The Bank of Ghana (BoG) says it will hold the Development Bank Ghana (DBG) to the same regulatory and supervising standards that it holds banks and Specialised Deposit-Taking Institutions (SDIs).
It also says it will maintain strong oversight of the Participating Financial Institutions (PFIs) that DBG will be working work.
The Governor of the BoG, Dr Ernest Addison, disclosed this on Tuesday in Accra during the launch of the DBG, and said there was broad international consensus that strong regulatory and supervisory regime would have to underpin the operations of Development Financial Institutions. (DFIs).
“It was on this premise that the Bank, working with other stakeholders, developed the legal, regulatory and supervisory framework for these DFIs which culminated in the passage of the DFIs Act 2020 (Act 1032). Act 1032 contains provisions on sound and prudent banking principles to guide effective operations of DFIs such as capital and reserve requirements, corporate governance and financial reporting,” the Governor said.
The DBG is a wholesale bank with the mandate to provide competitively priced funding for the growth of Small and Medium-scale Enterprises (SMEs) through commercial banks.
Mr Addison said the inauguration of DBG was timely as there was a resurgence in the establishment of new DFIs in developing countries.
That, he said, was as a result of the inability of the existing DFIs to fully address market gaps, facilitate meaningful increase in financial intermediation in terms of outreach and scale.
Dr Addison said National Development Banks along with multilateral development banks, played active roles in mobilising public and private sector resources to support critical economic sectors.
According to the Governor the country’s financial system had gone through significant transformation over the past years which had seen the introduction of reforms such as the recapitalisation reform by the BoG.
He however pointed out that despite the important roles played by banks and SDIs in financial transformation, there were some shortcomings on the financial landscape which was impeding growth.
Some of the shortcoming he mentioned include failure by banks and SDIs to pursue a long-term financing need to accelerate economic development and transformation and its failure to offer a larger lending share to key sectors such as the agriculture and manufacturing sector.
Dr Addison pointed out that the establishment of the DBG was not to compete with other banks but rather work in complementary fashion to ensure long-term finance to firms, an area that banks and SDIs were unable to finance.
“BoG will strive to work in close partnership with DBG to safeguard and protect DBG’s governance structure and work to create the right enabling environment both for DBG and its partners,” he said.
In addition, he noted that the expectation of the BoG for the DBG and other DFIs that would be licensed by the bank was to help address market failure in the Ghanaian credit market.
Dr Addison in furtherance indicated that the BoG had deployed the requisite tools to effectively regulate and supervise the operations of DFIs.
The BoG, he said, would strive to work in close partnership with DBG to help safeguard and protect its structure and also create the right enabling environment for the bank and its partners.