Design Study and Draft Business Plan for the Partial Credit Guarantee Facility for Development Bank Ghana

Area of Operation: Ghana

Duration of Assignment: December 2021 – December 2022

Name of Client: Ministry of Finance, Ghana

Project Description:

The Development Bank Ghana (DBG) intended to offer partial credit guarantees (PCGs) to retail partner financial institutions (PFIs) to mitigate their risk of lending to certain borrowers and market segments (SMEs, women, and first-time borrowers).

This PCG facility was expected to complement the Ghana Agricultural Risk Insurance Fund (GIRSAL), a risk-sharing facility for agriculture and agribusiness established in 2016 by Bank of Ghana and supported by the African Development Bank. The PCG facility was also expected to complement the guarantee facilities offered by development partners and local financial institutions.

A detailed study/assessment needed to be conducted to provide evidence-based recommendations and a draft business plan to inform the establishment of an effective and sustainable PCG facility.

Our Services:

  • Conducted desk research on global literature on credit risk sharing and identify successful examples that could be replicated or adapted for the design of the DBG’s PCG facility and current and past experiences on the establishment and operation of PCG facilities in Ghana.
  • Analysed the existing legal and regulatory framework and proposed changes needed in the legal and regulatory framework and prudential standards to provide an enabling environment for the PCG facility.
  • Estimated the current and expected demand for PCGs by financial institutions and estimated the volume and value of guarantees that can be provided and the incremental financing that would be generated by the new PCG facility.
  • Identified key constraints to access to finance and articulated how the PCG facility will mitigate such constraints
  • Proposed options for the legal, institutional, and organizational structure for the PCG facility, within the framework of the DBG, to enable maximum possible outreach and efficiency and specifically assessed whether the PCG should be established as a subsidiary of the DBG, or take another legal form.
  • Identified potential partners or providers to provide automated credit risk assessment solutions that can be developed over time to support effective risk management by the proposed PCG facility.
  • Profiled target SME beneficiaries and their needs.
  • Developed the mandate, value proposition, and business model for the PCG Facility.
  • Developed the final business case and business plan for the facility including an implementation plan, financial projects / financial model, core resources, identified strategic partners, guarantee approaches, coverage, and pricing structure, operational policies and procedures, key functions and processes, etc.
  • Developed the PCG facility’s draft Operations Manual, including detailed procedures on underwriting, pricing, risk management, investments, claim management, monitoring and evaluation, key templates and sample agreements, etc.
  • Conducted a business analysis to determine the required operational policies, procedures, and approaches to develop an appropriate MIS system.
  • Coordinated with the DBG to recruit an appropriate MIS service provider.
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