On Thursday, 20th May 2021, the finance minister, Mr Ken Ofori-Atta attempted to explain why there is the need for the government of Ghana to take a loan of €170 million from the European Investment Bank (EIB) for the establishment of a Development Bank, Ghana (DBG). Among other reasons, the Finance Minister said the DBG is " a key pillar in our efforts to quickly recover from the effects of the COVID-19 pandemic...". He further asserts that DBG will address the issue of lack of long-term funding and the lack of adequate funding to the productive sectors of the economy. He noted that the primary focus areas of DBG will be:
- Agribusiness, with a focus on off-farm value chain activities
- ICT, Software, and allied services including Business-process outsourcing, and tourism
- Boosting homeownership through affordable and longer tenure mortgage finance
The most interesting point the finance minister made in this brief is that DBG is not similar to the existing commercial banks in the country.
Before I delve into the issues raised by the finance minister, let me say that the history of development banks in Africa and Ghana specifically has been that of failure to achieve the objectives for which they are established.
Indeed, the Finance Minister himself stated this in paragraph 16 of his press briefing when he said that "Ladies and gentlemen of the media, despite the unsuccessful experience in Ghana and many African countries, development banks have been instrumental in driving economic transformation elsewhere". If indeed, as the finance Minister agrees, the history of development banks in Africa and Ghana has been failure, what has changed this time? This question is especially important when you consider the fact that we have a government with a weak monitoring and control systems, engaged in reckless borrowing raising our debt to GDP ratio to abnormal levels (78.01% Source: The Economist) and profligate expenditure.
Now, let's come to what the finance minister said will be the focus of DBG:
FOCUS ON AGRIBUSINESS
The purpose of the Agricultural Development Bank ( ADB) is to focus specifically on agriculture and its related activities. Apart from the fact that the bank has failed woefully in achieving this objective, it will be duplication of functions if we establish another bank with the focus on agribusiness. If there is any credit facility for the development of agribusiness, it could be channelled through the existing agriculture development banks. There will thus be no need to establish a bank that will be responsible for granting credit facilities to focus on the development of agribusiness.
In any case, the farmers who the bank was established to assist do not benefit from ADB in any way. The bank itself is struggling to survive. What sense does it then make to establish another bank that will usurp the functions of the existing ADB leading to its possible collapse?
ICT, SOFTWARE AND ALLIED SERVICES
The heading ICT, Software and allied services are not only bogus and fraudulent without any further explanation as to what it entails but capricious. If we indeed want to promote ICT in any form or way, it should feature prominently in our educational discourse and budget where training programs will be designed to help bring the citizens to speed on the happenings in the world of technology. This in all sincerity does not require the establishment of a €170 million bank.
BOOSTING HOMEOWNERSHIP THROUGH AFFORDABLE LONG TERM FINANCE
Government has never been committed to home ownership in Ghana. Indeed experts in the real estate business have requested for assistance in terms of guarantees and assurances from government to deploy their own low-cost housing schemes in Ghana. Government has either completely ignored them or regarded them as nuisance interfering in their 'chop chop' business.
The quest for an amount of €170 million for the establishment of the so-called Development Bank, Ghana is not only frivolous but an attempt to introduce another 'chop chop' scheme to the benefit of government and its agents. It is neither in the interest of Ghana nor it's millions of citizens looking for clean water to drink.