Ghana is hoping that the presence of the African Trade Insurance Agency (ATI), will help mitigate the country’s investment risk and thus unlock additional investments while also lower the cost of borrowing.
The Agency, according to Finance Minister, Ken Ofori-Atta, would support Ghanaian banks by providing access to credit insurance that would offer the much-needed collateral.
With ATl, banks would potentially gain additional and improved revenue streams, while at the same time help the economy to grow.
Ghana became a full member of the ATI in October 2019 with shareholding valued at US$176 million that was provided with the financial support of KfW, a German state-owned development bank.
With this membership, ATl expects to review, and potentially insure, the current pipeline transaction in Ghana valued at US$12 billion.
“ATI is a unique institution because the list of benefits it brings to countries goes well beyond insurance. It is not a typical insurance company, it operates on the level of investments and trade by supplying the insurance that fuels all the major investments and trade transactions in other regions of the world”.
The Finance Minister said this type of insurance had been in short supply on the continent largely because African economies got a late start to development compared to more developed regions.
“As a result, African governments tend to obtain lower credit ratings. Africa also has a risk perception challenge because it is perceived as riskier than other regions, these factors have led to a shortage of investment insurance”.
In 2019, ATI insured a portfolio of transactions across Africa valued at US$64 billion. The company is able to support such volumes of trade and investments in part because of an impressive network of international financial institutions such as reinsurance companies and financiers.
He said that Ghana can benefit from the ATI by using its insurance to attract commercial financing at the lower pricing levels enjoyed by more developed economies.
“This means financing at better terms and longer duration, which can help pay off more expensive debts and create a more sustainable debt management process,” he added.
The manufacturing and trade sectors are expected to benefit from ATI through credit insurance to expand their sales beyond Ghana enabling a targeted approach for exporters and suppliers.
John Lentaigne, the Acting Chief Executive Officer, ATI, said ATI had successfully helped neighbouring governments attract lower-cost financing at longer durations by providing a novel insurance scheme that effectively ‘wraps’ the government’s borrowing requests with insurance.
This, he noted, makes the request more appealing to commercial lenders and thus attracts better terms such as longer durations or lower all-in cost of finance.