A UK initiative will provide Ghana’s small businesses with loans in the local currency, helping to tackle the $4.8 billion funding gap that is one of Africa’s largest for the sector.
Details
British International Investment Plc. (BIL) the UK’s development finance institution, is backing a new lending platform with as much as $50 million for small- and medium-sized enterprises, the organization said in a statement Monday.
“SMEs face many challenges with accessing growth capital through tradition funding sources including high interest rates, short-term loans, high collateral requirements and currency mismatches,” BII said.
Why This Matters
Ghana, the world’s second-biggest cocoa producer, is facing a debt crisis while also battling rampant inflation. Its central bank earlier this month hiked the key lending rate to a record 30%.
In May, the government secured a $3 billion bailout from the International Monetary Fund to support its recovery.
The cedi has lost 26% of its value against the US dollar over the past year, deterring foreign investment in smaller businesses that employ more than 80% of Ghana’s workforce, according to a 2022 report by Impact Investing Ghana and Ashesi University.
What Happens Next
BII’s new initiative — called Growth Investment Partners Ghana — will provide companies with the equivalent of $500,000 to $5 million, mainly in local currency, “through flexible financing options that meet the needs of local businesses and are otherwise not available in the market,” according to the statement.
It plans to support as many as 150 SMEs in Ghana over the next 15 years.
Source: Bloomberg
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