What do you know: About development finance and why DFIs matter?

By Desmond Isaac ADDO

Email: [email protected]

For more than a hundred years, Ghana has grown cocoa.

But for most of that time, we did not make the real money from it.

We grew the beans.

Others made the chocolate.

For decades, Ghana exported cocoa almost exactly as it came from the farm. Countries elsewhere processed it, branded it, sold it, and earned far more from the same beans we worked so hard to grow.

To be fair, this did not go completely unnoticed. As far back as the 1960s, Ghana set up the Cocoa Processing Company in Tema. But progress was slow. By the 1990s, less than 20 percent of our cocoa was processed locally. More than 80 percent still left our shores raw.

By the late 1990s and early 2000s, one thing became clear: if Ghana was serious about industrialization, this had to change.

Processing cocoa is not a small undertaking. It requires modern factories, expensive machinery, reliable power, strict food safety standards, and large sums of money tied up for long periods. You must buy huge volumes of beans, process them, store them, ship them, and wait.

That is where the problem started.

Commercial banks were simply not interested.

From their point of view, cocoa processing was risky. Global prices go up and down. Power costs are high. Export markets are unpredictable. And repayments take many years. For ordinary banks, it did not look attractive.

So even though the opportunity was huge, the financing refused to come.

That is when development finance stepped in.

Institutions like the International Finance Corporation (IFC), Afreximbank, and other development-focused lenders provided long-term loans, guarantees, and technical support to major processors such as Cargill and Barry Callebaut, as well as local value-adding firms. This type of financing made it possible to build and expand large cocoa grinding plants in Tema and Takoradi.

And it worked.

Today, Ghana processes more than 40 percent of its cocoa locally; more than double what it did three decades ago. Thousands of skilled jobs have been created. Export earnings have grown. And Ghana now earns far more from the same cocoa it has always produced.

That change did not come from ordinary banking.

It came from development finance.

And that is why Development Finance Institutions, or DFIs, matter.

So, what exactly is development finance?

In simple terms, development finance is money that is not chasing quick profits. It is money meant to build economies.

It is the kind of financing used for things like power plants, factories, transport systems, farms, and industries that take years to mature but shape a country for decades. Unlike normal commercial loans, development finance is designed around national priorities; jobs, industry, food security, exports, and resilience.

Where private investors often want fast returns and low risk, development finance is willing to be patient. Its purpose is not just to earn interest, but to help entire sectors stand on their feet so that private capital can later come in with confidence.

Put simply, development finance is not thinking about the next quarter.

It is thinking about the next generation.

This is why it supports projects that create jobs, build industries, expand exports, stabilise energy and food supply, and strengthen the economy as a whole; things that commercial banks struggle to finance because they take too long, carry higher risks, and serve national goals before private profit.

A commercial bank may want its money back in three to five years.

Development finance can wait ten, fifteen, even twenty years because the real return is economic growth.

Who provides this kind of financing?

Development finance is provided by DFIs such as the World Bank, the African Development Bank, the IFC, Afreximbank, and Ghana’s own Development Bank Ghana (DBG).

Their role is not to replace commercial banks.

Their role is to make banking possible where it would otherwise not exist.

They do this by providing long-term funding, offering guarantees, taking early risks, and supporting new or difficult industries. In effect, DFIs go first so others feel safe to follow.

That is exactly what happened in Ghana’s cocoa sector.

Why does Ghana need DFIs so badly?

Because Ghana does not lack ideas.

It lacks patient capital.

Farming, manufacturing, housing, renewable energy, and industrial processing all take time. They need long repayment periods, stable financing, technical support, and affordable capital. Most commercial banks simply cannot wait that long.

Without development finance, farmers remain small, factories fail to scale, power projects stall, and SMEs stay stuck.

DFIs step into that gap. They fund the things that allow an economy to grow.

In fact, many industries we now take for granted only exist because development finance helped them at the beginning. Cocoa processing, solar energy, SME lending, and affordable housing were all once seen as too risky or unattractive. DFIs helped prove they could work. Once the risks reduced, commercial banks followed.

That is how economies are built.

And why does all this matter to the ordinary Ghanaian?

Because whenever a cocoa processor expands, a farmer gets long-term credit, a factory upgrades its machines, a solar company scales up, or an industrial park is built, development finance is usually somewhere behind it.

You may never see it.

But you feel it in jobs, incomes, exports, power supply, and prices.

Looking ahead, Ghana now needs development finance most urgently in three areas:

• Agro-processing and food security
• Clean energy and power infrastructure
• Affordable housing and urban development

These projects are too big, too slow, and too risky for normal banking.

But they are exactly what development finance was designed for.

Ghana’s ambitions industrialization, green growth, food security, climate resilience cannot be funded by ordinary banking alone.

They require development finance.

That is why DFIs matter.

They are the quiet engine of Ghana’s future

They do not appear on billboards.

They are rarely mentioned in speeches.

But they are quietly laying the financial foundations of tomorrow’s Ghana.

Next in the series we discuss Blended Finance and How Risk Is Shared.

Until then… Dear readers, what do you know about Development Finance today?

 

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