In a very ironic situation, Ghanaian businesses, especially Small and Medium Enterprises (SMEs), continue to cry out for affordable capital, despite the country sitting on an enormous GH₵86 billion ($7.9 billion) in pension funds.
In other words, while the country is sitting on enormous capital, businesses that need long-term patient capital are starving and gasping for breath to survive.
This is the observation of the Chairman of the Economic Affairs Committee of the Association of Ghana Industries (AGI), Eric Defor, who believes there is an urgent need for the country to refocus its pension funds.
The Pension Fund Paradox
Across the world, pension funds are lifelines for economies. They provide long-term, patient capital for industries to expand and innovate. In developed nations, they are the backbone of growth, channeling billions into infrastructure, manufacturing, and high-potential ventures.
Sadly, in Ghana, the story is different. A staggering portion of pension funds is lent back to the government rather than being deployed to productive sectors.
In an interview monitored by The High Street Journal, Eric Defor bemoaned that, “The pension funds are sitting on 86 billion Ghana cedis, which amounts to $7.9 billion at today’s rates. What are we doing with that money in our economy? We are sitting and lending the money to the government.”
He added, “It is not going into the productive sectors, and we are struggling to sustain even the achievements we’ve gained from monetary actions in our economy.
Regulation vs. Reality
Eric Defor recounts that the National Pensions Regulatory Authority (NPRA) amended its rules to allow up to 25% of pension funds to be invested in alternative areas such as infrastructure, private equity, and SME financing.
Unfortunately, the results are underwhelming. In 2024, only 0.58% of these funds, less than 1%, actually went into such investments. This stark underutilization leaves entrepreneurs sidelined, struggling to access affordable capital for expansion and innovation.
“The National Pension Regulatory Authority amended its regulations to allow pension funds to invest up to 25% of their funds in alternative investments other than treasury bills and government bonds. In 2024, only 0.58%, that is less than 1% of those funds, were invested in alternative areas,” he bemoaned.
SMEs: The Risk Nobody Wants to Take
Many analysts and economists tout SMEs as the engine of job creation in Ghana. But banks and fund managers often deem them “too risky.”
The high cost of borrowing, sometimes reaching over 30%, discourages entrepreneurship and forces many businesses to remain stagnant or fold. This explains why pension fund managers are unwilling to lend or support SMEs since there is the fear of losing the fund.
Eric Defor is therefore urging that the government must step in to de-risk these ventures. “One of the risks is the cost of capital,” he insists, noting that without intervention, SMEs will continue to suffocate.
Capital Exists, Application is the Problem
For the chairman of the Economic Affairs Committee of AGI, there is enough capital in Ghana to support the productive sectors of the economy. The challenge, he observes, is that the country is not applying it to the appropriate areas that we need to invest in.
Ghana’s challenge is not merely about scarcity of resources but rather about misallocation.
By funneling billions into government debt instead of real business activity, the country risks eroding hard-won monetary stability while neglecting its industrial growth ambitions.
The Call to Refocus
To take advantage of the billions, Eric Defor maintains Ghana must urgently refocus pension funds toward productive investments. With GH₵86 billion sitting idle, the country cannot afford to watch its indigenous businesses collapse under the weight of expensive credit and lack of support.
Pension funds represent an opportunity to fuel growth, create jobs, and reduce overreliance on external borrowing.
The question is whether Ghana has the political will and regulatory courage to unlock this potential.
