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Minimum Capital Requirement for Establishing Universal Banks and Development Finance Institutions
Dr Gideon Boako, MP for Tano North
I have received numerous inquiries regarding whether the minimum paid-up capital requirementsfor establishing Universal Banks and Development Finance Institutions are the same. These questions have arisen following the government’s announcement of plans to establish a Women Development Bank with a budgetary allocation of GH¢50 million.
I fully support the initiative to establish the Women Development Bank and sincerely hope that the government implements it effectively, in line with the expectations of many Ghanaians.
For the purpose of public education and clarification, I am providing the following insights into the minimum paid-up capital requirements for the establishment of Universal Banks and Development Finance Institutions.
- Minimum Capital Requirement for Universal Banks
In accordance with Section 28 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), the Bank of Ghana revised the minimum paid-up capital for both existing banks and new entrants. Effective 11th September 2017, the capital requirement increased from GH¢120 million to GH¢400 million, as specified in NOTICE NO. BG/GOV/SEC/2017/19.
- Minimum Capital Requirement for Development Finance Institutions
On 18th March 2021, the Bank of Ghana issued a directive on Licensing and Capital Requirements for Development Finance Institutions (DFIs), pursuant to the Development Finance Institutions Act, 2020 (Act 1032). This directive, contained in NOTICE NO. BG/GOV/SEC/2021/04, categorises DFIs into four (4) main classes, each with specific capital requirements:
Minimum Paid-Up Capital and Application Processing Fees:
1) Class 1– Wholesale Development Finance Institution: GH¢800 million.
2) Class 2 – Retail Development Finance Institution: GH¢600 million.
3) Class 3 – Guarantee Development Finance Institution: GH¢300 million.
4) Class 4 – Hybrid Development Finance Institutions (depending on the combination of activities undertaken):
– Class 4a (Wholesale, Retail & Guarantee): GH¢1.2 billion.
– Class 4b (Wholesale & Retail): GH¢1 billion.
– Class 4c (Wholesale & Guarantee): GH¢1 billion.
– Class 4d (Retail & Guarantee): GH¢800 million.
It is important to emphasise that, according to the notice, no pre-operating permit will be granted unless the applicant meets the required paid-up capital threshold, and the original sources of capital are deemed acceptable.
- The GH¢50 Million Allocation for the Women Development Bank
Given these statutory requirements, it is important to critically assess the government’s proposed GH¢50 million allocation for the establishment of the Women Development Bank.
Is this allocation intended for:
– A Universal Bank?
– A Development Bank?
– A Savings and Loans Company?
– A Microfinance Institution?
Clarity on this matter would be beneficial to ensure the initiative aligns with existing regulatory frameworks.
God bless you all, and have a blissful weekend
By Dr Gideon Boako (MP)
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