Minimum capital for Class 1 development banks pegged at GHC800million

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Bank of Ghana building in Accra

The Bank of Ghana (BoG) has pegged the minimum capital for a Class 1 development banks’ (wholesale development finance institution) licence in the country at GHC800 million.

This comes after the government announced the expected launch of the National Development Bank this year.

Those that intend operating as Class 2 development bank (retail development finance institution) however will require an initial minimum paid-up capital of GHC600 million.

This was contained in a policy directive document released by the bank and signed by its secretary, Sandra Thompson,  under section 6 of the Development Finance Institutions Act, 2020 (Act1032).

For Class 3 (guarantee development finance institution) licence, the aspiring firms will require an initial minimum paid-up capital of GHC300 minimum.

For Class 4 development finance institution licence, the initial minimum paid-up capital will however depend on the development finance activities that the development finance institution intends to undertake (combinations of wholesale, retail and guarantee).

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In the case of full or majority foreign ownership, the Bank of Ghana said not less than 60 per cent of the required capitalisation or contribution shall be brought into Ghana in convertible currency.

The application processing fee for acquiring any of the above licenses is however estimated at GHC20,000. This can be done through Payment Order with the Bank of Ghana as the Payee.

Provisional approval

BoG said it may issue a provisional approval for a specified licence to an applicant on terms and conditions that it considers appropriate and satisfied.

“The applicant will carry on business with integrity, prudence and the required professional competence as well as has and will maintain at all times an unimpaired paid up capital. The rest is where the applicant is a subsidiary of a foreign company, the applicant will maintain at all times within Ghana the required capital in the form of funds transferred from abroad together with other funds that may be determined by the Bank of Ghana,” it said.

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Where a provisional licence has been issued, the Central Ghana may issue the final licence to the applicant after satisfying itself that the conditions above and those set out in E below have been met.

Pre-operating conditions

The Central Bank said it shall not issue a licence to an applicant unless it is satisfied that the feasibility report submitted by the applicant is based on sound analysis and prudent, reasonable assumptions as well as the premises for the proposed development financial institution has sufficient title deeds/lease agreements.

Others are structures and processes for governance, including accounting, risk management, and internal control systems and records of the applicant are adequate; the significant shareholders are suitable and the ownership structure of the applicant will not hinder effective supervision, including supervision on a consolidated basis and the paid-up capital of the applicant meets the requirements set out herein and the original sources of capital are acceptable.

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Conditions for issuance of licence

BoG said a licence issued under the Development Finance Institutions Act, 2020 (Act 1032), shall be subject to conditions that it may impose.

Also, it may, where necessary, and in accordance with the Development Finance Institutions Act, 2020 (Act 1032), restrict the activities in which a development finance institution is permitted to engage.

 

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