A new financial engineering scheme to help project owners in the various sectors of the economy to raise adequate funding to undertake development projects in the country has been introduced.
Under the scheme, projects owners, particularly those in the construction sector, can access over 50 million-dollar collateral to enable them secure loans from local banks for the execution of their projects.
This means project owners will now not have the burden of providing landed property to banks to be able to access loans from banks to undertake their project.
The scheme, being introduced into the country by Eclipse Collateral Management and Advisory Services, is in partnership with a TUE Capital, an investment firm based in Malaysia.
Managing Director of Eclipse Collateral Management and Advisory Services, Kafui Amegah, told journalist the scheme not only help project owners to raise funds but also give them the chance to earn interest on the said cash collateral.
Once the cash is disbursed, it is put in a fix deposit and the certificate that is issued given to the project owners to enable them secure loans from their local banks, he said.
Interest accruing from the fixed deposit, he indicated, will be shared between Eclipse Collateral, the financier and project owner at the rate of 10%, 49% and 40% respectively.
“So you realize that in this model you’re helping contractors to pay part of their interest,” he said, adding “the 41 percent that the contractor gets does not go to him in the form of interest; it goes to pay part of the interest on the local loan that he has taken”.
He added: “Here we are telling the contractors that you get the banks working for you instead of you working for the bank; where the banks are paying you interest and you’re using the same interest to pay the interest on the local loan”.
Another advantage of the scheme, he said is the fact that once a project finished “the certificate is raised and then the certificate goes to the bank. If it is going to take government 10 years to pay, we don’t have a problem. So long as government has declared his intention to pay, the project owner has the ability to utilize our funds to undertake more project”.
Mr. Amegah noted the new financial engineering would help the country because the government can now undertake several infrastructure projects without thinking about funding.
“Our facility is going to help government to undertake infrastructural development without stress,” he said
Already, Mr. Amegah said Eclipse Collateral has had positive discussions with GREDA, Association of Building Contractors among other stakeholders to pitch the idea of the new financing scheme to them.
He said they were also arranging to engage government on the new collateral system, noting have engaging project owners who need the funds, adding “once we are able to get those who will require funding” the scheme will start receiving applications and disbursement.
How does it work?
For a project to qualify under the scheme, the project owner must have a registered company as per the laws of Ghana and must have a project, which should be of a commercial nature.
“We will look at how viable, sustainable the project is and how it can create social impact for us to support it,” Mr. Amegah explained.
Once an application is approved, it takes between three to six months for the cash collateral to be raised, he said.
He explained that the disbursed monies “are either fixed into Government of Ghana bond or with the banks which is also going to give us annual returns on the money.”
In order to avoid mismanagement of funds, Eclipse Collateral ensures strict monitoring of the projects under the scheme from start to completion, adding the funds are disbursed in tranches per the project phases.
“What we do here is that we monitor the project to make sure that the project hits its final execution,” he said.