Since its establishment in 2006, the Venture Capital Trust Fund (VCTF) has received investment totaling US$70 million, leaving a US$102 million financial gap that must be filled if it is to achieve its goal of providing financing to the Small and Medium Enterprises (SMEs) sector.

Assessments by Bolton Consulting Group (BCG) found that VCTF needed a minimum of US$172 million to fulfill its mission before the World Bank recapitalized it under the Ghana Economic Transformation Project with US$ 40 million and a US$ 5 million technical assistance facility.

The VCTF board has long-term funding sources as one of its main priorities, according to Yaw Owusu-Brempong, the organization's chief executive officer, in an interview with B&FT.

“At the board level, one of our major issues is a permanent source of funding. Because it’s a revolving fund, either we get one large money – which is very difficult – and then we don’t even go back to the ministry again, just like Development Bank Ghana; or on gradual basis, if for the next 10 years – if every year we are getting an additional US$10million – then after 10 years there will be no need to actually go back to the ministry. Because it doesn’t make sense that every now and then government will pump money into the fund.

“We keep returning because financial inflows haven’t been steady, but if financing does start to flow steadily, as the BCG has advised, then there may come a day when we won’t even need government support because we’ll be able to stand on our own two feet,” Mr. Owusu-Brempong said.

“The VCTF needed minimum of US$172million per recommendations by the BCG, and over the years from 2006 to 2021 the total monies given to us was US$30million; so there was a gap of US$142million. Now in 2022, as a result of the recommendation, US$40million has been received under the Ghana Economic Transformation Project. This leaves the current fund gap at US$102million,” the CEO revealed.

VCTF commitments

The VCTF has committed about US$25million – at different exchange rates – to seven funds between 2006 and 2020; and GH¢60million in 2022 and an additional GH¢60 million by the end of 2022.

Over the next five years, VCTF intends to deploy GH¢1.5billion to support SMEs. With this amount, we intend to leverage about GH¢5 for every GH¢1 spent; thereby increasing the capital pool for SMEs to about GH¢7.5billion.

Cause of funding gap

When the VCTF was set up in 2004 and started operations in 2006, the Fund was supposed to get 25 percent of the National Reconstruction Levy – mainly a levy on the banks and insurance companies, with seed money of about GH¢22million, equivalent to US$22million at the time.

“Unfortunately, in 2006 the levy was abolished – and that has been our biggest challenge,” the CEO said.

“So, our source of funding was the reconstruction levy and then allocation from the Ministry of Finance; but if the levy had been there, I’m sure we wouldn’t even have needed money from the Ministry of Finance. Unfortunately, it was abolished. So, subsequently, allocations from the Ministry of Finance were not consistent. There were some years we weren’t getting anything at all, depending on the ministry’s priorities,” Mr. Owusu-Brempong stated.