Ghanaian venture capital (VC) and private equity (PE) firms seeking new funding partners have a promising new option: the state-owned Development Bank of Ghana (DBG). Established in 2021, the Accra-based institution recently announced it’s open for business with qualified firms.
DBG aims to act as a “fund of funds,” strategically channeling investments into Ghanaian VC and PE firms with a strong track record and the potential to drive growth in critical sectors like technology, healthcare, and green energy.
“We believe venture capital and private equity play a crucial role in propelling businesses forward,” said Michael Mensah-Baah, DBG’s Deputy Chief Executive Officer, at the 2024 Ghana Venture Capital Association (GVCA) Annual Conference. “These firms can significantly enhance a company’s corporate governance, operational efficiency, and ESG practices. By providing fresh capital and fostering best practices, they contribute to long-term resilience, agility, and sustainability for Ghanaian businesses.”
Strong International Backing for DBG
The Development Bank of Ghana enjoys significant international support. The World Bank, through the International Development Association (IDA), approved a $250 million long-term loan in 2020. The European Investment Bank (EIB) and the German government’s KfW Development Bank have also committed €170 million and €46.6 million in loans, respectively. Additionally, the African Development Bank (AfDB) provided a $40 million grant. The Government of Ghana has also contributed $200 million of its $250 million pledge.
DBG currently boasts a capital base of Ghc1.2 billion (approximately $87 million) and has secured over $700 million from shareholders and partners for onward lending to participating financial institutions and capacity-building initiatives.
Unanswered Questions and Future Implications
While the specific details regarding the form of DBG’s financial support (equity or loans) for VC and PE firms remain unclear, this announcement signifies a potentially significant shift. It highlights a growing trend of state-owned institutions in Ghana actively engaging with the technology sector.
In 2023, the state-backed Venture Capital Trust Fund led a $10.5 million investment round in the Mirepa Capital SME Fund I (MCSFI), which targets technology startups. That same year, the Injaro Ghana Venture Capital Fund (IGVCF), also supported by the Trust Fund, provided a $2 million equity injection into Zeepay, a Ghanaian payments startup.
The involvement of DBG, with its substantial financial backing, could significantly increase investment opportunities for Ghanaian businesses in these key sectors. Industry experts will be closely following the details of DBG’s financing structure and its impact on the Ghanaian venture capital and private equity landscape.