The proposed new national bank, the Development Bank Ghana (DBG), is expected to commence its operations with a seed capital of about $1 billion, a close government source has revealed. This amount is expected to come from the government, its development partners and other secondary donor institutions.
The new development bank is going be a wholesale bank which will raise long term funds for capital market players and other banks. It aims at helping direct credit to areas that private investors may not want to venture due to their risky nature. Since the bank will provide long term capital to fund investment projects, it requires such a huge capital outlay.
As a result, the government entered into a partnership with three main institutions: The World Bank, the European Investment Bank (EIB), and KfW Development Bank.
The initial agreement was that the Government of Ghana will contribute an equity capital of $250 million. Also, the World Bank agreed to contribute $250 million. Out of the $250 million from the World Bank, a portion is expected to be used to make all the necessary arrangements for the DBG to fully commence.
Furthermore, the European Investment Bank agreed to contribute €170 million to aid the establishment of the bank which was fulfilled on May 19, 2021. Moreover, KfW also pledged to support the government with a minimum of €50 million.
Moreover, there are also other secondary players who have promised to support the government in funding the DBG. These include the French Development Bank (FDB) and the African Development Bank Group (AfDB). It is still unclear how much these two institutions will contribute towards the establishment of the new national bank.
It can be recalled that last month the Finance Minister announced the commencement of the new development bank by the end of July this year. According to him, the government has been able to raise the seed capital of $500 million. This $500 million is the minimum capitalization that the DBG requires to kick-start its operations.
Meanwhile, close sources reveal that the government of Ghana currently has raised $200 million out of its proposed $250 million that it disclosed to contribute towards the establishment of the development bank.
Progress on the establishment of the DBG
In the interim, all the policies and other necessary arrangements to commence the Bank are near completion. The DBG will be located at Ridge. According to sources, the building from which the bank will start its operation is almost 99% complete. Moreover, the government believes that after 5 to 6 years of operation, it will construct an office complex for the DBG.
President Akufo-Addo yesterday, 19th May 2021, signed the €170 million agreement with the EIB and pledged that the government will use the facility for its intended purpose. According to the President, the design and operation of the new national bank has been on the drawing board for two years. Also, the President said the bank will meet the highest standards and best practices of Development Banks across the world. The President further disclosed the DBG will help develop Ghana’s private sector, agri-business, manufacturing and ICT initiatives.
Meanwhile, experts have urged the government to appoint competent directors to manage the bank to harness its full potential and meet its purpose.
The Director of ISSER, Prof. Peter Quartey also advised the government to run the new bank as a business so as to ensure financial sustainability.