In the ambitious push towards a 24-hour economy, institutions like the Ghana Export-Import Bank (GEXIM) and the Development Bank Ghana (DBG) are poised to play pivotal roles. Yet, as they gear up to fuel national growth, there’s a crucial lesson to be learned from an often-overlooked financial dynamic – one that the National Investment Bank (NIB) has historically navigated with a different philosophy.
The Glaring Risk Mismatch in Development Banking
At the heart of the challenge lies a fundamental imbalance: the “risk mismatch.” Think about it from a bank’s perspective, especially when supporting burgeoning businesses, which is precisely what GEXIM and DBG are designed to do. When a business, backed by public funds or guarantees, unfortunately falters, the lending institution (and by extension, the public) absorbs the loss of the principal investment. It’s a significant downside that directly impacts the public balance sheet.
But what happens when that same business succeeds wildly? When it scales, innovates, creates jobs, and generates immense wealth? In the traditional banking model, the bank’s reward is capped. It simply receives its interest payment. The exponential “upside” – the lion’s share of the profit, the burgeoning equity, the multiplied value – largely remains trapped within private hands. The nation, through its public institutions, bore a significant portion of the initial risk, but often doesn’t adequately participate in the spectacular rewards.
Why NIB’s Model Offers a Blueprint
This is where the National Investment Bank (NIB) historically offered a different paradigm. NIB was not just a lender; it was designed as an investment bank, often taking equity stakes in the businesses it supported. This allowed NIB, and by extension the nation, to partake in the “upside” when businesses succeeded, creating a more balanced risk-reward profile.
For GEXIM and DBG, as they champion the 24-hour economy, this lesson is invaluable. If they are to truly unlock sustainable national growth and ensure that the public benefits proportionally from the risks taken, a re-evaluation of their engagement model is necessary. Merely providing loans, while essential, may not be enough to capture the full economic dividend. Exploring structured equity participation, innovative financing instruments that share in success, or mechanisms that allow for public benefit beyond interest payments, could transform the landscape.
Beyond Interest: A Shared Future
To truly foster a robust 24-hour economy where the benefits are broadly distributed, our development banks must move “beyond the ledger.” They need to design models where the incredible potential of successful ventures doesn’t just enrich a few, but rather contributes significantly back to the public wealth that underpinned their growth. Learning from NIB’s integrated investment approach could be the key to ensuring that the public not only bears the downside risk but also shares equitably in the upside of national prosperity.
Source: Original Article
