
Mr Ofori-Atta said currently, less than 15% of loans given out by banks are for 5 years or longer, making investment in long gestation project very difficult for our private sector.
“Agriculture and manufacturing sector receive around 4% and 8% respectively of banks loans compared to their shares in GDP and employment and potential for driving economic transformation”, he pointed out.
Reasons for DBG
Providing reasons why government considers DBG as the best approach to elevating the country from the COVID-19 induced setback, the Finance Minister explained that the creation of a modern and dynamic development bank is critical to the country’s economic rebound.
He said this approach has the potential to attract more private and international institutional capital as observed by the €170 million facility by the European Investment Bank (EIB) noting that the bank starts from a clean slate, with no legacy financial, governance and other issues an advantage policy banks like the Agric Development Bank (ADB) and National Development Bank (NIB) do not have.
Capitalization of DBG
Providing further details on the bank, the Minister said the bank will be launched in July 2021 with an initial government of Ghana equity contribution of $250 million of which US$200 million has already been paid by government and institutional investors.
He said government is aiming at increasing DBG’s lending capacity by raising additional funds from domestic and international private and institutional investors in order to build the needed foundation for the bank to shore up the Ghanaian economy.
“It is important to state that since independence, this is the first time we are establishing a bank of this nature.
“It is a model along the lines of the German Development Bank – KfW, which played a pivotal role in the post-World War II reconstruction and transformation of the German economy.
“Through DBG, Government will be able to further strengthen its support to the private sector to spearhead economic growth and transformation. DBG is an instrument to ensure long term finance to the private sector on a sustainable basis.
“Government therefore expects DBG to be a financially sustainable institution that is able to raise long term funds from the domestic and international capital markets and from international financial institutions, based on its own balance sheet.
“To this end, Government is taking pains to ensure that DBG has a strong governance structure with professional and independent Board and Management. A process to select the Board and Management on a competitive basis is currently underway”, Mr Ofori-Atta concluded.