Dr. Ernest Addison has emphasized that the Bank of Ghana (BoG) will hold the Development Bank Ghana (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.
The Governor disclosed that BoG will strive 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.
Speaking at the official launch of the DBG, the Governor of the Bank of Ghana indicated that 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
Dr. Addison noted that the commissioning of DBG today, Tuesday, June 14, 2022 could not have come at a better time because globally, there is a resurgence in the establishment of new Development Finance Institutions (DFIs) in developing countries.
According to him, this is largely due to the fact that existing DFIs have been unable to effectively address market gaps and facilitate meaningful increases in financial intermediation in terms of outreach and scale.
National Development Banks, along with multilateral Development Banks, play active roles in mobilizing public and private sector resources to support critical economic sectors, the Governor said.
He further highlighted that 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.
Rationale for the establishment of the DBG
Dr. Addison noted that despite the supporting role of banks and Specialized Deposit-taking Institutions (SDIs), there are shortcomings on the financial landscape which has a direct bearing on growth.
“Banks and SDIs focus on short-term financing for commercial purposes with little support for long term financing needed to accelerate economic development and transformation.
“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, Medium-sized Enterprises (SMEs) unviable. Also, the share of bank credit to the agriculture and manufacturing sectors hover around 4 percent and 8 percent, respectively”.
Dr. Ernest Addison
He further explained that these data show 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 which is what “DBG brings on board”.
“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 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”.
Dr. Ernest Addison
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, the Governor underscored.
Dr. Addison reaffirmed BoG’s commitment to supporting DBG in its mission because the “relevance of the DBG is now needed more than ever”. He urged all stakeholders to put in maximum efforts to ensure the success of the new bank.
READ ALSO: Interest Payment & Employee Compensation Higher Than Domestic Revenues By 9.3% In Q1 2022
