The Venture Capital Trust Fund (VCTF) is a scheme established by the Government of Ghana through Parliamentary Act 680 passed in November 2004. The object of the Act is to establish a venture capital trust fund with the aim of providing investment capital to small and medium scale enterprises. In addition the Act provides for the development and promotion of VC financing in the country. A greater percentage of monies from the Trust Fund will be invested in priority sectors of the economy identified from time to time in accordance with the Government's growth strategy.

Currently the only source of funding for the VCTF is an amount of money equivalent to twenty-five percent (25%) of the proceeds of the National Reconstruction Levy (RCL) starting from 2003 financial year; however since the RCL is being phased out by the end of the 2007 Financial Year, other sources of funding to anchor the scheme to are being explored. These sources include: such other monies as the Minister with the approval of Parliament may determine; fees and other monies earned by the Trust Fund in pursuance of its functions under this Act; money that accrues to the Trust Fund from investment made by the Board; grants, donations, gifts, and other voluntary contributions to the Trust Fund; and other moneys or property that may in any manner become lawfully payable and vested in the Board for the Trust Fund .

The SME sector constitutes in excess of 90% of the economy of the country. The need to provide secured source of financing for this sector cannot be over emphasized. SMEs, if properly structured and capitalized have the potential to grow and spearhead accelerated growth of this economy into a middle income status. Unfortunately since there is a dearth of long term investment funds for SMEs (as a consequence of the banks and securities markets shying away from the high risk investments in these sectors), it has became imperative for the Government to set up a scheme that will provide long term funding for the high risk investment needs of the SME sector. Such support to the business sector is in consonance with the recognition that the private sector is the engine of growth of the economy and the policy to promote and support them, is to engage the private sector as an equal partner to help government achieve the country?s developmental goals.

The functions of the VCTF are basically two: The provision of credit and equity financing to eligible venture capital financing companies to support small and medium-scale enterprises which qualify for equity, quasi-equity and credit financing; and The provision of monies to support other activities and programs for the development and promotion of venture capital financing in the country.

The VCTF is managed by a 9-member Board of Trustees appointed by the President in consultation with the Council of State. The Board members are persons of integrity, knowledge, expertise and experience in the venture capital industry. The day-to-day administration of the Trust Fund is undertaken by a Secretariat that is headed by an Administrator who is also a full member of the Board.

Any individual or business entity that needs financing to establish or run a business.

Funds are accessed through the Venture Capital Financing Companies (VCFC) and not directly from the VCTF.

YES. Though the scheme is funded by the Government, monies invested with companies have to be paid back to VCTF to be recycled to other investee companies. For credit investments, the credit has to be repaid. If it is equity there would come a time of exit, when the VCTF investment will be liquidated by selling the VCTF equity holdings back to the original owners or other partners. For sure this is not free money!

Term of investment will vary from one entity to another but will definitely not be in perpetuity.

NO. The money of the Venture capital scheme is available to qualifying Ghanaian businesses.

NO. It is not a bank. It is a trust fund that will provide monies through non-bank finance companies to qualifying businesses.

It varies depending on the documentation, investigations and the type of business that is applying for the funds.

NO. The Government and Parliament will always provide another source of funding to replenish the coffers of the scheme.

Proof of Tax Clearance Certificate, an application and a comprehensive business plan will be the basic requirements in addition to any other information required by the finance company.

Not necessarily. The benefits of the trust fund is not only money but also the provision of Technical Assistance. Depending on the expertise available in the potential investee company, that company may be provided with management and or other technical assistance to boost the company?s capacity to utilize the funds as intended. The investment package that may be administered to the beneficiary SME, credit or equity, may or may not affect the ownership structure.

NO. Generally the fund is available to all sectors of the economy but priority would be given to certain sectors of the economy from time to time, in line with the Government?s economic growth policies and objectives. Currently the priority sectors identified are the Pharmaceutical, ICT, Agro-processing and Tourism industries. These priority sectors may benefit from about 55% of the total funds available. The reminder of the funds are available to other viable business opportunities.

