DBG funds will not be used to buy government securities – assures deputy director general

The newly launched wholesale bank, Development Bank Ghana, has assured that it will implement effective measures to ensure that its funds are used to support key sectors of the economy.

The country’s universal banks, for some time now, have been accused of using part of their funds to invest in less risky government securities instead of giving those funds as credit to the private sector.

According to the May 2022 edition of the Bank of Ghana Monetary Policy Report, the asset and liability structure of the banking sector remained skewed towards less risky assets in April 2022.

Investments continued to dominate the composition of assets, but their share fell from 47.0% in April 2021 to 43.2% in April 2022, while the share of “cash and bank receivables” fell from 18.6 % to 21.7% during the same comparative period.

Loans and advances (net), however, remained the second largest component of banks’ assets, registering a higher share of 27.4% in April 2022 compared to 26.5% the previous year due to stronger credit growth in April 2022.

Speaking to the media on the steps taken by DBG to ensure that it does not repeat the mistakes of current banks, DBG Deputy Managing Director Michael Mensah-Baah noted that Development Bank Ghana, which is a wholesale non-deposit bank that will provide funds to existing commercial banks and other eligible financial institutions to provide long-term loans has sufficient measures in place to ensure that the funds it lends to banks are used as expected.

“We have specifically put in place certain measures that will ensure that the funds that reach the commercial banks that we work with end up reaching the SMEs. First, we will select commercial banks that already lend to SMEs. Secondly, we will ensure that commercial banks understand the credit risk of SMEs, and finally, we have an agreement with commercial banks that specifically guarantees that the funds we give them go to specific sectors of the economy, such as agriculture, manufacturing, ICT and high value-added services. All of this is written into the framework loan agreement that we have with the commercial banks. »

“As part of this agreement, there is a specific period during which the funds remain in the commercial banks. If the time (one month) passes without the funds being disbursed, then the funds revert to DBG,” he added.