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Ghana’s ambition for a vibrant 24-Hour Economy is commendable, promising sustained growth, increased productivity, and new opportunities. However, realizing this vision requires robust and intelligent financial backing, particularly from our key development finance institutions like the Ghana Export-Import Bank (GEXIM) and the Development Bank Ghana (DBG).
As these institutions gear up to play a pivotal role in funding the enterprises that will power this round-the-clock economic engine, they must critically re-evaluate a fundamental challenge: the inherent “Risk Mismatch” in traditional banking models, especially for public development banks.
Consider the scenario: when a business, funded by GEXIM or DBG, unfortunately fails, the bank loses its principal investment entirely. The full financial burden, ultimately resting on the public balance sheet, is significant. Yet, when that same business succeeds wildly, expanding, innovating, and contributing substantially to the national economy, the bank’s return is typically limited to its pre-agreed interest. The substantial “upside” of that national growth – new jobs, increased tax revenue, technological advancements, and wealth creation – predominantly remains trapped in private hands.
This dynamic creates an imbalance where the “downside” risk disproportionately stays on the public balance sheet, while the exponential rewards of national progress are not adequately shared or reinvested back into the development finance ecosystem. For institutions tasked with fostering national development, this isn’t just a commercial oversight; it’s a strategic impediment to sustainable economic transformation.
This is where GEXIM and DBG can draw invaluable lessons from the operational frameworks and strategic approaches of institutions like the National Investment Bank (NIB). While the specifics of NIB’s model are beyond this scope, the implication is clear: there are alternative, more equitable ways to structure financing that better align the interests of public development banks with the broader national economic objectives.
To truly fuel a sustainable 24-Hour Economy, GEXIM and DBG must explore innovative financing structures that allow them to participate more meaningfully in the upside of successful ventures, beyond mere interest. This could involve equity participation, revenue-sharing agreements, or other hybrid models that ensure the public investment yields a proportionate return, not just for the bank’s balance sheet, but for the continuous cycle of national development. Learning from and adapting the best practices from NIB and other successful models will be crucial in ensuring that our development banks are not just lenders, but true partners in prosperity, balancing risk and reward for the collective good.
Source: Original Article
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