G H A N A I A N – I T A L I A N C O - O P E R A T I O N

GHANA PRIVATE SECTOR DEVELOPMENT FACILITY (GPSDF)

Credit Facility for Small and Medium Enterprises

OFFICIAL GUIDELINES
for
ACCESSING THE CREDIT FACILITY

Prepared by:
The Ministry of Trade and Industry (MOTI)
The Embassy of Italy in Accra / The Italian Cooperation (MAE DGCS)

January 2012

  1. INTRODUCTION

Following the successful implementation of the Project named “Ghana Private Sector Development Fund”, financed by the Italian Government in 2003 for a total amount of 11,000,000 Euro, the Italian Ministry for Foreign Affairs (DGCS) approved in December 2007 additional financial resources of 22,000,000 Euro in order to continue to support the effort of the Government of the Republic of Ghana to promote private sector development.The new financial resources consist in two main components: a loan component of 20,000,000 Euro, used to establish a credit facility in favour of Ghanaian private Small and Medium Enterprises (SMEs), and a grant component of 2,000,000 Euro, which will cover the operational costs and the technical assistance activities of the Project.

  1. BENEFICIARIES OF THE CREDIT FACILITY

II.1 Eligibility Criteria

Beneficiaries of the Credit Facility shall be only Ghanaian Small and Medium Enterprises which fulfil the following eligibility criteria:

  • The ownership of the enterprise must be 100%private;
  • The enterprise must be part of the production or of the service sector (i.e. farming activities are not eligible);
  • The production activity of the enterprise must not harm the environment (i.e. wood processing activities are not eligible);
  • The enterprise must not make use, directly or indirectly, of child labour;
  • The operation of the enterprise must not have any direct or indirect connection with military activities or weapons (including sporting fire arms, defence systems, military installations, military equipment and materials), tobacco processing and luxury goods;
  • On the other hand, start-up companies (companies registered but not yet into operation) are also eligible, as long as they provide the relevant certificates of registration.

II.2 Preferential Criteria

The following preferential criteria (related to the operational structure of the beneficiary SMEs) will be taken into consideration:

  • Women Entrepreneurs;
  • High utilisation of women labour;
  • High labour utilisation;
  • Operation in the agro-industry or food industry sub-sectors;
  • Operation in the industrial sector;
  • Participation of or concrete synergies with Ghanaians residing in Italy;
  • Italian participation in the ownership of the enterprise;
  • Foreign participation in the ownership of the enterprise;
  • Activity oriented to the improvement of the environment conditions;
  • Activities in the Tourism sector.

In respect of loans approved for SMEs that are in compliance with one or more of the above preferential criteria, on-lending, re-lending and leasing special conditions will be applied (cf. Par. III.3).

  1. UTILISATION OF THE CREDIT FACILITY

III.1 Eligibility Criteria for Contracts to be Financed

In order to be considered eligible for the Credit Facility, the supply contracts shall have the following characteristics:

  • The total aggregate value of the supply contracts, for which the financing is requested by a single SME, must not be lower than EURO 25,000.00 equivalent and not higher than EURO 550,000.00 equivalent.
  • Each supply contract may include capital goods, spare parts, consumable production inputs and services thereto connected (like design, training, buildings erection, after sale services, etc) and may include also construction works.
  • The total aggregate price of the contracts, for which a financing is requested by a single SME, must be relevant to goods and services of Italian origin for a quota not lower than 70%. The remaining 30% of the total aggregate price of the contracts can be related to the supply of goods and services (or construction works) of local origin (from Ghana or neighbouring Countries) including not more than 5% of the total aggregate price of the contracts for raw materials and/or semi-finished goods for manufacturing relevant to the investment.
  • The supply contracts must not include: (i) goods and services related, directly or indirectly to military activities, (ii) luxurious items and, (iii) goods that are not in conformity to the international rules on environmental protection and on workers’ safety.

III.2 Local Financial Intermediaries Eligible to provide Loans

The Local Financial Intermediaries to channel the Credit Facility to the beneficiary SMEs are all the Ghanaian Commercial Banks and Leasing Companies that satisfy the laws and regulations of the Republic of Ghana, provided thatthey sign a Framework On-lending Agreement with the Bank of Ghana:

  • The Commercial Banks will act solely as intermediary of the Credit Facility by on-lending the loans received by the Bank of Ghana to the SMEs;
  • The Leasing Companies will, as well, receive loans from the Bank of Ghana but they will act also as contracting party with the Suppliers. Therefore the Leasing Companies will have, for a certain period, the ownership of the purchased goods.

