The Venture Capital Trust Fund is now seeking the amendment of the law which established it, in order for it to diversify its sources of funding.
The VCTF is a government institution, established in 2004 by Act 680, for the purpose of providing equity and quasi equity to start up and early stage small and medium- sized enterprises.
However, because its establishing law narrows its eligible funding sources down to primarily government itself and recycled cash flows from its activities, the Fund continues to face financing shortfalls which are constraining its ability to provide funding for deserving emergent SMEs.
Speaking in an interview VCTF’s Board Chairman, Amoafo Yeboah, said, “The reason why we are asking that the Act be amended is so that we will become autonomous so we can seek funds from other institutions like the World Bank and the African Development Bank among others, because the government cannot continue to put money in the Fund.”
The VCTF operates by partnering with financial institutions such as commercial and universal banks, as well as fund management firms, to establish dedicated specialist Venture Capital Finance Companies (VCFCs) which use funding provided by the partnering institutions to provide equity and quasi equity financing to start up and early stage SMEs with identified strong growth potentials. Several of such VCFCs have been established over the past decade.
Mr. Yeboah said “ the VCTF itself is finding it increasingly difficult to meet cash calls made by the VCFCs in which it is a financial partner, to meet the financing needs of both ongoing and new enterprises those VCFCs are investing in”.
To meet its share of the immediate new investment outlays approved by the VCFCs in which it is a partner, the VCTF has asked government for GHȻ30 million.
However, Amoafo Yeboah acknowledged that continued financing of the Fund by government was a difficult proposition and at best insufficient for its purposes, which was why it wanted financial autonomy to allow it seek and secure its own financing from diverse sources.
“The current high interest regime currently obtaining in Ghana has made access to equity financing by startup SMEs more important than ever and thus the sustainable and timely financing of the VCTF,” he said.
Besides its provision of equity finance through VCFCs, the VCTF also has a Special Purpose Vehicle through which it finances farmers in northern Ghana to produce sorghum for Guinness Ghana Breweries Limited.
This has enabled that company to replace hitherto imported barley hops with locally cultivated sorghum, which also provides a livelihood directly to some 4,500 farmers.
From initial annual production of 96 metric tons, annual production under the scheme now stands at 900 metric tons.
By Times Reporter