Experts Push for Dedicated Bank to Drive 24-Hour Economy Growth

Experts say a dedicated bank is needed to finance Ghana's 24-Hour Economy, which could face a major financing constraint unless the country changes how it funds agriculture and industry. The proposed Value Chain Industries Bank (VCIB) would target agriculture, manufacturing, fast-moving consumer goods (FMCGs), and export value chains.

Private-Sector Led Development Finance Institution

Industry stakeholders propose a private-sector-led development finance institution, the Value Chain Industries Bank (VCIB), to provide long-term capital from raw-material production through manufacturing to the final market. The proposed bank would address the persistent mismatch between short-term financing and the longer investment periods required to build competitive industries. VCIB would target agriculture, manufacturing, fast-moving consumer goods (FMCGs), and export value chains, focusing on the entire production chain rather than treating factories as isolated investments.

Financing the Entire Value Chain

The experience of indigenous agro-processing companies such as Ekumfi Fruits & Juices highlights the challenge of financing the entire value chain. A large processing facility cannot operate efficiently without adequate raw materials, and where financing builds factory capacity without simultaneously expanding farms and outgrower production, utilization can remain below installed capacity. Low utilization raises unit costs, weakens competitiveness, and puts pressure on cash flow and debt servicing.

Aligning Financing with Industry Gestation Period

The proposed bank would seek to address the mismatch between short-term financing and the longer investment periods required to build competitive industries. VCIB would align the tenure of financing more closely with the gestation period of the industry being financed. This approach would enable companies to invest in the entire value chain, from raw-material production to manufacturing and distribution, rather than relying on short-term financing that cannot support long-term growth.

Recognizing Biological Assets in Agricultural Financing

The proposed bank would also place greater emphasis on recognizing biological assets in agricultural financing. Commercial cocoa, oil palm, citrus, avocado, and other plantations carry future production potential but may not receive sufficient recognition under conventional collateral structures. Subject to appropriate valuation, insurance, legal enforceability, and prudential requirements, VCIB would assess agricultural investments using a combination of land, biological assets, expected yields, confirmed offtake, and projected cash flows rather than relying predominantly on conventional fixed collateral.

Emphasis on Demand and Credible Offtake Arrangements

The proposed bank would also place greater emphasis on demand and credible offtake arrangements. Instead of asking only what collateral a producer owns, financing decisions could also consider who will buy the output. Credible offtake arrangements involving FMCGs, processors, distributors, supermarkets, and exporters could become part of the assessment of a project's ability to generate cash and repay financing. This approach effectively moves industrial financing from "finance, produce, and search for a market" towards "identify demand, secure offtake, produce, and finance."

Digital Payments and Cash-Flow-Based Financing

Digital payments could further strengthen the model. Subject to regulatory and data-protection requirements, verified transactions across farmers, suppliers, manufacturers, distributors, and retailers could provide lenders with greater visibility into actual turnover and support increased use of cash-flow-based financing.

Relevance to the 24-Hour Economy

The proposal has particular relevance to the 24-Hour Economy. A factory cannot simply introduce another production shift without additional raw materials. More raw materials require agricultural investment; higher production requires working capital; increased output requires logistics and warehousing; and ultimately the additional goods require domestic or export markets. A 24-hour factory therefore requires a 24-hour value chain—and that value chain requires appropriately structured finance.

Next Steps for the Proposal

The proposal must still demonstrate that it can be converted into a financially viable and properly regulated institution. Proponents are expected to engage government and the Bank of Ghana on feasibility, licensing, capitalization, ownership, governance, and the appropriate prudential framework. If Ghana wants to grow what it processes, process more of what it grows, substitute imports, and expand exports, financing cannot stop at the factory gate. It must run through the entire value chain.

Source: JOY