Country Diagnostics

The Country Diagnostic for Ghana

This document summarizes the outcomes of the Ghana long-term finance country-diagnostic undertaken under the auspices of the Long-Term Finance Initiative hosted by the African Development Bank (AfDB). The diagnostic was carried out between June 2019 and March 2020 and summarizes the main findings and recommendations. It focuses on four key areas: (i) Macro, banking and capital markets; (ii) Enterprise finance; (iii) Infrastructure finance; (iv) Housing finance.

The emphasize of this report is primarily on deepening the domestic market for long-term finance. Although deepening domestic markets is a medium- to long-term endeavor, it is fundamental both to enhancing domestic saving and the efficient deployment of scarce domestic resources, and to reducing exposure to potential foreign exchange risks. Developing economies such as Ghana will continue to rely on foreign capital resources as an important source of investment financing for the foreseeable future. However, strengthening the domestic financial system—particularly the enabling environment and institutional infrastructure, will be important in two main ways: in gradually increasing the depth of local markets and reliance on domestic funding sources, and in attracting foreign sources of capital, such as foreign direct investment and portfolio investments.

The Country Diagnostic for Côte d’Ivoire

The Country Diagnostic for Côte d’Ivoire focuses increasing the availability of finance for productive investment in the infrastructure, housing, and enterprise finance. It applies a flexible definition of LTF that reflects the differing life of assets being financed, which may vary between 20 to 30 years in the infrastructure and housing sectors to 5 years or less for enterprises. Gaps in the provision of LTF arise because of the limited maturities available to those financing investments in these sectors. Long-term funding for infrastructure in Africa is predominantly provided by circumventing the domestic intermediation process altogether—by using long-term funds provided by governments or donors, or by obtaining capital in the form of foreign borrowing or direct investment. Enterprises, particularly if small and medium-sized, face serious challenges in accessing adequate and affordable long-term financial resources. Rather than funding themselves on formal markets through bank loans or the issuance of debt and equity, small and medium-sized enterprises (SMEs) rely on funding provided by family and friends, even though such funding is unlikely to be sufficient in terms of size and maturity to satisfy their investment needs. Housing finance is found to be scarce and offered over too short a term, and is therefore unaffordable for many households, leading to incremental construction.

Given scarce fiscal resources and the underdeveloped status of domestic financial markets, the Country Diagnostic for Côte d’Ivoire identifies sizeable long-term financing gaps in the three identified sub-sectors (infrastructure, housing, and enterprise sectors). This deficiency points to the imperative of enhancing the provision of LTF by leveraging public and donor resources and by harnessing the contribution of the private sector. In this context a concerted effort is required to better use existing sources of long-term funding, as provided by banks, institutional investors, and similar enterprises, and to develop new sources of funding.

The diagnostic undertaken in Côte d’Ivoire identifies seven broadly defined hurdles, see figure in the link below. Each of these hurdles and corresponding recommendations for their alleviation are briefly outlined and recommendations are organized according to their different time horizons: (a) operational changes that imply potential “quick wins” and (b) those changes that will require structural, institutional, legal, and regulatory modifications and thus may take longer to implement. Finally the key agencies designated to take responsibility for implementation of each of the recommendations is identified.