The establishment of the Development Bank Ghana (DBG) according to the Director for the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, will play a counter-cyclical role in Ghana’s economy upon establishment.
According to Prof Quarter, the DBG in playing its counter-cyclical role will sustain overall investment levels and protect the productive sectors of the economy.
Playing a counter-cyclical role will mean providing more funds to the productive sectors of the economy to be able to still provide goods and services for demand and consumption amid economic downturns.
Counter-cyclical measures are policy measures that counteract the effects of the economic cycle, particularly during economic downturns.
Making the assertion at the Development Dialogue held by ISSER on the topic, National Development Banks and Sustainable Financing in Ghana, Prof Quartey noted that the DBG upon establishment will complement and strengthen operations of existing financial institutions through the provision of more funds, technical support and training.
Speaking further at the dialogue, Prof Quartey noted that the DBG in its operations will share credit risks with commercial banks since it will not be dealing directly with individuals and businesses.
“Now about risks, because the bank won’t be dealing directly with customers, it will be sharing some associated credit risks with commercial banks and that will also result in having lower non-performing loans, both of which led to the collapse of the two previous development banks which are the Cooperative Bank and Housing and Construction Bank,” he stated.
“The success of the Bank, will depend on employing competent managers, being operated as a business and devoid of excessive political interference,” he added.
The Development Bank Ghana would see micro, small and medium-scale enterprises (MSMEs) being able to access cheap but long-term loans with tenors of 5 years, 7 years, or even 15 years to finance their businesses.
These loans, norvanreports understands, would be at commercial but competitive interest rates (lower rates) agreed up by the government with the existing commercial banks.
The bank will refinance credit to industry and agriculture as a wholesale bank and also provide guarantee instruments to encourage universal banks to lend to these specific sectors in particular.
DBG will finance multiple interventions to attract private sector financing for credit-constrained MSMEs and small companies based in Ghana.
The bank 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.