Introduction
Financing startup, existing and expanding enterprises has been a major concern for entrepreneurs who have the urge to push their businesses to a higher level.
Provision of financing to businesses is critical for the development of SMEs.
The Venture Capital Trust Fund (VCTF) seeks to provide fund to SME’s. There are sectors of the economy that receive priority in terms of the provision of funds. Currently the priority sectors are :

• ICT
  
• Agriculture
  
• Tourism
  
• Pharmaceutical
  

However, other sectors of the economy can access the fund, depending on the viability of the project
What Company Gets Funding?

• Every or any company can apply for funding.
  

What to submit
The funds basic requirements for accessing the fund are:
· An application letter
· A comprehensive business plan
· A tax clearance certificate (for existing business)
· Plus any additional document that may be requested
Where to submit proposal

The SME submits above basic requirements to one of the Fund Managers of the Venture Capital Financing Companies setup fund investment.

SME’s seeking funding will submit the basic requirements stated to the respective Venture Capital Financing Companies

The Business Plan
One of the requirements in the accessing of the fund is the submission of the business Plan. The object of the business plan is for the SME to provide sufficient information (management, marketing, financial , etc.) to the financing company so as to enable them make informed funding decisions. Among others the format of the comprehensive business plan should include:
· The background of the company
o The corporate structure
o The Board of Directors
o The Management
· The project concept
· The Capital Outlay : Equity/debit contribution
· The product or services - Description
· The marketing plan
· The industry analysis
· The financial statements, ratios and Sensitivity analysis
· The Economic and Social impact
· Risk analysis and Mitigation plan
· Exit strategy, etc
Who are the Venture Capital Financing Companies?
VCTF has partnered with some private financial and non financial institutions in the formation of Venture Capital Financing companies (VCFC) for the development of venture financing in the country and the disbursement of the VCTF fund’s to SMEs..
Currently venture Financing companies established and running include
· Activity Venture Finance Company
· Bedrock Venture Capital Finance Company
· Ghana Growth Venture Finance Company.
Stages of Applications Review

Submitted Application (SME’s) applications will go through the following stages
· Preliminary review state
· Desktop review of business plan
· Due diligence state
· Final approval by investment committees

Can one access funds directly from the VCTF?

Accessing funds is through a VCFC which has received funding from the Trust Fund
A Venture Capital Financing Company, VCFC, qualifies to apply for funding from the Trust Fund. SME’s will submit request for funding by providing the basic requirements to the VCFC, who after vetting will offer appropriate financing to the applicant..
How does one qualify to become a VCFC?
A Venture Capital Financing Company, VCFC, qualifies to apply for funding from the Trust Fund if

• Is incorporated in Ghana as a limited liability company under companies Code, 1963 (Act 179)
  

• Has as its sole authorized business, the business of assisting the development of small business by making equity and quasi-equity investments and providing business and managerial expertise to small business in which it has made or propose to make an eligible investment.
  
• Is managed by an investment adviser licensed by the Securities and Exchange Commission who is in good standing.
  
• Has met the minimum equity capital requirements prescribed by regulations made under this Act 680.
  
• Has in place adequate governance, internal control and monitoring procedures for selection of investment projects for monitoring and management of these projects
  

Can an SME do multiple placements of applications in term of accessing fund at various VCFC that have received funding from the VCTF?
An SME may place its applications at all or some of the VCFC for evaluation of business plan in a way of broading its chances getting of Venture financing. However VCTF has a depository database of beneficiaries of venture capital financing to red-flag. beneficiaries of financing from one venture capital fund from financing from another.
What Assistance will VCTF give to beneficiaries of venture Funds?

Technical support will be provided to qualified investee company to build or improve capacity

Technical assistance will also be provided to needy investee to improve their chances of profitability

Who bears the cost of Technical Assistance?

