DBG secures $70m in seed funding for Partial Credit Guarantee Scheme
The Development Bank Ghana (DBG) has secured a significant seed fund of US$70 million to support its partial credit guarantee scheme, as it looks to spur investments in high-risk sectors of the economy while effectively managing risks associated with loan defaults. The funds have been contributed by the World Bank Group, with an amount of US$50 million, and the Kreditanstalt für Wiederaufbau Development Bank of Germany, with a remaining sum of US$20 million.
This scheme is aimed at providing an additional layer of support for participating financial institutions (PFIs) to help them manage risks associated with loan defaults. The PFIs will be able to share the risk of investment with DBG, as the bank aims to encourage banks to use their own funds to invest in productive sectors of the economy. This initiative is expected to enable banks to better serve the SME sector effectively and, at the same time, promote prudent lending practices and risk management within the industry.
DBG’s Chief Executive Officer (CEO), Kwamina Duker, has disclosed that the partial credit guarantee is scheduled to commence operations in the third quarter of 2023. The bank plans to expand its PFI network to at least 10 by the end of the year, in a move aimed at enhancing its reach and ability to support SMEs across the country.
DBG has already onboarded Zenith Bank, thereby expanding the bank’s network of partners and enhancing its ability to reach more SMEs across various sectors. Mr. Duker has further noted that the bank has completed due diligence and is on course to onboard Ecobank and Absa as new PFIs this month.
In the first quarter of the year, the bank increased its lending portfolio by disbursing GH₵57.2 million to three PFIs for onward lending to businesses in the agriculture and manufacturing sectors, bringing the bank’s loan book size to GH₵302 million. Additionally, DBG has provided capacity building to 644 local businesses, including 444 young entrepreneurs and 52 staff from 13 financial institutions. The training focused on various aspects of business management, entrepreneurship, and specialized lending to improve the sustainability and growth potential of SMEs and enhance the lending capabilities of PFIs.
DBG is determined to address the challenges facing SMEs and build on the strong momentum generated in the first quarter, with a particular focus on expanding its lending portfolio, strengthening relationships with its PFIs, and promoting sustainable development. The bank has committed to disbursing at least GH₵600 million in loans for on-lending to SMEs this year, and it possesses the capacity to provide additional loans to back sustainable projects as they are presented to it, demonstrating its unwavering dedication to growing with its partners.
Cumulatively, DBG will have invested about GH₵800 million by the end of 2023 in various sectors since its launch in June 2022. The bank has so far provided technical assistance to over 1,000 local businesses while offering loans of up to GH₵300 million. It aims to focus on sectors with high growth potential and significant social and environmental impact, such as agribusiness, manufacturing, and low-carbon and climate-resilient investments.
Another priority of the bank is to enhance capacity-building initiatives. Mr. Duker mentioned that the bank will intensify efforts to provide training and support to SMEs and PFIs, equipping them with the necessary skills and knowledge to succeed in their respective sectors. The bank aims to offer training on business management, financial planning, and environmental and social risk management to 15,000 businesses and entrepreneurs.
DBG uses a wholesale banking model, providing funds to eligible financial institutions that can on-lend the funds to targeted industry sectors, including agribusiness, manufacturing, ICT, and high-value services.
