The Bank of Ghana has formally launched the Development Bank Ghana (DBG) on the fourteenth of June 2022, with the President of the Republic of Ghana, Nana Addo Dankwa Akufo-Addo, Ghana’s Minister for Finance, Mr. Ken Ofori-Atta, Board of Directors, Managing Director, Key Management Personnel and Staff of Development Bank, Ghana Valued Stakeholders of DBG and so on present at the event.
After tireless efforts by stakeholders and other partners to move the DBG thought from origination to operationalisation, DBG has been launched by the Governor of the Bank of Ghana, Dr Ernest Addison.
The launch of the Development Bank Ghana (DBG) is because of a resurgence in the foundation of new Development Finance Institutions (DFIs) in developing countries.
This is generally because of the fact that current DFIs have been not able to actually address market gaps, work with significant expansions in financial intermediation concerning effort and scale.
National Development Banks, alongside multilateral Development Banks, assume active roles in mobilizing public and private sector resources to support critical economic sectors.
Overtime, the role of development banks has expanded to include finance for infrastructure expansion, environmentally green projects, as well as a wide range of developmental objectives. Despite these, DFIs maintain the provision of medium to long-term finance and project finance at the core of their activities.
With Ghana’s Financial System and Expectations for DBG, Ghana’s economic system has gone through a huge change throughout the course of recent years, which has expanded the scope of financial services offered by monetary delegates.
The recapitalization changes, which originated before the pandemic, along with the Coronavirus relief measures introduced by the Bank following the pandemic, situated banks to face the hardships related with the pandemic and support loaning to help financial movement.
In spite of the supporting role of banks and Specialized Deposit-taking Institutions (SDIs), there are deficiencies on the monetary scene which has an immediate bearing on growth. Banks and SDIs center around momentary funding for business purposes with little help for long haul supporting expected to speed up financial turn of events and change.
Available data show that, less than 15 percent of loans granted by banks are for 5 years or longer, making investment in long gestation projects, especially for Small Mediumsized Enterprises (SMEs) unviable. Also, the share of bank credit to the agriculture and manufacturing sectors hover around 4 percent and 8 percent, respectively.
This data shows that only a small share of lending goes to key sectors such as agriculture and manufacturing relative to their shares in GDP and employment. This therefore, necessitates the establishment of modern market-oriented development finance institutions, which will focus on providing medium to long term financing to support key sectors of the economy.
While recognizing the very crucial role of development banks, Ghana need to also make it clear that their presence on the financial landscape is not designed to provide competition to the banks and SDIs, but rather, to work in a complementary fashion to ensure more longer-term finance to firms, an area that banks and SDIs are ordinarily unable to finance. Such a successful synergy between banks and DFIs will ensure greater depth in Ghana’s financial sector.
As per the Dr Ernest Addison, experiences from countries show that DFIs can play key developmental roles when well-structured, insulated from political interferences in operational decisions, and professionally managed along sound principles that balance development objectives with market realities.
Therefore, Bank of Ghana’s expectation is that DBG, together with the other DFIs that will be licensed by the Bank, would help address market failures in the Ghanaian credit markets, thereby helping businesses invest long-term, and promote economic growth and job creation.
There is broad international consensus that a strong regulatory and supervisory regime would have to underpin the operations of DFIs. This consensus was made following the observation that inadequate regulation and supervisory framework and undue political interference were major contributory factors that led to the collapse of development banks in Africa during the 1960-80s.
Speaking at the event, the BoG Governor, Dr Ernest Addison expressed that, it was on this premise that his outfit, working with other stakeholders, developed the legal, regulatory, and supervisory framework for these DFIs which culminated in the passage of the Development Finance Institutions Act, 2020 (Act 1032).
Act 1032 contains provisions on sound and prudent banking principles to guide effective operations of Development Finance Institutions, such as capital and reserve requirements, liquidity requirements, ownership and control, corporate governance, restrictions on lending and investments, and financial reporting, amongst others, to ensure they are operationally efficient.
Provisions on corporate governance structures have been strengthened under the Act. As a result, the Ownership, Governance and Operational Structures of DBG have been carefully designed to ensure that DBG is managed professionally to successfully carry out its economic transformational mandate.
As the regulator, the Bank will deploy the requisite tools to ensure effective regulation and supervision of DFIs. Starting with the DBG, the Bank will also ensure that DFIs in Ghana operate in a financially sustainable manner, to achieve the development mandate, foster confidence, and attract more investments into the economy to support growth.
Dr Ernest Addison repeated that the Bank of Ghana will hold the DBG to the very regulatory and supervisory guidelines that it holds banks and SDIs, while simultaneously keeping up with oversight of the Participating Financial Institutions (PFIs) that DBG will work with.
The Bank of Ghana is ready to work in close partnership with DBG to achieve this, from two key angles. First, in helping to safeguard and protect DBG’s governance structures, and second, in working to create the right enabling environment both for DBG and its partners.
The DBG, alongside its partners, has the potential to be truly a catalytic entity in Ghana’s economic transformation.
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