Ghana's Development Bank launches at last.

After having been first conceived in 2017, the Development Bank Ghana (DBG) was finally launched this week to help catalyse growth in the country’s small and medium enterprise sector.

The DBG has an initial $700m to loan to private financial institutions – including CalBank, CBG, GCB and Fidelity Bank – who in turn will on-lend to SMEs.

The bank is financed through a consortium of loans from international lenders including the World Bank ($250m), the European Investment Bank ($170m), the German state-owned development bank KfW ($46.5m), the African Development Bank ($40m) and the government of Ghana ($253m).

“Today’s launch marks an important milestone in our journey and is the result of many months and years of hard work from the DBG taskforce and working group, our staff, and our partners. However, tomorrow is no time to be complacent. We have an enormous task ahead of us…DBG recognises the crucial role of SMEs in our country’s economy and has made it its mission to catalyse their growth. We cannot do this without operating as a united front alongside our partners,” says chief executive Kwamina Duker, a former managing director of Fidelity Bank Asia,

Long-term loans remain a barrier to the growth of SMEs

Ghana wants the new bank to ease the access to credit and finance for its SMEs, which comprise about 80% of businesses in Ghana, by providing loans with tenors greater than three years. An estimated one to two million SMEs in Ghana are estimated to generate some 70% of GDP.

Long-term loans remain the main challenge for SMEs in the country. According to Ghana’s finance minister, Ken Ofori-Atta, only 15% of bank loans are for five years or longer, stifling investment in long-term projects.

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Recent research on national micro, small and medium enterprises by the Ghanaian Ministry of Trade and Industry says that the perceived risks associated with lending to SMEs make them unattractive.

“These perceived risks stem from low financial management skills among entrepreneurs, lack of proper documentation to support loan applications, and the focus on agro-based business lines by many MSMEs,” says the research paper.

And yet when SMEs manage to have access to funding, high interest rates make it difficult to make profits and invest in further development.

According to the paper, SMEs in Ghana are facing the “missing-middle” challenge, in which access to financing options is only made available to large corporations – which can afford them – and micro-enterprises through poverty alleviation policies.

“This creates a gap in the middle part of the ecosystem which consists primarily of small and medium enterprises who are inadequately financed and lack access to requisite business development services,” says the research.

The bank will also be used for capacity building, mentoring and business advisory services, and is partnering with the Association of Ghana Industries (AGI), as well as the Ghana Incentive-based Risk Sharing for Agricultural Lending.