The World Bank has defended its decision to support the Government of Ghana in the establishment of the Development Bank Ghana (DBG) with a loan facility of $200 million.
The World Bank’s defense and explanation for the loan facility support follows concerns raised about the rationale for which the World Bank provided the loan amount to support government establish a new development bank when existing ones set up for a similar purpose in the past have failed to live up to expectations and are now operating as universal banks.
Speaking in a media interaction, Country Director of the World Bank, Pierre Frank Laporte, noted the World Bank initially had reservations about supporting the establishment of DBG with the said loan facility, but later agreed to support the establishment of the development bank after government agreed to some conditions stipulated by the World Bank.
According to Mr Laporte, government gave assurance that it will comply with the conditions spelt out by the Bank to ensure that things are done differently and properly to prevent DBG from suffering the same ill-fate of the previous development banks.
In many countries, development banks have not been a good experience; they’ve been fraught with inefficiencies, political interventions, and all sorts of problems. But the good thing is that there are also good models of development banks. So, when we said we would go forward with it, we said we would only agree when government accepted that we will do it the right way.
And the right way means putting in place the right government structures. For instance, the appointment of members of the board, appointment of CEOs and other key personnel. And the internal governing structure of the bank itself must also be based on a modern framework that is internationally acceptable by good standards. In all these things we had to get government assurances, and we got them. And it is because of this that, finally, we accepted we would go forward with it.
“The good thing is that we are not alone. The European Investment Bank recently approved €170million. So, it is a good sign that there is consensus and recognition we need to do something to help the financial sector and private sector in Ghana,
Mr Laporte posited.
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Speaking further, he added that the new development bank will help address the age-old problem of access to long-term financing in the country.
We know that access to finance in Africa is a huge problem – whether it is startups or companies looking to expand, and even big companies will tell you this. Access to finance is one of the biggest constraints to development and poverty-reduction in Africa. In Ghana, it is almost impossible to get long-term financing for private investment.
But people should get something straight; people should not expect that they will come to the development bank and be given money. It is going to be a wholesale bank. The bank will provide credit lines through existing commercial banks that will allow them to give longer-term financing. So, through this, we are hoping to fill a big gap that exists in the financial sector,
he stated.
DBG in its operations is expected to over the medium-term, focus on and transform industry, agriculture, agro-processing, and housing and mortgage sub-sectors of the economy.
When operational, DBG will deploy products and instruments such as credit guarantee funds, refinancing of Participating Financial Institutions (PFIs) loans, term loans, business development services and factoring, among others.
