The Chief Governance Expert, Operations Policy and Review Department of the African Development Bank, Mr. Gabriel Negatu has appealed to financial institutions to support African entrepreneurs to become innovative and compete effectively in the global market.
Speaking on behalf of the ADB President at a forum for chief executives officers of financial institutions across Africa in Accra, he said surveys conducted on firms have shown that access to finance is one of the three biggest constraints for enterprise growth in Africa.
"The ability of African entrepreneurs to harness and take advantage of global market opportunities depends in large part on the availability of affordable and accessible financial instruments and products."
The 2007 annual forum of the Association of African Development Finance Institutions (AADFI) was hosted by the National Investment Bank (NIB). The three-day forum is under the subject of "Implementation of Standards and Guidelines in African Development Banks and Financial Institutions".
Mr. Gabriel Negatu said, "By providing the poor with access to affordable credit and other financial services, a well-functioning financial sector can have a sizable impact on reducing poverty."
He said despite the importance of the financial sector to Africa's economic growth, its potential remains largely untapped, and its contribution to-date remains largely marginal at it best.
Mr. Negatu noted that inappropriate sequencing of reforms in the financial sector, continued state involvement and interference in the management of financial institutions and inadequate regulations and supervision have also been major constraints to the realization of this potential.
"In my view," he told the CEOs "herein lies the role of financial intermediary institutions that are vital to the growth, diversification and differentiation of the sector. Your sub-sector, in particular, will have to be strengthened with a renewed mission, strategy and corporate culture re-oriented to meet the above challenges."
Despite the potential of DFIs, Mr. Negatu regretted that, many have failed financially and accused them of failing to achieve their development goals.
He said the operations of DFIs are fraught with externally imposed burdens and poor governance. "There is no doubt that if DFIs are to contribute to their national development, they need to be empowered, they need to be strengthened, and they need to operate in a transparent manner," he noted.
He promised the support of ADB to the activities of DFIs. This would however be based on certain conditions.
"These conditions include ensuring stringent compliance with corporate governance standards; suitable designed operating standards and procedures - including prudent credit risk policies and practices prudential supervision and regulation."
The Chief Director of Ministry of Finance and Economic Planning, Nana Boateng Siriboe who spoke on behalf of the sector minister said development banks should be resourced and encouraged to help governments to solve their development challenges faster without relying on development partnership.
Using the case of Ghana, he said DFIs have assisted the government in a number of ways including mass transportation, export development and industrialization.
He criticized the activities of some DFIs which move from their core functions and rather tend to enhance commercial banking activities for profitability to avoid collapsing.
"We in government believe that profit-making should not be the only motive of development banks at the expense of the overall development of the nation," Nana Siriboe said.
He advised the CEOs to ensure the standards and guidelines they adopt for the DFIs are consistent with government initiatives of respective countries.
Mr. Daniel Gyimah, Managing Director of the National Investment Bank (Ghana) Ltd said DFIs were established to assist in accelerating the pace of development in Africa.
"The task has not been easy and there have been various degrees of successes in every country. This association finds relevance in its creation in 1975," he said.
