• Cost of lending to the private sector has often been high
• The start of operations of the DBG is expected to change that
• Government has secured a provisional license for the DBG to commence
Chief Executive of the Ghana Association of Bankers, John Awuah has expressed confidence that the establishment of the Development Bank Ghana will offer more lending support to the private sector.
According to him, once the bank commences operations, the Association is willing to partner with it in order to address the issue of private-sector lending.
“Cost of long-term funding in the country is very high because people are looking at what the available benchmark is. and we’ll be working closely with our partners to ensure that we have access to the right mechanisms to be able to extend long-term credit,” Awuah told journalists. “We’ve also seen that partnering strongly with the proposed Development Bank can also be a good avenue to having access to long term funding to enable us to intervene properly in the market.”
Meanwhile, the Bank of Ghana has indicated that credit to the private sector has marginally picked up along with trends staying below expectation. This is however due to the coronavirus pandemic-related risk aversion.
Over the period, commercial banks have often failed to lend to the private sector, with the Ghana Bankers’ Association blaming the situation on the lack of access to long term funding for the private sector.
There are also concerns raised over the high treasury bill rates meant for the low level of credit advanced by financial institutions to the private sector.
The move to set up the Development Bank Ghana was first announced in Parliament by the Finance Minister, Ken Ofori-Atta in 2019.
Most recently in May this year, Ghana secured a €170million facility from the European Investment Bank for the establishment of the Development Bank Ghana (DBG).
The DBG is expected to help address two important constraints in the country’s financial system: namely, lack of long-term funding, and the lack of adequate funding to productive sectors of the economy.
The banks’ primary focus areas will be agribusiness, manufacturing, ICT, tourism, boosting homeownership through affordable among others.