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African DFIs tasked to enhance credit rating positions to boost investment

Development Finance Institutions across Africa have been tasked to beef up efforts to enhance credit rating positions to attract more global investments.

According to the Bank of Ghana, access to global debt capital and loan markets continues to remain a problem hence the call for the financial institutions to implement policies that will attract investments on more favourable terms.

Development Finance Institutions (DFIs) provide risk capital for economic development projects on a non-commercial basis.

Ghana is currently in the process of setting up such an outfit called the Development Bank Ghana with funding from internal and global partnership sources.

Among the objectives for setting up the bank is to position certain sectors of the Ghanaian economy to attract the needed global investment.

Many DFIs across the continent are in the process of positioning their economies for similar investments.

It is in this regard that the Bank of Ghana is asking these institutions to implement policies that will enhance their ratings in order to attract global investments.

The Head of Banking Supervision at the Bank of Ghana, Osei Gyasi, was speaking on behalf of the Governor of the Central Bank at the 2022 annual general assembly of the Association of African Development Finance Institutions.

“African DFIS should work at enhancing credit rating positions. In spite of the large number of African DFIs, access to global debt capital and loan markets continues to be dominated by a few leading multilateral African or regional DFIs largely due to innovations in credit enhancements and structuring. It is imperative, therefore, for DFIS to implement policies that will enhance their ratings in order to attract more global investments on more favourable terms, including longer tenors and lower interest rates.”

Following the recent increase of the Monetary Policy Rate by 200 basis points to 19 percent due to the high inflation rate, it is expected that the cost of borrowing from financial institutions will go up at least for the next two and half months.

It is for this reason that banks and other financial institutions will have to review their fees and charges to adjust to the current monetary policy situation.

Managing Director of the National Investment Bank, Samuel Sarpong spoke to Citi Business News on the sidelines of the meeting.

He said, “All banks are going through a period o adjusting to the various economic conditions as well as the monetary policy situation. For example, the cost of doing business has gone up significantly with the inflationary rate and all banks are adjusting their rates and fees to make sure that they make profit. So similar to other banks, NIB is looking at its interest rates, fees and cost of doing business and adjusting appropriately just as any other business will do.”

The 48th Association of African Development Finance Institutions annual general assembly which was hosted by the National Investment Bank was under the theme, ‘Unlocking Innovative Resources for Development Finance Institutions: Agenda for African DFIs’.

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