Kojo Oppong Nkrumah justifies establishment of Development Bank Ghana

Information Minister, Kojo Oppong Nkrumah, has justified the government’s decision to set up another national bank, the Development Bank Ghana (DBG).

The Ministry of Finance and the European Investment Bank (EIB) on Wednesday, May 19, 2021, signed an agreement for the provision of a €170 million facility for the establishment of the new national bank.

This event took place when President Nana Addo Dankwa Akufo-Addo met with the President of the European Investment Bank, Dr. Werner Hoyer, as part of his official visit to Belgium.

Many have questioned the need for another national bank, given the existence of the National Investment Bank (NIB), Agricultural Development Bank (ADB), the Consolidated Bank Ghana (CBG), and the Ghana Commercial Bank.

In an interview on Eyewitness News on Thursday, May 20, 2021, the Minister explained that the development bank will, through the commercial banks provide certain key sectors with loans at relatively favourable conditions and rate.

“The Development Bank, unlike the Commercial bank is able to mobilise significantly larger amounts of money for a significantly longer period and significantly lower rates of interest. It focuses on sectors that are mainly for development, but may not be the preference areas of commercial banks.”

“One of the challenges that commercial banks in our country have had over the years is the ability to get access to large folds of deposits for long tenures and at lower rates, and even to lend to sectors of the economy that are good for development, but may not be less risky for commercial purposes.”

“So what the government has done is to set up this development bank, which is

mobilizing, at least for the first over five years, in excess of over a billion dollars capitalization which the bank can now leverage on, with a multiple of two or three, and then unlend to commercial banks who will now have access to this large pool of resources to impact areas like agriculture, which will impact farmers in remote areas, manufacturing, housing, ICT, among others.”

Touching on sectors of the economy that stand to benefit from the project, the Ofoase/Ayirebi legislator said the bank will take into consideration the focal areas of Ghana’s development as outlined in the National Development Plan.

On the impact of the €170 million facility on the country’s debt stock, he said the focus of the conversation now is whether or not the bank will end up having a positive impact.

“We are building organizations that will have and subsequently balance their own balance sheets. Of course, initially you will need to capital, but once they start operating and unlending the bank will be able to sustain itself.”

“What is critical is whether or not the bank is able to inject about a billion dollars into Ghana’s banking system, which will support a lot of these commercial banks and more importantly, affect the sectors of the economy that will need financial support.”

He indicated that the government has made a contribution of about 200 million dollars of its own resources “out of the 250 million it has pledged to invest, and will continue to pump money into the project.”

He indicated that the bank will be fully owned by the government.

“The search for human capital is ongoing globally, to ensure that we have the best talent around the world to manage it, so it does not become “a job for the boys,” he added.

DBG is an integral feature of the GH¢100 billion Ghana Cares ‘Obaatampa’ Project, which is seeing to the revitalization of the Ghanaian economy following the onset of COVID-19.

Speaking at the signing ceremony on Wednesday, President Akufo-Addo noted that “the Development Bank Ghana is going to play a very important part in the rapid economic transformation of Ghana, following the onset of COVID-19.”

He said “We want to restructure the economy and move it from being a mere producer and exporter of raw materials to one that places much greater emphasis on value addition activities. We see this Bank (DBG) as one that will play a pivotal role in this”.

The President indicated that the design and operation of the Bank, “which has been on the drawing board for the last two years”, will satisfy the highest standards, scrutiny and best practices of Development Banks across the world, assuring further that the €170 million facilities from the EIB will be used for the purposes for which it was sought.”