U.S. Loan Guarantee Helps Ghana Port Company Acquire Forklifts
FrontLines - June 2009
By Nancy Leahy
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A Safebond-owned top-lifter loads a container.
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In 2005, Safebond was a
two-year-old port services company
in Ghana that had yet to
make a name for itself in the
industry. With its business on
the line, Safebond finally got its
big break when the government
of Ghana awarded the start-up
company a contract to provide
services for the Ghana Ports
and Harbors Authority.
Under the contract, Safebond
was responsible for loading,
offloading, and storing cargo
coming in and out of Ghana’s
busy port in Tema.
For such a young company,
the contract was a coup.
However, one significant challenge
remained: Safebond
needed forklifts to move the
cargo on and off ships. To buy
the six forklifts required for the
job, the company needed to
secure a loan for $600,000.
“As a start-up, it was difficult
to get the loan we needed,” said
Safebond Director of Finance
Isaac Kodom. “We didn’t have
the financials to support our loan
application unless we could find
a company to guarantee our
application.”
Faced with this seemingly
impossible situation, Safebond
ultimately approached Ecobank
Ghana Ltd. for a loan. Ecobank
had recently entered into an
agreement with USAID that
allowed the bank to issue credit
to borrowers that might otherwise
be deemed too risky.
The agreement between
USAID and Ecobank was a
credit guarantee program
through a public-private partnership
mechanism called the
Development Credit Authority.
Credit guarantees spread the risk
of a loan default among partner
institutions. The partnership
between USAID and Ecobank
allowed Safebond to get financing
without the financial history
that a loan application would
normally require.
Credit guarantees can introduce
banks to new or underserved sectors by mitigating the risk of
issuing loans by up to 50 percent.
Once the guarantee expires, banks
are familiar with new borrowers,
and these borrowers, in turn, have
proven their creditworthiness. As
a result of these guarantees, lending
does not rely on external
donor funding, since local financial
institutions have realized the
profitability of these underserved
borrowers and continue to lend to
them without the credit guarantee.
Because of the guaranteed
$600,000 loan from Ecobank,
Safebond has been able to
establish a credit history and obtain subsequent financing
both from Ecobank and from
other financial institutions without
a USAID guarantee. The
company has grown from a
small start-up into a company
worth $20 million with 800 permanent
employees, and has
expanded operations in Ghana’s
other port in Takoradi.
Safebond is also working in
Liberia, and plans to expand to
Kenya and Angola.
Without the initial financing
from Ecobank, says Kodom, “I
don’t know what would have
happened.”
★
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