Business News of 2014-06-11

Societe General channels GH¢315m to SMEs

Ghanaian entrepreneurs are to benefit from €80 million from the European Investment Bank (EIB) under its programme to leverage investments across the country.
The fund, approximately GH¢315 million, has been set aside by the EIB to support investments into small and medium enterprises (SMEs) which are engaged in exports.
Subsequently, Societe General Ghana has received the first tranche of €20 million (about GH¢80 million) from the facility for onward lending to SMEs. The 10-year facility (the Investment Facility Resources (IFR) is part of the benefits the EU offers members of the African, Caribbean and Pacific (ACP) group of states which have signed a non-reciprocal trade treaty, the Economic Partnership Agreements (EPAs), with the European Union and its member states under the Cotonou Accord of 2003.
The EIB is the long-term lending bank of the European Union (EU) and it is owned by the 28 member states of the EU.
The Managing Director of SG Ghana, Mr Gilbert Hie, said at a signing ceremony in Accra on June 3 that the facility was to be used to finance up to 50 per cent of SG Ghana’s capital expenditure intended to develop its intermediation capacities such as developing its branch network, IT systems and training as well as finance eligible SMEs.
“It will ensure the long-term resources needed by the SME sector to finance their investment and drive sustained economic growth. This facility also provides lower interest rates and cheaper funding for SME projects to allow for more competitive advantage in the local market,” he said.
The EIB Representative for West Africa, Mr Christophe Lucet, said sustainable economic growth could only take place when businesses were able to develop, adding that companies and entrepreneurs were crucial in identifying new opportunities and creating jobs.
Banks, he said, were, therefore, best placed to finance the real economy, given their knowledge of local market needs and realities as well as their ability to get closer to customers. However, he noted that their credit to the private sector remained low at 16 per cent of Gross Domestic Product (GDP) in 2012, which is far below the average for sub-Saharan Africa’s 61 per cent.
He said banks could not be blamed for the low lending, considering the inherent risks involved in lending and the high proportions of non-performing loans (NPL).
“EIB is intervening by supporting banks focused on Africa that are both robust and innovative. Apart from Societe General, which is a leading international group, EIB is also working with other banks in Ghana, both international and local, to help improve access to finance for Ghanaian businesses,” he said.
Mr Lucet added that EIB was looking at several opportunities for direct investments in agribusiness, a sector with a significant potential for job creation.
The EIB is a not-for-profit institution with an objective to finance projects that are important to the EU in Europe and around the world with low-cost and long-term loans, sometimes supported by technical assistance.
The role of the EIB is to support the development of the productive sector with financial instruments with the objective of promoting economic growth and reducing poverty. In West Africa, the EIB has invested €1.9 billion in direct project financing since the signing of the Cotonou Agreement in 2003.