In 2001, however, came a
different approach when the New Patriotic Party (NPP)
government came into office, it promised the
establishment of a Venture Capital Fund.
The idea was that
many of these SMEs which form
the bedrock of Ghana's economy
lacked the financial muscle to survive. It is estimated
that some would have required
just one million cedis (almost
a $100) to have been functional.
But for lack of this sum
most of these enterprises
Previous Funds failed because
of the usual attitude;
that " government owed" them a
coupled with the sheer ineptitude on the path of
the managers of the Funds.
The result was a
depletion of capital of these Funds because
beneficiaries or borrowers did not
Venture Capital Trust Fund
took off after what Chief Executive Nana
Osei-Bonsu said were: "period of organization, planning
and strategising a suitable framework for operation".
the Venture Capital Trust Fund (VCTF)
is officially processing applications from
various individuals and businesses that need funds for
The Trust Fund has leveraged
from a number of banks, finance houses and insurance
companies, a total of 44 million dollars
as capital for onward lending
to small medium enterprises in the country, with the
assurance that it (the Trust
Fund) will not deplete
its Fund as
the previous government Business Assistance Fund
under the NDC government did.
Nana Osei-Bonsu said the Fund has managed to collaborate
with many of the nation's premier
financial houses for capital; Ghana Commercial
Bank, the nation's foremost
bank, Agricultural Development Bank, National Investment
Bank, State Insurance Company,
Fidelity Partners and the HFC Partnership.
"These companies on their own
raised 33 million dollars to
match a total of 11 million
dollars from the Fund,"
said Mr. Osei-Bonsu.
new world of venture capital in Ghana, Mr. Osei-Bonsu
said "this is
a significant step since the Fund was originally
capitalised by government with only 25 million dollars."
"What we have done since November
1, 2006 is to form the Activity Venture Capital
Financial Company with the Ghana Commercial
Bank/Agricultural Development Bank group which put
together six million dollars while the VCTF put up four
million. Then the
National Investment Bank/ State Insurance Corporation
group which also put up six million dollars with four
million dollars from the VCTF."
Mr. Osei-Bonsu continued.
Other investors in the group
are: " Fidelity Partners which came up with 15 million
dollars to match 3 million from the
fund. The HFC partnership and the Fund put
together 4 million and 2
million dollars respectively,
as well as the Gold Coast Securities
from whom we raised 2
An obviously delighted Nana Osei-Bonsu said further
deals were in the works with
ECOBANK Partners and Boulders Securities, who would be
putting up 5 million dollars and 10 million dollars
In accordance with the Funds plan,
SMEs seeking to access
funding under the Venture Capital Trust Fund Act 2004
(Act 680) can do so directly and
not through any consultant.
To qualify, an applicant must
provide an application letter, comprehensive business
plan, tax clearance certificate for existing business
and any additional documents that may be requested.
Under the VCTF Act of 2004
(Act 680), an SME means an industry, project,
undertaking or economic activity which employs not less
than 100 persons and whose total asset base excluding
land and building does not exceed the cedi value of one
million US dollars.
Officials from the Ministry of Finance and Economic
Planning said money could only be
released after due diligence,
and would be monitored even
after approval to make sure
that the money was used
for the intended purpose
so as to protect the Fund from carrying any
"So far, 48 companies have
lined up with their
applications for funding," Nana
Osei-Bonsu said. About 70% of the funds, he
explained, would go to areas such as the agriculture,
pharmaceuticals, tourism and Information Communication
Technologies (ICT) with the rest left open for any
project not considered as priority.
According to Nana Osei Bonsu, "the Fund is not a social
investment organization but a business entity set up to
do profitable business."
Funds would be disbursed through
Fund Managers who are rregistered
members of the Securities and
Exchange Commission as advisors
at 50% below Bank of Ghana Prime Rate.
Going by the current prime rate, the interest
rate to access funds would be
7.25% plus the margin imposed by the Fund Managers.
would not dole out the amount required
directly to the said SME, "but
will deposit the amount with
a named bank."
From this bank amounts for specific tasks
and operations would be paid for.
He said SME's or companies who refuse these internal
controls and the support required from the VCTF before
funding was provided would not
receive any funding whatsoever.
Nana Osei Bonsu said it was
not the wish of the Trust to take over any company and
thus urged all clients to come
forward with their financial lawyers and
planners to negotiate their
Mr. Osei Bonsu said the Fund was not
a bank, but only geared towards people and
businesses that had business
ideas worth investing into.
Since the Trust Fund, according to the law, could not
accept collateral, it would
invest not more than 49 per cent
of the capital required in any
The Venture Capital Fund signed its first agreement in
August 2006 with Sinapi Aba
Trust, a financial non-governmental organization, and
disbursed to it 3.6 billion cedis for
farmers in the Brong Ahafo; Upper East; Upper West and
the Northern Regions under an agreement signed with the
As a result, about 1,200
sorghum farmers in the Atebubu, Wa, Tamale and
Bolgatanga areas would benefit
from the amount to plant crop for local use.
Nana Osei-Bonsu said the agreement with Sinapi was based
on an investment option to provide credit facility
directly to the NGO to lend to umbrella farmer
organizations, cooperatives, groups,
or directly to the farmers to produce up to an estimated
1,600 tonnes of sorghum for the period 2006 to 2007.
The VCTF operates two pay
back initiatives, namely credit and equity, for
recycling to other investment companies. Under a credit
investment, the credit must be repaid but for the
equity, the VCTF investment would be liquidated by
selling the Trust's equity holdings back to the original
owners of the company or other partners at the time of
Some would be clients of VCTF
are however a bit skeptical about
their ability to access funds for fear that the Fund may
not play fair, and would politicised
the system; giving mostly to
ruling party supporters and cronies as was done under
Not so, said Mr. Osei-Bonsu.
The Fund would give money to the deserving and would
make sure that it was paid back.
The Sinapi agreement,
according him, would be paid
back because the farmers had
the added advantage of a ready market
to supply 1,600 tonnes of sorghum
to Guinness Ghana Breweries
Also waiting to further strengthen
the sorghum market, Mr. Osei-Bonsu pointed out,
was a plan by consortium of European NGOs and
Financial Agencies to assist
with 2.8 million dollars over five years in the
Agreement to help develop local supply of sorghum to
replace imported barley.
Deputy Minister of Finance and Economic Planning,
Professor George Gyan-Baffour said the establishment of
the Fund was a manifestation
of the Government's objective of making the private
sector the engine of growth of the economy.