MICROCAPITAL BRIEF: Ghana’s Ministry of Finance to Launch Development Bank of Ghana with $250m from World Bank’s IDA to Promote MSME Lending, Including to 2k Enterprises Led by Women

The International Development Association (IDA), a unit of the World Bank, recently agreed to provide USD 250 million for Ghana’s Ministry of Finance to create the Development Bank of Ghana (DBG). DBG is slated to provide “long-term wholesale financing, credit guarantees, and other services” benefitting 10,000 micro-, small and medium-sized enterprises (MSMEs) – including 2,000 that are led by women – that are active in agribusiness, manufacturing and unspecified “high-value services.” DBG also is to create a “digital financing platform to leverage private sector financing by making it more efficient and less risky for private financiers to lend to MSMEs,” according to Carlos Vicente, a senior financial sector economist with the World bank. The effort also includes promoting the incorporation of environmental and social standards into local retail lending.

Established in 1960, IDA operates in the world’s 76 poorest countries, including 39 in Africa. The organization offers low-interest loans with repayment terms stretching from 35 to 40 years, including 10-year grace periods. Instead of loans, IDA provides grants to countries at higher risk of debt distress. IDA’s investments totaled approximately USD 30 billion during the year ending June 2020, bringing its number of projects to 1,605, with a total value of USD 130 billion.

The World Bank Group is a multilateral organization whose goal is “to end extreme poverty and promote shared prosperity in a sustainable way.” As of 2020, it has 189 member nations. The group encompasses (1) The International Bank for Reconstruction and Development (IBRD) and the IDA, which make up the World Bank; (2) the International Finance Corporation; (3) the Multilateral Investment Guarantee Agency; and (4) the International Centre for Settlement of Investment Disputes. During the 12 months ending June 2020, the World Bank Group disbursed funds totaling USD 54 billion.

By Romil Pandey, Research Associate

Sources and Additional Resources

The World Bank press release
https://www.worldbank.org/en/news/press-release/2020/10/29/world-bank-supports-the-establishment-of-the-development-bank-ghana-to-boost-access-to-finance-and-job-creation

World Bank description of Ghana Development Finance Project
https://projects.worldbank.org/en/projects-operations/project-detail/P169742

IDA homepage
https://ida.worldbank.org/

World Bank Group Annual Report 2020
https://www.worldbank.org/en/about/annual-report

Past MicroCapital article on IDA
https://www.microcapital.org/microcapital-brief-da-afghanistan-bank-dab-international-development-association-ida-international-finance-corporation-ifc-harakat-to-establish-credit-bureau-collateral-registry-in-afghanis/

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