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Gideon Sackitey, Accra

Several attempts have been made by a number of governments over the years to make available long term capital to Small Medium Enterprises (SMEs). Notable among them was the bold attempt by the then National Democratic Congress (NDC) governments' Business Assistance Fund (BAF), a venture which failed to survive.

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 failed.

Previous Funds failed because of the usual attitude; that " government owed" them a favour, 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 payback.

The 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".

Currently, the Venture Capital Trust Fund (VCTF) is officially processing applications from various individuals and businesses that need funds for their operations.

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.

In the 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 million dollars."

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 respectively

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 liability.

"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.

The Fund 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 plans.

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 project .

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 VCTF.

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, individuals, businesses 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 exit.

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 previous regimes.

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 Limited (GGBL).

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.

Nana Osei-Bonsu

CEO, Venture Capital Trust Fund


The view from the modern office building of the Venture Capital Trust Fund, Accra


Ida Adu

Administrative Assistant, VCTF


The Old US Embassy

View from the offices of VCTF






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