KfW, the German development bank, has reaffirmed that its partnership with the recently launched Development Bank Ghana (DBG), which was signed in December 2021, seeks to provide much-needed support to the Small and Medium-sized Enterprise (SME) sector and thereby promote the sustainable development of the Ghanaian economy based on a model similar to its own.
Specifically, this partnership has been built to enable DBG to provide longer-term financing for the private sector, particularly SMEs in the agribusiness, manufacturing, high value services and ICT sectors.
Through this support, KfW, the development financing arm of the German Government, will aid SMEs to make productive investments in order to retain and create jobs for the youth in the country.
On behalf of the German Government, KfW has contributed €46.5 million as a subordinated loan with favorable conditions. Additionally, a grant of €3 million for technical assistance is provided to DBG in support of SMEs.
The model KfW is supporting in Ghana is similar to the one it implements for its domestic business in Germany. Based on this model, KfW lends to DBG who will in-turn lend to Participating Financial Institutions (PFIs) or commercial banks who will finally lend to SMEs.
Commenting on the partnership through the media, the Country Director of the KfW Office in Accra, Arndt Wierheim said “KfW is undertaking a financial co-operation on behalf of the German government and we think DBG as a national development bank in Ghana is perfectly suited to support SMEs. We are very happy to implement our model with our Ghanaian partners here in Ghana.
History shows that over its 70 years of implementation, the KfW model has been very successful in building a solid bedrock of SMEs, which is necessary for every strong economy and that is what we are trying to do in Ghana. KfW is supporting DBG on a path to a more sustainable and dynamic socio-economic growth in Ghana which will lead to the creation of more jobs”.
“From that point of view, we hope with our support to DBG, we can grow and give more life to the Reform and Investment Partnership which the Governments of Ghana and Germany signed a couple of years ago, where DBG will be a very strong pillar. We hope that DBG will be a success as KfW has been successful over the last 70 years in Germany”, he added.
The Federal Republic of Germany, through financial and technical cooperation, over the years has provided extensive support to the Government of Ghana. This has been in three critical areas. One area is energy. The second is governance and the third is sustainable economic development. Mr. Wierheim explained that “within that third pillar, we are trying to support access to finance in Ghana; to support and finance SMEs through the financial sector and DBG as a new focus for us in Ghana is trying to do that.”
KfW’s support to DBG is, however, broad and not only in the areas of funding and technical assistance. Within KfW’s support to DBG, there is an embedded governance structure mirrored on international best practices which is aimed at ensuring that the expected support to SMEs does not encounter any challenges or bottlenecks.
This is possible because KfW, together with other development partners such as the World Bank and the European Investment Bank (EIB), has been involved right from the beginning in contributing to the design of the governance structure of DBG.
According to Arndt Wierheim, “we have a very thorough monitoring and reporting system in place which we do for all our projects, but, specifically for DBG which is also very important to us. We have yearly progress missions to Ghana from our headquarters to see where the project is going.
We expect several things and one thing is to have a sister organization in Ghana which works similar like KfW so we can work on the same level. We have a common purpose and we have a similar structure. For us it is not only important to have implemented the very ambitious policies and support mechanisms for SMEs. We need a partner like DBG so we grow together and support Ghana.”
