Spio moots clearing house to structure and finance projects banks reject
The Minister of Trade and Industry, Mr Ekwow Spio-Garbrah, has mooted the establishment of a Project Development Clearing House where real sector project proposals rejected by banks and other financial institutions can be lodged for fine-tuning and revival.
The Minister said proposals submitted to the database with the consent of the potential borrower, could then be screened, grouped into sectors and regions for stakeholders to work on bringing them to life through various means, including consolidation and joint ventures.
Mr Spio-Garbrah called for collaboration with interested parties such as the Association of Ghana Industries (AGI), the Ghana Association of Bankers (GAB), the Ghana Chamber of Commerce and Industry, with the blessing of the government to make the project support vehicle operational.
The trade and industry minister put forward the idea, which he said, had been agitating his thoughts for some time now, in Accra today when a delegation from Grofin Fund, a development and impact financing institution, paid a courtesy call on him in his office today.
GroFin, which promotes financial inclusion through support entrepreneurships, is currently managing US$500 million fund for business support in 13 countries across the world.
It has so far invested advisory services and debt finance in about 60 companies in Ghana to the tune of between US$22 million and US$25 million. The fund supports its clients, mostly businesses which are not ready for bank financing but are too big for microfinance companies – with advisory, capacity building and access to patient finance, with a tenor of between three to eight years.
The three-man Grofin delegation was led by the Regional Investment Director for West Africa, Mrs Gwen Abiola-Oloke and included Mr Samuel Sedegah, the Ghana Country Manager.
Ending frustrations of potential entrepreneurs
The GroFin delegation was at the ministry to introduce the business to the ministry while seeking collaboration to reach out to more potential clients in the country.
Dr Spio-Garbrah said would be a good feat for an institution such as GroFin, working with this ministry and some of its agencies such as the National Board for Small Scale Industries (NBSSI) and the rural enterprises programme, to work closely to operationalise such a some clearing house mechanism.
“This should allow for banks and financial institutions which do not want to fund a programme to notify the clearing house with the consent of the prospective borrower. The accumulation could be databased by sector and region.
“Each of the projects could become potentially viable through a number of interventions such as knocking two or three projects together to increase their capital and cash flow, after which other development finance and business support organisations could step in to assist,” Dr Garbrah stated.
By that arrangement, he believes, “we can save a lot of projects which are being rejected everyday by the 30 banks in Ghana and which have nowhere else to go. We don’t want to frustrate potential business owners by simply letting them have negative reactions all the time.”
How to structure the house
This would depend on the strength of interest coming from the banks and other stakeholders ready to work with the ministry and the government in that respect
The Clearing House, however, would require a think-tank of young but experienced individuals, along with some experienced experts in various business related fields to help make it a success.
The suggestion could just be the answer to the challenge where thousands of businesses in Ghana apply for credit from banks and get refused on daily basis.
The cost of capital in the country has also remained sticky high for so long ranging between 30 per cent and 90 per cent across the bank and non-bank financial institutions, as the benchmark rate – the 91-day treasury bill rate – stands at 22.76 per cent, the monetary policy rate at 26 per cent, with inflation standing at 18.7 per cent for April.
The missing middle
Mrs Abiola-Oloke said GroFin worked with a segment of the businesses which they call “the missing middle” which were business not ready for bank credit because they had no formal structures and did not meet the acceptance criteria of banks, but were also too big for microfinance companies to handle.
“We look out for viable entrepreneurs and not necessarily business viability. Our key value proposition is business support, because it is not only finance that determines success; they need to know how to use the finance,” she said.
GroFin therefore works closely with the businesses, assisting them to put structures in place, comply with regulation and doing things right. “By the time they graduate from our three-year business and finance support, they are ready to access bank credit,” Mrs Abiola-Oloke said.
Mr Sedegah said GroFin did not go through financial intermediaries because they were directly interested in the entrepreneurs as well as their businesses so they could work with them up the scale to formalise their operations and follow good governance structures.