Ghana Development Bank

Kick Starting the GhDB Operations.

 

 

• Legal framework:

A team of expect with knowledge in development banking/financing will draft the legal framework of the GhDB on behalf of the Government of Ghana (GoG) to secure parliamentary approval.

 

• Seed Capital: 

GhDB will require a seed capital of about three million Ghana Cedis (Gh¢ 3 million) to cover for the initial set up, operations and administration cost (including salaries) for the first twelve months of it operation.

 

• Issuing of Bond:

Upon it establishment, the GhDB will issue its first bond which will be christened the “The Cedi Bond”. This Cedi Bond will be sold to only the central bank which in our case is the Bank of Ghana (BoG).

 

• Paying for “The Cedi Bond”:

The Bank of Ghana having purchased the will increase its balance sheet electronically using the policy of and using the electronic money, the BOG will credit the reserve accounts of GDB at the central bank.  

Like other bond, this is not free money, but a loan whose principal and interest has to be paid when it’s matured.

 

Example: The GhDB can issue let say a Gh¢15 billion thirty year The Cedi Bond at a special low interest rate of about 1.5 % per annum, the Bank of Ghana will purchase The Cedi Bond and will increase its balance sheet electronically by 15 billion Ghana Cedis and will credit all the Gh¢15 billion into the reserve accounts of the GhDB at the Central Bank.

Though the money at this stage is still in its electronic form, it has the same value as the printed notes in circulation because it was created by the central bank which is the only institution in the country with the authority to do so, it’s like mobile money.

 

• Using “The Cedi Bond” proceeds:

The GDB having for example this in it account will go out and spend by investing in the real economy through the commercial banks and other qualified financial institutions and not directly to customers.

This will ease access to financing for companies with solid business models and good growth prospects to create jobs and apprenticeships for young people.

 

Proceeds or Credit from The Cedi Bond is not government money and neither the presidency nor the finance ministry will have direct access to it.

 

Proceeds will not be used to finance government deficits and will not be used to buy cars for government departments and officials or be used by government to pay workers’ salaries or arrears or increases, but it will be used by the GhDB to provide medium to long term loans to finance productive fixed asset investment in all sectors of the Ghanaian economy and contributes to the development of the capital markets to aids the flow of local and international capital to businesses for the production of  goods and services that can be sold to raised back the money used in producing the very goods and services.

 

Government ministries will be forbidding from accessing funds directly from the GhDB.

 

Commercial banks and other financial institution that access cheap loans from GhDB will to be allowed to divert the cheap loans in buying of bonds but will be suppervise to make sure the loans recieved are use for the very purpose they were granted for.

 

Proceeds or Credit from The Cedi Bond is not government money and neither the presidency nor the finance ministry will have direct access to it.

 

Proceeds will not be used to finance government deficits and will not be used to buy cars for government departments and officials or be used by government to pay workers’ salaries or arrears or increases, but it will be used by the GhDB to provide medium to long term loans to finance productive fixed asset investment in all sectors of the Ghanaian economy and contributes to the development of the capital markets to aids the flow of local and international capital to businesses for the production of  goods and services that can be sold to raised back the money used in producing the very goods and services.

 

Government ministries will be forbidding from accessing funds directly from the GhDB.

 

Commercial banks and other financial institution that access cheap loans from GhDB will to be allowed to divert the cheap loans in buying of bonds but will be suppervise to make sure the loans recieved are use for the very purpose they were granted for.