To support banks and financial institutions in properly assessing and managing risk, Development Bank Ghana (DBG) has secured $70 million to implement a Partial Credit Guarantee scheme.
The World Bank is offering $50 million, while KfW Development Bank will provide $20 million for the establishment of the Partial Credit Guarantee (PCG) subsidiary of the Bank.
This was announced by Kwamina Duker, the Chief Executive Officer (CEO) of DBG, at the DBG and Ghana Association of Banks program on Ghana’s Medium-Term Outlook in Accra on the theme: “Ghana’s Medium-Term Outlook, Navigating through Economic Uncertainties and an IMF Programme.”
“We are excited to announce that the Partial Credit Guarantee subsidiary is scheduled to commence operations in the third quarter of the year. This timely launch will provide our partner financial institutions with an additional layer of support, allowing them to better manage risks associated with loan defaults while continuing to serve the Small and Medium Enterprises sector effectively,” Duker said.
Speaking on the subject of “The Role of DBG, Working Together to Resuscitate the Country’s Economy,” Duker claimed that one of the main difficulties facing the banking and financial sector was macroeconomic uncertainty.
He said the prevailing macroeconomic conditions, such as high inflation, currency depreciation, and fiscal constraints, had created an uncertain business environment, compelling banks to take a more cautious approach to lending, and affecting the ability of Small and Medium Enterprises (SMEs) to access credit and plan for growth.
“We are determined to address these challenges and build on the strong momentum generated in the first quarter, with a particular focus on expanding our lending portfolio, strengthening relationships with our PFIs, and promoting sustainable development,” he said.
He said DBG had budgeted to disburse at least GH600 million in loans for on-lending to SMEs this year.
“We possess the capacity to provide additional loans to support sustainable projects as they are presented to us, demonstrating our unwavering dedication to growing with our partners. The bank will focus on sectors with high growth potential and significant social and environmental impact, such as agribusiness, manufacturing, and low-carbon and climate-resilient investments,” Duker, said.
He added that DBG would continue to find and onboard new PFIs to expand the bank’s reach and capacity to support SMEs across the nation as we seek to have at least 10 PFIs by the end of the year. To date, DBG has partnered with four PFIs and completed the due diligence and process to onboard Ecobank and Absa.
According to the CEO, DBG increased its lending portfolio in the first quarter of the year by disbursing GH57.2 million to three PFIs for loans to companies in the manufacturing and agricultural sectors, bringing the bank’s loan book size to GH302 million.
In his remarks, John Awuah, CEO of GAB, stated that the DBG’s creation was timely and would guarantee a rise in the number of loanable funds available to Participating Financial Institutions (PFIs).
Adding that the collaboration of the DBG and the GAB would ensure banks provided the necessary long-term funding at competitive rates to the business community, he claimed the DBG and the PFIs had the opportunity to deepen sustainable financing within the larger and more productive sectors of the economy.
Professor Eric Osei-Assibey urged banks to support the manufacturing and agricultural sectors in order to spur economic growth and generate job opportunities for young people.