The Board of Directors of the African Development Bank Group on Friday approved a grant of $40 million from the African Development Fund to the Republic of Ghana to further capitalise The Development Bank Ghana (DBG), a newly established development finance institution in Ghana.
The Development Bank Ghana is designed to provide financing to micro, small and medium sized enterprises as well as small corporates in agribusiness, manufacturing and information and communication technology (ICT).
Ghana is pursuing an economic transformation agenda that requires the availability of affordable capital for medium and long-term investment by the private sector. However, there are constraints to private sector development, particularly for MSMEs, which account for the majority of businesses in the country, due to the lack of access to medium and long-term credit.
Commenting on the approval, Marie-Laure Akin-Olugbade, the African Development Bank Group’s Director General for West Africa said: “The project to support the DBG is aligned with Ghana’s Beyond Aid Vision and supports the Government’s efforts to revitalize the economy post-COVID-19. The Ghana Beyond Aid Charter calls for the establishment of a new National Development Bank that is strong enough to mobilize domestic and foreign long-term private capital, in addition to Government’s contributions, toward agricultural and industrial transformation. This institution, which will operate as a wholesale bank, using a private sector model, will provide financial institutions with long-term financing to accelerate Ghana’s industrialization and agricultural modernization.”
Eyerusalem Fasika, the African Development Bank’s Country Manager for Ghana, pointed out the impact that the DBG is expected to have on Ghana’s thriving private sector, which can drive economic growth and deliver shared prosperity. “The project will support Ghana’s COVID-19 Alleviation and Revitalization of Enterprises Support (Ghana CARES) program that identifies the expansion of access to finance for Ghanaian businesses as one of the key measures for economic revitalization and transformation.”
Stefan Nalletamby, Director, Financial Sector Development Department, pointed out that: “The DBG project is another example of the Bank Group’s strategy to support African countries to establish new development finance institutions whose designs and structures are aligned with international best practice standards. The DBG is an institution that will ease access to finance for businesses in Ghana and contribute to efforts targeted at lowering the cost of credit in the country,” he said.
Overall, the DBG is expected to yield significant economic benefits to the Ghanaian economy as it seeks to increase access to finance, which is consistently identified by businesses as the top impediment to growth. Increased access to finance would particularly allow creditworthy businesses in the target sectors to invest, innovate and create high-quality jobs. In the short term, there is strong potential for job creation in the agriculture and agribusiness sectors, which will be supported by manufacturing along the supply chain to generate high value economic activity and high-quality jobs in the long-term.
The African Development Fund is the Bank Group’s concessional funding arm.