The Minister of Finance, Ken Ofori-Atta, has clarified the operations of the yet to be created Development Bank of Ghana (DBG). According to him, this will not be a deposit taking institution to mobilize funds from individuals and business consumers but will rather be made to lend to institutions, providing support for key sectors of the economy, particularly agricultural and real estate.
Addressing the media at a short briefing in Accra following the recent loan agreement of 170 million euros between the government and the European Investment Bank, Mr. Ofori-Atta said DBG is a key pillar in the country’s efforts to quickly recover from the effects of the COVID-19 pandemic and quickly resume its economic transformation path as articulated in the Ghana CARES/Obantanpa Programme.
Explaining further, the Finance minister said DBG is a key pillar in Ghana’s efforts to quickly recover from the effects of the COVID-19 pandemic and quicly resume the country’s economic transformation path as articulated in the Ghana CARES/Obantanpa Programme. The new bank is intended to be a model institution that supports the financial system to play its role in supporting the private sector to expand and create jobs. DBG will help address two important constraints in our financial system, namely the lack of long-term funding, and the lack of adequate funding to the productive sectors of the economy.
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.
Primary Focus Areas of DBG will be:
- Agribusiness, with a focus on off-farm value-chain activities
- ICT, software, and allied services, including Business-Process Outsourcing, and Tourism
- Boosting home ownership 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, ADB, 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.
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.