The Bank of Ghana has welcomed Development Bank Ghana (DBG), saying it brings to the banking industry an establishment of modern market-oriented development finance institution, with the focus on providing medium to long term financing to support key sectors of the economy.

Speaking at the launch of the bank today, Governor of the Bank of Ghana, Dr. Ernest Addison, said experiences from countries show that Development Finance Institutions (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, the Bank of Ghana’s expectation is that DBG, together with the other DFIs that will be licensed by the Central Bank, would help address market failures in the Ghanaian credit markets, thereby helping businesses invest long-term, and promote economic growth and job creation.

“While recognizing the very crucial role of development banks, we need to also make it clear that their presence on the financial landscape is not designed to provide competition to the banks and Specialised Deposit Taking Institutions, 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", he mentioned.

Available data show that, less than 15% of loans granted by banks are for five years or longer, making investment in long gestation projects, especially for Small Medium sized Enterprises (SMEs) unviable. Also, the share of bank credit to the agriculture and manufacturing sectors hover around 4% and 8%, 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 Gross Domestic Product and employment.

This data, the Governor, believes shows that only a small share of lending goes to key sectors such as agriculture and manufacturing relative to their shares in Gross Domestic Product and employment.

This he believes DBG will address.

Regulatory oversight

The Governor reiterated that the Bank of Ghana will hold the DBG to the same regulatory and supervisory standards that it holds banks and SDIs, while at the same time maintaining oversight of the Participating Financial Institutions (PFIs) that DBG will be working with.

This Dr. Addison said the Central Bank will strive to work in close partnership with DBG to achieve this, from two key angles.

First, the Bank of Ghana will help 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 Development Finance Institutions Act, 2020, 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.”

Furthermore, the Governor said the 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.