DBG secures US$70m for credit guarantee scheme

The Development Bank Ghana (DBG) has received a seed fund of US$70million for its partial credit guarantee scheme, which will provide an additional layer of support for participating financial institutions (PFIs) to better manage risks associated with loan defaults.

The World Bank Group contributed US$50million of the amount, with the remaining US$20million coming from the Kreditanstalt für Wiederaufbau (KfW) Development Bank of Germany.

This scheme is expected to boost investments in high-risk sectors of the economy as the PFIs continue to serve the SME sector effectively while sharing the risk of the investment with DBG, and is in line with the bank’s plan of encouraging banks to use their own funds to invest in productive sectors of the economy.

Disclosing the achievement as part of DBG’s role in working with the banking sector to resuscitate the country’s economy, DBG’s Chief Executive Officer (CEO), Kwamina Duker, indicated that the partial credit guarantee is scheduled to commence operations in the third quarter of this year.

“As we move forward, we will rely on the support of all our banking partners in our initiative to digitally transform financial services. We seek your continued support as we aim to be a conduit for financial institutions to collaborate on innovations, such as common underwriting standards and co-creating robust alternative credit scoring models. These joint efforts will allow us to better-serve the needs of businesses while also promoting prudent lending practices and risk management within our industry,” Mr. Duker said.

In view of this, DBG plans to expand its PFI network to at least 10 by end of the year.

So far, DBG has onboarded Zenith Bank – expanding the bank’s network of partners and enhancing their ability to reach more SMEs across various sectors.

Mr. Duker further noted that the bank has completed due diligence and is on course to onboard Ecobank and Absa as new PFIs this month. “DBG will continue to identify and onboard new PFIs to enhance our reach and ability to support SMEs across the country, as we seek to have at least 10 PFIs by end of the year.”

In the first quarter of the year, the bank increased its lending portfolio by disbursing GH₵57.2million to three PFIs for onward lending to businesses in the agriculture and manufacturing sectors; bringing the bank’s loan book size to GH₵302million.

Additionally, capacity building has been provided to 644 local businesses – including 444 young entrepreneurs and 52 staff from 13 financial institutions during the quarter. The training focused on various aspects of business management, entrepreneurship and specialised lending to improve the sustainability and growth potential of SMEs, as well as to enhance the lending capabilities of PFIs.

“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,” the CEO assured.

“Our first priority is to accelerate lending activities. We have committed to disbursing at least GH¢600million in loans for on-lending to SMEs this year. We possess the capacity to provide additional loans to back sustainable projects as they are presented to us, demonstrating our unwavering dedication to growing with our partners,” he stated.

Cumulatively, DBG will have invested about GH¢800million by 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¢300million.

It expects 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.

“This will include offering training on business management, financial planning, and environmental and social risk management to 15,000 businesses and entrepreneurs.”

The bank aims to make long-term, competitively-priced loans available to small- and medium-sized businesses in Ghana to relieve the bottlenecks affecting availability of such loans. DBG uses a wholesale banking model, providing funds to eligible financial institutions that can in turn on-lend the funds to targetted industry sectors including agribusiness, manufacturing, ICT and high-value services.