Hope soaring for the new Development Bank
Adnan Adams Mohammed
Industry players, including investment bankers and business leaders, have lauded the establishment of a Development Bank.
They believe it will serve as a panacea for addressing long term financing challenges experienced by local industries.
The Government of Ghana in partnership with the European Investment Bank, and other international development institutions have committed to the establishment of a new development finance institution in Ghana to provide patient capital for Ghana’s industrialisation agenda. A leading investment banker has endorsed the approach being used for the establishment of the Development Bank Ghana.
“The Development Bank Ghana is set up to attract very cheap capital which should boost Ghana’s economic growth through agriculture and manufacturing”, the Deputy Managing Director of the Ghana Stock Exchange, Abena Amoah speaking at a development finance series organised by Citi TV and Citi FM in collaboration with the research and consultancy centre of the University of Professional Studies in Accra, last week, noted.
Also, the President of Association of Ghana Industries (AGI), Dr Yaw Adu Gyamfi has expressed confidence in the sustainability of Ghana’s development bank.
According to him, the development bank will serve as a panacea for addressing long term financing challenges experienced by local industries.
Speaking at a corporate dinner series for CEOs of Large Corporates organised by the Association of Ghana Industries in Accra, last week, Dr. Adu Gyamfi noted that governance structures being put together for the Development bank inspires hope.
“This is an investment bank and not a depository bank. No one has asked anyone to go and put money there…In terms of the policies and the laws that have been passed, this bank should not be like NIB or ADB, and we are hoping for the best,” Dr. Adu Gyamfi said.
He added that the business community has its “eyes open to ensure that the bank survives” because its survival will mean a lot to the nation’s industrial development and also curb the growing number of unemployment.
The Development Bank Ghana, when fully operationalised, will serve as a wholesale bank, attracting cheap capital and lending to special sectors of the economy through commercial banks.
Despite being described as the bedrock of Ghana’s economic development, the agriculture and manufacturing sectors receive just 4 and 8 percent respectively of investment.
The situation results from the lack of capital due to the short term nature of investment funding available and this propelled the establishment of a new development bank.
This, however, will not be the first time government is establishing a development bank.
According to Dr Emmanuel Debrah, a finance Lecturer at UPSA, all development banks have collapsed due to poor corporate governance.
“When I heard of the Development Bank, what came to mind was all the development banks Nkrumah built. All of them are no more. The question is what have we learnt from there to guide the sustainability of the yet to be operational Development Bank, Ghana… Research has shown that all development banks in the past collapsed due to poor corporate governance,” Dr. Debrah noted.
Subsequently, Director of the Financial Sector Division of the Ministry of Finance, Sampson Akligo, speaking on the same platform, gave the assurance that the Government is plugging all loopholes to ensure the Development Bank Ghana stands the test of time.
“Typically, the way the bank was set up under the Companies Act gives us some level of immunity so in that case, we don’t have direct political involvement. Secondly, we have done all that we can to make sure that recruitment is done through an independent process,” Mr Aklogo said, adding that the diversity of the partners working with the government to establish the bank is a testament to its sustainability.
Addiyionally, Madam Abena Amoah who was on the same panel endorsed the government’s approach noting that “Development bank is structured to raise very cheap funds” which should “allow businesses to borrow into the target sectors”, i.e. manufacturing, housing, agriculture etc.
Speaking on why Ghanaian businesses prefer debts to equity in their quest for funding, Awura Abena Agyeman, CEO of wear Ghana noted that young businesses are not just interested in money but also in what she calls smart Capital.