DBG will help drive Ghana’s economic transformation.
SMEs form the backbone of Ghana’s economy. However, they lack access to long-term finance to grow their businesses. DBG addresses these gaps, by providing loans to participating financial institutions (PFIs), to on-lend to SMEs.
In Ghana, in 2018, only 33% of the volume of loans and advances had a maturity of more than three years, of which loans with a maturity of more than five years was only 15% compared to 23% in upper-middle-income countries. In comparison, the volume of loans with maturity of more than three years accounted for 35% in Nigeria.
At the same time, Ghana’s credit to the private sector was only 12% of GDP, significantly lagging its peers (Kenya 27%).
The ability of lenders to provide long-term loans requires access to long-term funding to avoid asset/liability maturity mismatches. However, funding of Ghanaian banks is dominated by deposits and borrowings with a maturity of less than one year—85% and 64%, respectively (82% combined).
In 2020, the projected financing gap for manufacturing and services (including agribusiness but excluding trade) was GHS 158.4 billion (US$28 billion), or 40% of the projected GDP. The gap for long-term finance (tenors of three years or more) is GHS 52.4 billion (US$9.3 billion).