The local financial institutions which signed the Framework On-Lending Agreement and consequently participated in the GPSDF between 2003 and 2008 are listed below, while the updated list of eligible financial institutions in the second phase is reported in annex IV.

Local Commercial Banks
The Trust Bank
P.O. Box 1862 - Accra
Tel. 0302-222407
Merchant Bank Ghana Ltd.
P.O. Box 401 - Accra
Tel. 0302- 666331/5
Cal Merchant Bank Ghana Ltd.
P.O. Box 14596 - Accra
Tel. 0302-221087/221056
SG-SSB
P.O. Box 13119 - Accra
Tel. 0302-228322/228334
International Commercial Bank
PO Box 20957 - Accra
Tel. 0302-666190 / 665779
First Atlantic Merchant Bank
PO Box CT 1620 - Accra
Tel. 0302-231433
National Investment Bank Ltd.
P.O. Box 3726 - Accra
Tel. 0302-661701-16
Amalgamated Bank Ltd.
P.O. Box 1541- Accra
Tel. 0302-249690/249683
United Bank of Africa
(ex Standard Trust Bank Ltd.)
P.O.Box 14596 - Accra
Tel. 0302-683526
Ghana Commercial Bank
P.O. Box 134 – Accra
Tel. 0302-664191 / Local Private Leasing Companies
Leasafric Ghana Ltd.
P.O. Box CT2430 - Accra
Tel. 0302-251640/228373
Ghana Leasing Co. Ltd.
P.O. Box 14295 - Accra
Tel. 0302-667218
Merban Finance & Leasing Co.
P.O. Box 401 - Accra
Tel. 0302-66633/5
Horizon Finance and Leasing Company Ltd. (ex General Leasing & Finance)
P.O. Box CT 1967 - Accra
Tel. 0302-231844

III.3 Characteristics of the Loans to the SMEs

In re-lending the loan received by the Bank of Ghana to an SME, the Financial Institution may make use of its own format, provided that the re-lending conditions to the SME are not less favourable than the following:

  • Interest rate to SME between 9 and 12% per year;
  • Repayment of principals in a period not less than 5 years and not exceeding 8 years after the communication from the Bank of Ghana of the final allocation of the contract/s to the Soft Loan. For leasing companies, the repayment period can last between 2 and 7 years;
  • The repayment period for principals shall include a grace period which must be related to the reasonably expected time necessary for the delivery of the goods to the beneficiary SME and, where applicable, for the buildings erection and commissioning; the grace period shall not exceed 2 years (for banks) or 1 year (for leasing companies).

Whenever the special conditions referred to in Par. II.2 apply, the interest rate indicated above will be reduced by 1%.

  1. CONTACTS

A Facility Management Unit (FMU) has been established in order to facilitate the implementation of the Project.

The beneficiary SMEs will have the responsibility for the identification and formulation of sound proposals for investment suitable to be financed through the Credit Facility. During the preparation of their proposals, the SMEs may request the advice of the FMU and its support in the preparation of the business plan.Similarly, the Financial Institutions will have the full responsibility for the evaluation of the requests for financing, but may request the advice of the FMU for the appraisal of the proposals.

CONTACTS: N.90 Sunyani Avenue, Box KDPMB 12, Kanda – Accra, Ghana
Tel. +233-302-230117/237352, Fax +233-302-235452, Email
Websites: (project site), (Ministry of Trade and Industry) and (Italian Embassy)

Annex I – Example of Business Plan contents

•Company background

•History, previous jobs and credit history

•Vision, mission and objectives/strategy

•Human resources (e.g. board of directors, management team and system, organogram, shareholding structure etc)

•Current status: existing activities, assets and products (if you are starting up a company, this paragraph would describe previous activities and experiences in related areas)

•Location and contact details

•Legal status and relevant company certificates (Certificate to Commence Business, Certificate of Incorporation, Bank statements, audited financial statements etc.)

