The Board of Executive Directors of the World Bank endorses US$250 million from the International Development Association (IDA) to support the establishment of the maiden “wholesale” bank of Ghana, the National Development Bank.
This initiative is to boost access to long-term finance and promote job creation for 10,000 enterprises in key sectors including, agribusinesses, manufacturing, and high-value services.
The World Bank Country Director for Ghana, Sierra Leone, and Liberia, Pierre Laporte, intimated that by offering long-term wholesale financing, credit guarantees, and other services, the Ghana Development Finance project will assist in increasing overall lending to priority sectors and market segments.
“The project is aligned with government priorities outlined in the Coordinated Programme of Economic and Social Development Policies and is an integral part of the World Bank Group’s efforts to promote sustainable growth in Ghana,” Pierre Laporte opined.
The Development Bank of Ghana will also finance various interventions to attract private sector financing for credit-constrained Medium to Small Scale Entities (MSMEs) and small companies based in Ghana.
Carlos Vicente, World Bank Senior Financial Sector Economist, remarked that “these interventions will include the establishment of a Partial Credit Guarantee facility and a digital financing platform to leverage private sector financing by making it more efficient and less risky for private financiers to lend to MSMEs”.
“We have secured US$250 million from the World Bank as initial capitalization to kick-start the operations of the NDB and an interim board was set-up. In view of the high level of interest generated, other Donors such as DFID, KFW, AfDB are expected to provide additional capitalization for the Bank once it becomes operational in 2020.
The National Development Bank as envisioned will refinance credit to industry and agriculture as a wholesale bank, and also provide guarantee instruments to encourage universal banks to lend to these specific sectors of the economy,” the Finance Minister added.
Hon. Ken Ofori-Atta, Minister of Finance, pronounced at the 2021 first quarter budget reading that “we have also established a National Development Bank which already has commitments of over 500 million USD as a wholesale bank to further support these financial institutions”.
Mid-year Budget Review
At the reading of the 2020 Mid-year Budget Review to Parliament, the Finance Minister indicated that the government is set to complete discussions with the World Bank and other development partners to capitalize on the bank for it to commerce operations.
“Government is working with KfW, World Bank, AFD and European Investment Bank (EIB) to operationalise the Development Bank Ghana (DBG) by September 2020. The Bank will focus on transforming the industry, agriculture, agro-processing, and housing and mortgage sub-sectors of the economy over the medium-term. It will serve as a promotional bank for the country, with a focus on mobilising medium to long-term funds and channel them into the economy through the financial system as a wholesale bank”.
The National Development Bank is supposed to act as an independent institution with a strong corporate governance framework and would be globally rated to enable it to leverage foreign private capital for industrial and agricultural development in the country.
The government will also provide periodic dedicated funds for intervention in key areas of the economy such as large scale agro-processing, housing, through various schemes and funds as needed for economic and social development and jobs, Mr. Ofori-Atta added.
The National Development Bank will be regulated by the Bank of Ghana, with a competitively selected independent Board and Management.
“Government completed a draft Development Finance Institutions Bill, 2020, which received Executive approval and is a key regulatory pillar for the promotion of the development finance ecosystem. This Bill will be laid in this august House for consideration and passage”.
The Hon. Ken Ofori-Atta has mentioned that “The Bank is also expected to source funds from the domestic, regional, and international capital markets through periodic issuance of bonds, diaspora instruments, and direct borrowing”
