A renowned economist and investment analyst, Kwame Pianim, says the yet-to-established Development Bank Ghana must work to prevent collapse by putting in place measures to be able to recoup monies borrowed to customers.
Sharing his opinion on the establishment of the bank, Mr. Pianim, opined that the bank must put in mechanisms that will allow effective tracking and recovery of loans to prevent collapse.
He spoke during the Tesah Capital Investment Dialogue series held on July 7, 2021.
“Setting a development bank does not solve our problems. We’ve been there before. Because they [the previous banks] didn’t have a commercial banking wing, they weren’t keeping an eye to get their monies paid back when they give loans out,” he stated.
“So the development bank that we are setting up is going to give their money to the banks. If this bank does not find a way or use the transmission mechanism, or getting monies to their customer and being able to collect the money from their customers, then we are in trouble.”
In May 2021, the Finance Ministry agreed to a loan of 170 million euros from the European Investment Bank to finance a new national bank – the Development Bank of Ghana (DBG).
The new institution, to be set up in July, is also backed by the World Bank and the German development bank KfW.
The non-deposit taking bank will aim to tackle the lack of long-term financing for industry and agriculture.
Many have questioned the need for another specialized bank, given the existence of the National Investment Bank (NIB) and Agricultural Development Bank.
This is because previous attempts to create specialized Ghanaian banks for agriculture and manufacturing have not successful, as these banks have diversified their offerings. This has mainly been attributed to poor corporate governance by successive governments.
The current government, however, has, over time, said it has learnt lessons from the failures of previous development banks and is striving to ensure the new development bank becomes credible and is free from political interference and manipulation.
Kwame Pianim also asked for the establishment of more indigenous financial institutions to boost confidence in the country’s banking sector.
“For developed countries, about 6% of GDP is insurance. If Ghana has 6% of GHS6 billion, that’s GHS3.6 billion for investment. So we should focus on our financial institutions and how to domesticate them. Let’s help to build them. Let’s make sure that all government institutions are insured, pay the monies to the insurance companies so that we grow the long term savings. When the long term savings are there, they’ll look for long term funding for our companies.”