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1. Resource-Backed Loans in Ghana: Risks, Opportunities and Lessons

Author:
Denis Gyeyir
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Developing countries have trouble financing development mainly due to limited access to capital markets, high cost of borrowing, slow growth, or a mix of these. Countries with natural resource endowments have attempted in the last few decades to leverage these endowments to surmount those challenges. Many of their development efforts focus on closing huge infrastructure gaps. Ghana is a producer of cocoa, minerals, oil and gas—assets that have increasingly featured in the government’s infrastructure financing plans. Ghana’s infrastructure financing totaled USD 23 billion between 2007 and 2020, and annual infrastructure investment will need to reach $9.3 billion by 2030 (13.9 percent of 2019 GDP). Official development funding and private sector financing have been inadequate to meet these infrastructure needs. As a result, the Ghana Infrastructure Plan identifies Chinese infrastructural funding as a source to fill the gap. Ghana’s infrastructure financing has in part relied on leveraging its natural resources. Through resource-backed loans (RBLs), governments (directly or through state-owned companies) borrow funds and repay the loans in physical natural resources or with money from resource-related future income streams. Ghana has entered into three such RBL deals, totaling more than $5 billion, in the last two decades; all three involve Chinese state-owned enterprises as lenders.
Topic:
Natural Resources, Infrastructure, Resource-Backed Loans, and Revenue Management
Political Geography:
Africa and Ghana

2. Creating a Micro, Small, and Medium Enterprise Focused Credit Risk Database in India: An Exploratory Study

Author:
Savita Shankar
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Center for the Advanced Study of India
Abstract:
Despite being the focus of numerous policy initiatives, the credit gap of the MSME sector in India has been persistent. An investment in tapping the data being generated by lenders to build a database to inform future lending is likely to improve the quality of lending decisions over time. This, in turn, has the potential to further expand MSME loan access and reduce MSME borrowing costs. To realize this objective, a credit risk database (CRD) has been found to play a useful role in catalyzing collateral and guarantee free loans for SMEs in Japan. The availability of the OCEN network and the account aggregator framework offers an opportunity to create a CRD involving banks and NBFCs at relatively low incremental cost. The CRD’s role will be distinct from that of credit bureaus and rating agencies as it is based on financial and default data for the sector as a whole, rather than for individual entities. The main benefits of CRD include the development of credit scoring models based on nationwide data and the availability of benchmarks for different segments of the MSME sector. Additional benefits are that the credit scores from the models could be used to develop a more sophisticated pricing mechanism for guarantees and for potentially aiding MSME loan securitizations
Topic:
Microcredit, Risk, Credit, and Resource-Backed Loans
Political Geography:
India

3. Resource-Backed Loans: Pitfalls and Potentialloan

Author:
David Mihalyi, Aisha Adam, and Jyhjong Hwang
Publication Date:
02-2020
Content Type:
Special Report
Institution:
Natural Resource Governance Institute
Abstract:
Through “resource-backed loans” (RBLs) countries access finance in exchange for, or collateralized by, future streams of income from their natural resource wealth. The authors of this report reviewed countries’ past experiences with RBLs across sub-Saharan Africa and Latin America from 2004 to 2018. They identify risks and opportunities RBLs pose and provide recommendations for countries considering taking RBLs in the future. The researchers identified 52 RBLs, 30 of which were taken by countries in in sub-Saharan Africa and 22 in Latin America. They are distributed across 14 countries in the two regions. Thirty-eight were lent by Chinese policy banks, seven are from commodity traders, four are from other Chinese state-owned enterprises, one is from Korea Exim, one is from Nigeria and one is from Russia's Rosneft. Forty-three of the loans are backed by oil, six by various minerals, two by cocoa, and one by tobacco. The total loan amount represented in the dataset is $164 billion, of which $66 billion went to Africa and $98 billion to Latin America.
Topic:
Natural Resources, Finance, Resource-Backed Loans, and Revenue Management
Political Geography:
Africa, Sudan, Brazil, South America, Venezuela, Nigeria, Angola, Ghana, Ecuador, Guinea, South Sudan, and Congo