The European Investment Bank (EIB), the European Union's long-term financing institution, is lending EUR 10 million from risk capital resources (1) to two financial institutions in Ghana for on-lending to the private sector to finance small and medium-scale investments. The financial intermediaries are Ecobank Ghana Ltd, a subsidiary of the West African regional Ecobank Group, and SSB Bank Ltd. This is the first EIB global loan (2) scheme available to Banks in Ghana.
The objective of the EIB loan is to respond to an increasing demand for the financing of investments from Ghanaian SMEs and export oriented enterprises. It will contribute to the development of the private sector in Ghana by stimulating employment creation and diversifying economic activities across a wide range of sectors.
The EIB facility provides long-term funding (5 to 12 years) to part-finance viable private sector projects in major productive sectors of the Ghanaian economy, including industry, agro-industry, mining, tourism and related services. Investments can be new projects, expansion, modernisation, restructuring or diversification of activities. The loans, which should range between EUR 100 000 and EUR 1 million, will be available in local (cedi) or foreign currency, as may be appropriate for the financing needs of a particular project.
Funding applications are to be channelled through the financial intermediaries, which are responsible to select and appraise eligible projects and take the credit risk.
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects which further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union. At present, the Bank's financing is carried out under the provisions of the Fourth Lomé Convention, which was concluded in 1989 for a period of 10 years and is accompanied by two Financial Protocols, spanning 1991-1995 and 1996-2000. Under the second financial protocol, the total financial aid available amounts to EUR 14.6 billion, of which EUR 12 billion is grant aid from the EU member states, EUR 1 billion is managed by the EIB as risk capital finance and up to EUR 1.6 billion is in the form of loans from the EIB's own resources.
(1) The EIB manages part of the European Development Fund (EDF), which is constituted by contributions from EU Member States, for risk capital operations.
(2) Global loans are basically lines of credit opened to banks and other financial intermediaries operating at national or regional level, which pass on the proceeds, in the form of sub-loans, for smaller-scale investment schemes.