•Project description

•Financing required (project cost estimates and proposed financing details)

•Technical specifications of all equipment/products/services to be purchased, and possible suppliers in Italy (and Ghana/neighbouring countries, if applicable)

•Marketing analysis (situational analysis, structure of the sub-sector, target market, marketing objectives and strategies, competition analysis)

•Technical analysis (location, plant and machinery, other fixed assets, raw materials, production process, expected outputs and products, demand/supply analysis)

•Risks analysis (political environment, market, financial risks)

•Socio-economical analysis (linkage effect, import substitution, employment generation, poverty alleviation, capacity building, taxes etc.) and general efficiency of the project

•Financial analysis (break-even analysis, projected cash flow tables, loan repayment schedule, internal financial rate of return analysis, sensitivity analysis, depreciation, maintenance and amortization schedule)

•SWOT (Strengths, Weaknesses, Opportunities and Threats of the project)

Annex II – Frequently Asked Questions

Q. What are the minimum and maximum amounts for the loan?

A. Between 25,000 and 550,000 Euro.

Q. What is the best interest rate I could obtain?

A. The interest rate, to be negotiated with the banks, will be between 9% and 12%. A reduction of 1% could be applied if you meet the preferential criteria listed in the guidelines.

Q. What are the repayment periods?

A. Between 5 and 8 years for the banks, and between 2 and 7 years for the leasing companies.

Q. Can I expect a grace period?

A. Yes, the grace period is related to the delivery/installation of the goods, and should not exceed 2 years (for the banks) and 1 year (for the leasing companies).

Q. Do I have to purchase equipment and materials from Italy?

A. Yes, at least 70% of the loan amount should be used to purchase equipment from Italy. The remaining 30% can be used to purchase equipment and services from Ghana or neighbouring countries.

Q. How can I find suppliers in Italy?

A. On the basis of the technical specifications described in your business plan, we will assist you in finding the proper suppliers.While the GPSDF staff is available to facilitate the liaison with the suppliers, for example byresearching their contact details and financial information, by organizing meetings with visiting Italian companies, andby posting relevant part of the application form (such as the equipment request)in theGPSDF web pages, the Ghanaian company applying for the loan is ultimately responsible for the selection of the suppliers.

Q. Will you charge me to find the suppliers or to revise my business plan?

A. No, there are no charges involved.

Q. Can I obtain a loan for farming activities?

A. No, there must be some kind of processing activity (for example, production of fruit juices, jams etc.)

Q. Can I obtain a loan for trading activities (shop, general commerce, import-export etc.)?

A. No, there must be some kind of productive activity.

Q. Can I obtain a loan for a proposal related to the service sector (such as tourism)?

A. Yes; in fact, the tourism industry is now considered a preferential sector.

Q. Can I purchase raw materials?

A. Yes, up to 5% of the total loan amount can be used to purchase raw materials.

Q. Can I use the loan for constructions works?

A. Yes, up to 30% of the loan request can be used for constructions works.

Q. Do I need collaterals to obtain the loan?

A. While not required by the eligibility criteria, the commercial banks are unlikely to process the loan if no collaterals are offered. Leasing companies might accept to use the purchased equipment as collateral.

Q. Do I have to inject internal equity into the project proposal?

A. While not required by the eligibility criteria, it is indeed recommended.

Q. Will you come to visit my facilities?

A. Yes, we will inspect your facilities once your application is deemed eligible.

Q. Does your approval mean that our company will receive the loan?

A. No, our approval means that you are eligible to receive the loan at the favourable conditions described above: however, your application will then be submitted to the local financial institutions for examination, in order to discuss the needed collaterals, the exact interest rate and the repayment/grace periods.

Q. My bank is not listed in your list of financial institutions; can it participate in the GPSDF project?

A. Yes, all banks and leasing companies in Ghana are welcome to participate in the GPSDF project, as long as they sign the relevant Framework On-Lending agreement with the Bank of Ghana.

Q. Are you going to help me finding a bank or leasing company that will channel my loan?

A. While we will provide your contact details and all requested documentation to the participating local financial institutions, we strongly encourage you to get in touch with them directly and discuss the financing conditions (such as interest rate, repayment period and grace period within the GPSDF guidelines).

