BoG approves provisional license for Development Bank Ghana

A provisional licence for the commencement of operation by the national Development Bank Ghana (DBG) has been approved by the Bank of Ghana (BoG).

The approval of the licence by the BoG was made last week and stated in a letter to the Finance Ministry.

However, the approval comes with certain conditionality, which not met, the DBG will not be allowed by the BoG to commence operations.

The conditionality includes the appointment of a Chief Executive Officer (CEO) for the Bank, the formation of a Board of Directors and the provision of a minimum capital requirement.

This is per report by the norvanreports.

Minimum capital requirement for classes of development banks

With regard to a minimum capital requirement for the DBG, it is anticipated that the BoG will require a minimum of GH₵ 800 million given that the BoG in March this year, came out with the minimum capital requirements for the various classes of development banks to be established in the country.

The minimum capital requirement for a Class 1 development bank (wholesale development finance institution) licence in the country has been set at GH₵ 800 million by the Central Bank.

For a Class 2 development bank (retail development finance institution), the initial minimum capital required is GH₵ 600 million. Class 3 development banks (guarantee development finance institution) will require a minimum capital of GH₵ 300 million to operate in the country.

With regard to Class 4 development finance institution licence, the initial minimum capital required will however depend on the development finance activities that the institution intends to undertake.

In the case of full or majority foreign ownership, the Bank of Ghana said not less than 60% of the required capitalization or contribution shall be brought into Ghana in convertible currency.

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Pre-operating conditions

The Central Bank said it shall not issue a licence to an applicant unless it is satisfied that the feasibility report submitted by the applicant is based on sound analysis and prudent, reasonable assumptions as well as the premises for the proposed development financial institution has sufficient title deeds/lease agreements.

Other considerations re the structures and processes for governance, including accounting, risk management, and internal control systems and records of the applicant are adequate.

Also, the significant shareholders suitable and the ownership structure of the applicant will not hinder effective supervision, including supervision on a consolidated basis and the paid-up capital of the applicant meets the requirements set out herein and the original sources of capital are acceptable.

Conditions for issuance of licence

The Central Bank said a licence issued under the Development Finance Institutions Act, 2020 (Act 1032), shall be subject to conditions that it may impose.

Also, the Bank of Ghana may, where necessary, and in accordance with the Development Finance Institutions Act, 2020 (Act 1032), restrict the activities in which a development finance institution is permitted to engage.

Development Bank Ghana

A state-owned development bank known as the Development Bank Ghana (DBG) is expected to be launched this year.

Reports indicate that government has been in discussions with four different international financial institutions – KfW, World Bank, AFD and European Investment Bank (EIB) – to help establish the new bank.

It is expected that combined resources from these international institutions will amount to about $500 million, which will be used as the seed fund for DBG.

DBG will focus on transforming industries, agriculture, agro-processing, and housing and mortgage sub-sectors of the economy over the medium term.

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.

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