Absa Bank Ghana urges recycling startups to begin with smaller-scale projects and expand gradually to attract investor confidence and financing. Kobla Nyaletey, Executive Director for Retail and Business Banking at Absa Bank Ghana, highlighted this strategy at the Landfills2Landmarks Summit. This approach is crucial given Ghana's challenging macroeconomic conditions.
Ghana's recent high interest rates have made lending to businesses difficult. Financial institutions invested capital in safer alternatives, not real-sector enterprises. The cost of capital in Ghana two years ago was about 25% to 30%. This level is too expensive for many businesses to sustain operations.
This situation fits into Ghana's broader economic trend of tight monetary policy. The Bank of Ghana has maintained high policy rates to combat inflation. This has led to increased borrowing costs for businesses across all sectors. The high cost of capital has squeezed many small and medium-sized enterprises (SMEs).
Mr. Nyaletey stated that recycling is a relatively new industry in Ghana. Therefore, project promoters must work hard to educate potential investors and financiers. They need to explain the opportunities and risks involved in this emerging sector. Additionally, businesses in unfamiliar sectors must devote time to engaging financial institutions.
Understanding the industry and its long-term potential helps secure funding. Mr. Nyaletey encouraged entrepreneurs to adopt a phased growth strategy. This means not seeking large sums at the initial stage. Smaller projects are easier for banks to support due to lower financial risks.
For example, Absa Bank can lend up to GHS 2 million without collateral quickly. A project worth about GHS 13.5 million (equivalent to 1 million US dollars) might receive funding. However, projects requiring significantly larger investments, such as GHS 270 million (20 million US dollars), attract more rigorous due diligence processes. This ensures banks thoroughly assess higher risks.
The implications for Ghana's recycling sector are significant. Startups need to focus on building credibility step-by-step. They must strengthen investor understanding and confidence over time. This approach could unlock much-needed financing for an industry important for environmental sustainability.
Policymakers and market participants will watch how this advice impacts investment flows. Success will depend on the ability of startups to create viable, smaller projects. These projects must also demonstrate clear pathways to larger, more impactful ventures.