Ghana

Even though the development of the financial sector has progressed considerably in Ghana over the past years, it still faces considerable challenges: Capacities of the Central Bank of Ghana do not meet the requirements necessary to supervise the many financial institutions and despite the vast amount of financial institutions there are still larger parts of the local population which do not have access to financial services especially in rural areas. In the rural north of Ghana, bank branches mostly are several hours walking distance away. Consequently, the local population has little opportunity to execute transfers, to get a loan, or to deposit savings within the formal financial system. Unavoidably, loans are taken out from informal moneylenders and savings are entrusted to so-called “Susu-Collectors”. Along with that, not only high fees are paid but also considerable risks of losses are taken. These deficiencies result in very limited economic participation by micro, small and medium enterprises and low-income households. The low concentration of deposits in the formal financial system leads to a lack of cheap and low-risk refinancing sources for the financial institutions. Due to the outlined challenges, growth-enhancing and job-creating investments often cannot be realized.

Aiming at contributing to setting up high-performance structures in the Ghanaian financial industry, the Federal Republic of Germany promotes several projects to develop the financial sector in Ghana. Its main focus is on microfinance and so-called “structure-building” projects, such as Mobile Banking or deposit insurance systems. In recent years, several microfinance institutions have been provided with debt and equity to push for product diversification, to support their expansion in rural regions and at the same time to strengthen their compliance with guidelines of Responsible Finance. The financial cooperation with Ghana does also support the introduction of the cashless payment system “e-zwich” aiming at facilitating access to the formal financial system and thus reducing costs of entrepreneurial activity. Through establishing a deposit insurance system, confidence in financial institutions shall be strengthened expecting a shift of savings from the informal to the formal and regulated financial sector.

Ghana has had two administrative levels since the beginning of the 1990s: First, there is the powerful national government and its subordinate regional administrations. Second is the district level with its municipal structures.

In practice, the municipal administrations are often faced with problems: It is often unclear exactly which tasks they should take on. Moreover, the staff is not sufficiently qualified to perform the services expected of them. This issue ultimately comes down to a lack of money, particularly for infrastructure, given the insufficient funds from the revenue sharing. The District Development Facility (DDF) fills this financial gap. The DDF is supported by Germany through KfW together with Denmark, France, Canada and Switzerland as well as by the Ghanaian government. The funds go to the country's 216 districts for investments deemed particularly important at a regional level. Every year the DDF investigates whether the districts have met certain minimum requirements and if they have put up a sufficient performance for their citizens.

The criteria examined get stricter every year. This ensures that the facility helps foster positive competition between the district administrations; those that best serve their citizens get the most money. This decentralized approach guarantees that in particular local priorities and needs are taken into consideration. The DDF also helps finance a national further-education and training programme for all of a district administration's employees.

Project example - District Development Facility  (PDF, 144 KB, non-accessible)

As West Africa’s second-largest and growing economy, the demand for fresh food is increasing, though the productivity of agriculture is still low. Its share of GDP has reduced to 22%, but it employs still 50% of the country’s working population. However, most farmers cultivate only small plots, and many of them can barely secure their own subsistence with farming. The famous cocoa-industry in Ghana impressively shows that things could be different. Ghana also offers opportunities from the export of cashew nuts, palm oil, rubber, yam, fruits (mainly pineapples, mangoes and papaya) as well as fresh vegetables. Large volumes of rice, poultry, fish which could be produced locally, are imported and significant opportunities arise from the growing domestic demand.

The German Development Cooperation, which has been one of the consistent development partners in the agricultural sector in Ghana since the 1970s, is in complete alignment with the development strategy of the Government of Ghana. The objective of the cooperation is to create jobs and increase families´ income. KfW on behalf of the German Government supports the “Outgrower and Value Chain Fund (OVCF)”. The OVCF integrates smallholder farmers into commercial agricultural development by providing improved access to medium and long-term financing for investments for both smallholder farmers and Technical Operators (processors, exporters). This is achievable only due to a close and contracts based collaboration between smallholder farmers, successful agribusinesses, and local financial institutions.