GCB Bank Limited, Ghana, is ‘your bank for life’; at least that’s what their tagline reads. In a conversation with The Times of Africa, Mr. George Fuachie, Head, Corporate Banking, GCB Bank Limited, the second largest bank in Ghana by net profit and total assets, answers the question on everyone’s mind regarding the ‘One District, One Factory’ initiative in Ghana – how will the funding of the most ambitious industrialization program of the country happen?
There is a lot of enthusiasm about the ‘one district, one factory’ initiative. However, people need more clarity regarding the funding of such an ambitious project. What is the plan of action?
I can only speak for my bank as a financial institution. I am aware that there are different considerations as far as the funding of the programme is concerned. The Government of Ghana is trying to facilitate some funding but it will not be immediate. Such efforts take some time. Primarily, the Ghana Export-Import (EXIM) Bank and the Ghana Commercial Bank (GCB) will be considered.
A number of issues have come up, not because they were unanticipated, but because this is the phase where we expected such issues to occur. The funding needs of the companies such as lower rates of interest, the tenure of the facilities they need, with people asking for seven, eight and even ten years and a number of other things can become a challenge for the banks considering the commercial aspects.
But to make ‘One District, One Factory’ a success, we and other financial institutions are coming up with arrangements to accommodate the needs of these companies.
My bank, for instance, has committed in principle close to $250 billion to the ‘One District, One Factory’ initiative. Now, that doesn’t mean that we are rigid on how much we seek to lend. We could exceed the pre-decided limit. In principle, it is a demonstration of our commitment to that space. The projects that are viable have to be supported.
GCB would fund any opportunity that we find consistent with our risk profile. The definition of the risk appetite of the bank, however, has to be relooked at because ‘One District, One Factory’ is a special project.
I have seen a number of business proposals and if you look at the viability of those projects, they have to have interest rates below a certain margin. We have to support these companies and their projects and we have to do so profitably.
So, as a commercial bank, we definitely seek to lend. Though all these discussions are in the initial stages.
To answer your question, the funding arrangements are not cast in stone. They are still being developed, especially from the credit perspective. The money has to be given and it has to come back. If the bank is supposed to lend for 10 years, then we are prepared to do so.
I would suggest lending at lower interest rates specifically. Latest by the beginning of next year, there will be clarity as to what all is available (in terms of funding) for this initiative.
You are talking about lending to companies in millions and for tenures of eight to 10 years. Aren’t you worried as a bank about the menace of non-performing assets (NPAS)?
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My bank is a very strong bank, at least by Ghanaian standards and I would like to believe, to a certain extent by international standards as well. Recently, we took over the deposits and selected assets of UT Bank Limited and Capital Bank Limited, Ghana.
Of course, our strength does not translate into recklessness as far as lending is concerned. You don’t take two steps forward and three steps backward. That is why I was talking about developing a credit policy around this. And we surely will not do this with a view of losing money.
We do this to support the Government, we do this to support the bank as a commercial institution and we do this to support the emerging entrepreneurs. But we make sure to do it profitably such that it is a sustainable arrangement. We are evaluating all the key risks associated with this initiative.
There is a full department in the bank for the ‘One District, One Factory’ initiative. So, it is not like an add-on. It is a dedicated department, which brings along the responsibility of making it work.
NPAs are also an issue but I believe my bank has what it takes and we will move forward with an understanding of exactly what we are putting our feet into.
Factories would be set-up under the ‘One District, One Factory’ initiative and this will create employment. However, not necessarily everybody would be skilled enough to get the job. If a company from India goes to Ghana to train the local population, what kind of financial assistance can they expect from the banks or the Government?
There are a number of discussions along the lines of getting them (Indian companies) to come and support this entire initiative in Ghana. I cannot probably share with you the complete details as of now.
The bank itself as an institution is committed to working to skill the youth beyond the ‘One District, One Factory’ initiative. This will have a national impact to provide practical and professional training in view of equipping people with the power of skills.