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Ghana Exim Bank: The hope for trade finance and economic growthTuesday, August 23, 2016 > 15:08:19
Successive governments have made a lot of efforts to enhance the contribution of Small, Medium Enterprises (SMEs) and Export Trade to the growth of the economy of Ghana.
However, most of these policies have not been able to harness the full potential of SMEs to enable them play the expected role in the transformation of the economy.(2013 Ghana Banking Survey.)
One of these interventions was the Export Development and Investment Fund (EDIF). The mandate of EDIF enshrined in Act 582, limited its interventions to the provision of funding for the development and promotion of Ghana’s export trade.
As a result, the EDIF Act was amended in line with Government policy to include the provision of financial resources for the development and promotion of the country’s agriculture, relating to agro-processing and agro-processing industry. Thus, the birth of the Export Trade, Agricultural and Industrial, Development Fund (EDAIF).
While the broadening of the scope of the Fund was admirable, it did not adequately address the funding gaps facing the SME’s and the export community. Consequently, the potential of SMEs and the benefits associated with export trade are yet to be fully hitched. This challenge has necessitated the move to establish the Ghana Export-Import Bank (EXIM Bank).
Ghana Exim Bank: what is it?
The Export-Import Bank of Ghana was set up by an Act of Parliament (EXIM Bank) The Export- Import Bank of Ghana Act 911, 2016 to:
• support and develop directly or indirectly trade between Ghana and other countries and
• build Ghana’s capacity and competitiveness in the international market-place.
The Bank will be independent in the performance of its functions and not subject to the regulatory and supervisory control of the Bank of Ghana or the Banking Act, 2004 (Act 673).
Through its unique function enshrined in the Act, it is anticipated that the Bank will help boost exports by equipping Ghanaian businesses, particularly SMEs, with the right financing mix required not withstanding global economic competition and thereby transforming the economy of the country into an export-oriented one.
The role of the bank
To achieve its object, the Bank shall buy, sell, dispose, lease out, borrow, lend, accept pledge, accept mortgage, exchange, transfer, accept, transfer or execute any acts regarding its property, both inside and outside the country, as well as accept property, given by others.
Fundamentally, the bank will act as the principal export finance institution of the country, supporting and enhancing existing trade and investment activities. To achieve this feat, EXIM Bank shall provide credit facilities to an exporter or the exporter’s bank, a buyer or a buyer’s bank and the bank own facilities can be leveraged where commercial banks are unable or unwilling to lend.
This, it is believed, will fulfill the export policies adopted by government of Ghana and enhance the exportation of value-added products to transform the economy into an export–oriented economy.
The creation of Ghana EXIM Bank provides opportunities for companies to take advantage of guarantee facilities of different types to execute export contracts and import transactions. SMEs that otherwise would be disqualified by commercial banks for want of collateral can gain access through guarantees of the EXIM Bank.
A resilient third party guarantee also implies risk reduction with consequential effect on cost of borrowing. Ghana EXIM Bank will also play a key role in the promotion of cross border trade and investment, with a mandate to enhance and integrate the country’s trade and investment activities in the economy.
The Bank will manage an equity financing scheme to support the long-term financing needs of export-oriented companies and contribute to shares, debentures, of Ghanaian firms involved in export. Equity injections serve to improve capitalization of Ghanaian businesses, particularly startups, and thus enhance access to commercial bank lending.
Besides, the Bank will be providing technical, administrative and financial assistance of various kinds for export or import of goods and services. EXIM Bank will analyze export projects on the basis of technical, managerial, marketing, and financing feasibility.
When the Bank finds a project viable on the above grounds, it will not hesitate to fund or support it. Apart from the above assistance, the Bank shall undertake and finance techno-economic research, surveys, or any other study in connection with the promotion and development of international trade.
Exporters will be provided with market development assistance so that they can undertake advertising and sales promotion activities in foreign countries. The bank, through its marketing advisory service, will also help Ghanaian exporting firms in globalization efforts by proactively assisting in locating overseas distributor(s), buyer(s), and partner(s) for their products and services.
A tool for effective trade facilitation
The need for developing and transitional economies to take a very critical look at their trade policies with a view to facilitating trade has become more imperative in this era of globalization than ever before.
Developed economies have through trade facilitation succeeded in developing their firms and industries and equipping them with the ability to trade in almost all parts of the world to their advantage. This global competition challenges the competitive edge of domestic firms even in their home markets and Ghana is no exception to this development.
Trade finance refers to innovative, custom-engineered financial products and services that meet a country’s import and export needs. It is completely different from regular commercial bank lending, mortgage lending or insurance. The words, “innovative and custom-engineered” are very vital to the development of any successful trade finance product.
Indeed, the establishment of EXIM Bank is an opportunity for exporters and importers to look for competitive advantage that will help them to increase their sales for economic development.