Minister for Finance, Ken Ofori-Atta, has averred that the conversion of National Investment Bank (NIB) and the Agricultural Development Bank (ADB) into the Development Bank Ghana (DBG) would have been very costly.
DBG, which is an integral feature of the GH¢100-billion Ghana Cares ‘Obaatampa’ Project, is seeing to the revitalisation of the Ghanaian economy following the onset of COVID-19.
The Ministry of Finance and the European Investment Bank (EIB) recently signed an agreement for the provision of a €170-million facility for the establishment of DBG.
This signing event took place on Wednesday, 19 May 2021, when President Nana Addo Dankwa Akufo-Addo held a meeting with the President of EIB, Dr Werner Hoyer, as part of his official visit to Belgium.
The €170-million facility, according Dr Hoyer, is the largest facility provided by EIB for the establishment of a development bank in Africa or for any other project, for that matter, on the continent.
Speaking at the signing ceremony, President Akufo-Addo noted that “the Development Bank Ghana is going to play a very important part in the rapid economic transformation of Ghana, following the onset of COVID-19.”
According to him, “we want to restructure the economy, and move it from being a mere producer and exporter of raw materials, to one that places much greater emphasis on value addition activities. We see this Bank (DBG) as one that will play a pivotal role in this”.
Dr Hoyer, for his part, was confident that the establishment of DBG will help unlock opportunities for growth in Ghana, as well assist in the rapid recovery of the Ghanaian economy from the ravages of COVID-19.
He noted that the establishment of the Bank is in line with the objectives of the European Union, and will help develop Ghana’s private sector, agri-business, manufacturing and ICT initiatives.
While describing the decision to establish DBG as “a wise one”, the EIB President added that the bank sees the partnership with Ghana as a fruitful one, indicating that the EIB will follow keenly the development and workings of DBG in Ghana.
Some critics, however, raised issues about the move to set up a new bank after the government, through the Bank of Ghana, collapsed some nine local banks in the financial sector clean-up exercise during President Akufo-Addo’s first term of office.
One of those critics is A Plus, who questioned why the Akufo-Addo administration spent more than GHS21 billion “to collapse banks that needed about GHS9 billion to survive” but now “borrowing 170 million euros to establish a new national bank when you already have NIB which is struggling; adb which is struggling”, as well as GCB Bank and CBG.
“Ghana beyond aid but you are borrowing money to start a national bank”, some critics observed.
Addressing such criticisms at a press conference on Thursday, 20 May 2021, Mr Ofori-Atta said: “Work on the DBG started in 2018 with a task force of industry experts established by the government to recommend the best approach to establish a modern and dynamic development bank”.
Based on the recommendation of the task force, he said the government decided to set up DBG “as a new non-deposit-taking-wholesale-bank under the Companies Act”.
DBG, as a wholesale and non-deposit taking bank, Mr Ofori-Atta added, “requires no branch network and minimal staff”.
“It will, therefore, be very costly – financially and in terms of closure of branches and employment loss – to try to convert adb or NIB into a viable modern development bank”, he noted.
“The advantage we foresee of a greenfield approach is that one gets to start from a clean slate, with no legacy financial, governance and other issues. This allows us to focus on the future and move straight into setting up DBG equipped with modern and sound design principles”, Mr Ofori-Atta explained.
According to him, the greenfield approach also has the potential to attract more private and international institutional capital “as we have witnessed with EIB’s €170 million facility”.
“It also the government’s plan to attract other shareholders, both domestic and international, so as to increase DBG’s capital base and also reduce the government’s share over time”, he added.