Q. I have applied to your facility, how do I know the status of my application?

A. The database of all participating companies and their monthly status can be downloaded from the website

Q. I have read your guidelines and prepared a business plan. What should I do now?

A. Please fill the application form in Annex 3 and submit it, along with your business plan, in one of the following way:

1. By email (preferred, as we will need a digital copy of your business plan):

2. By mail or in person, at: N. 90 Sunyani Avenue, Box KDPMB 12, Kanda – Accra, Ghana.

Annex III – Application Form[1]

A. GENERALITIES

Company Name:
Contact Name and Position:
Mailing Address (please also specify site location, if different than mailing address):
Telephone and Fax: /
Email:
Year of Establishment :
Current Sector (e.g. Agro-processing, Mining etc.): /
Description of current business activities:

B. COMPANY PROFILE

Share Capital (Cedis):
Turnover in the past Year (Cedis): /
Number of Employees: / Male: Female: Total:
Italian participation in ownership (Yes/No):
Foreign participation in ownership (Yes/No):

C. LEGAL CERTIFICATES

Business Certificate (Certificate to Commence Business / Business Registration Certificate) / N. Date:

Other relevant licenses to carry on trade (e.g. Registration Food And Drug Board, Ghana Standard Board certificate, Environmental Permit, Incorporation under Companies Code 1963 [Act 179], Land Certificates etc.) / N. Date:
Type:
N. Date:
Type:


D. PROJECT DETAILS

Objective of the Project (Project Sector and description of planned activities): /
(1) Equipment/Goods to be purchased in Italy(from Italian Manufacturers) through the GPSDF loan / Description :

Cost Estimate(Cedis):
(2) [If applicable] Equipment/Goods/Services to be purchased in Ghana (including construction works) through the GPSDF loan / Description :

Cost Estimate(Cedis):
(3) =(1)+(2)Requested amount for GPSDF credit facility (Cedis): /
(4) Additional internal Equity injected into the project(Cedis): /
(5) = (3)+(4)Total Investment Cost (Cedis):

Signature (or Contact Name): ______Date: ______

Please submit the duly completed application form (which can also be downloaded from the website ), along with your business plan in digital format(in MS Word or Excel) and a copy of all the certificates listed in table C, in one of the following ways:

1. By email (preferred):

2. By conventional mail or in person, at: GPSDF - N. 90 Sunyani Avenue, Box KDPMB 12, Kanda – Accra, Ghana.

Annex IV – Characteristics of invoices from suppliers

Invoices are only required after the loan approval (at the early stage of the loan request process, quotes from supplierswill suffice).

Invoices must include the following:

1. Invoices must be “CIF”, i.e. inclusive of cost, insurance and freight to Ghana;

2. The total cost must be as close as possible to the amount approved by the GPSDF Joint Management Committee (JMC). Likewise, the equipment to be purchased must be as similar as possible to the equipment approved by the JMC.

3. When the equipment requires installation and/or training, the related costs should be integrated in the invoice as well, unless they are already included in other contract(s) financed by the GPSDF.

4. All warranty components should be included: for example, shipping costs and replacement/reparation of faulty parts; travel costs, accommodation and per diem of technician (if applicable) etc.

5. When applicable, a price breakdown should be provided (i.e. unit cost of equipment).

Unless otherwise noted in the invoice, the Italian supplier will not cover the following costs:

1. Custom duties, levies and similar fees.

2. Storage fees, in case the Ghanaian company did not have the requested materials or human resources needed to install the equipment upon arrival. To avoid such situation, it is recommended to check in advance all installation needs with the supplier.

3. Transportation costs from the port to the Ghanaian company’s premises.

4. Reparation costs incurred after the expiration of the warranty (for example, per diem of technician, travel/accommodation costs etc.). It is recommended to enquire about such costs in writing before the needs arise.

5. Supporting equipment necessary to the installation of the machinery (for example lifting equipment, workmanship, tools, utensils and apparatus), that should be provided by the Ghanaian client.

The Payment terms agreed upon by the Bank of Ghana and ArtigianCassa should be as follows:

25% Advance Payment

The following documents will be required from the supplier:

(a)Pro-Forma Invoice

(b)Performance Guarantee (as per provided template)