VCTF will share the cost of providing TA with the beneficiary enterprises.
Leveraging Venture Capital Finance Fund
VCTF has formed partnerships with private finance companies in establishing Venture financing companies. VCTF has leverage the fund to increase the fund available to SMEs. With the new partnership bringing in US$14m. Thus a colossal sum of US$24m is available for funding to SMEs. Two other partnerships to be formed will bring an additional US$20m for financing of SMEs using only $10 million of VCTF’s money.
Thus a total venture capital fund of US$44m will be made available to finance and develop Small and Medium Enterprises in the country to create jobs, increase employment and reduce poverty from an initial seed money of US$20m.

New Venture Capital Firms Commence Operations
Two new Venture Capital Finance Companies, VCFCs, namely Bedrock Venture Capital Finance Company and Ghana Growth Venture Finance Company, will commence operations on March 1, 2007. This is part of the VCTF initiatives in fulfilling the objectives of the VCTF in developing venture capital financing industry in the country. Already the pioneer firm, Activity Venture Finance Company commenced operations in November 2006.
It is hoped that two more venture capital finance companies, also partnership between VCTF and financial institutions are likely to be formed before the middle of 2007.
Does it Cost To Submit Proposal?
It does not initially cost any SME when submitting its applications for funding. However at an advance stage of the processing when funding is approved, the SME’s will pay
Commitment fee of 1.5% of the amount approved before disbursement
What If Information Is Inadequate?

The Fund Manager will request for all relevant information during the review process. SME may be invited for clarification or/and submission of additional information if and when appropriate.
How much funds can an SME access?
The amount to be accessed from the fund depends largely on the SME’s project in the agreed financial proposal. However the accessible funds range from ¢250million to ¢5 billion

How Is Disbursement Done?
That varies according to the facility granted
What equity contribution does one require to access fund?
A minimum 51% equity is preferred.
Any collateral?
The VCTF does not require any collateral for accessing and disbursing the fund. What it needs is a good viable project that is managed by a competent management team.
What Is The Exit Strategy?

An exist strategy would be mutually agreed between Finance company and the SME.

 

Is the Activity Venture Finance Company a bank?

No, it is not a bank. It is a non-bank finance company that provides monies (equity or quasi-equity) to qualifying businesses.

Is the term of investment limited to a certain number of years?

Yes, but the term varies from one business entity to the other.
Is the fund meant to satisfy a specific group of Ghanaians?
No, funds of AVFC are available to any qualifying Ghanaian businesses.

How long does it take to benefit from the fund when you qualify or have met all the criteria?
Procedures and formalities for accessing funds will vary, but will be highly dependent on the documentation; investigations and the nature of the business applying for the funds.
Would the management and or ownership of a beneficiary SME change or be affected by accessing the fund?
Not necessarily.  The benefits of the trust fund are not limited to financial support; it also involves the extension to the SMEs of some useful Technical Assistance. Depending on the level of expertise available within the potential investee company, the company may be offered some managerial support and or other technical assistance as may be desirable to boost the company’s capacity to utilize the fund as intended.

Accordingly, the investment package that may be administered to the beneficiary SME – be it credit or equity- may or may not affect the ownership structure.

Are investments restricted to any specific sectors of the economy?
No, generally the fund is available to all sectors of the economy but priority is given to certain sectors of the economy from time to time in line with the Government’s economic growth policies and objectives.
Currently the priority sectors as identified by the fund are the Pharmaceutical, ICT, Agriculture and Tourism sectors. 
These priority sectors may benefit from about 55% of the total funds available while the remainder will be spread to cover other viable business opportunities. 

What is the ceiling per an investment?
It is up to $500,000.00 per any investment and this can be structured to suit the investee company.
What is your Interest Rate?
This is a low cost financing deal. However, the actual rate charged will be determined on a case by case basis, depending on the risk associated with the project. But for sure the rates would be far lower than those charged by banking institutions.

For further Information Contact:

The Fund Manager
Activity Venture Finance Company
6^th Floor, GCB Towers
Kwame Nkrumah Circle, Accra

ACTIVITY VENTURE FINANCE COMPANY -NEW DEAL FOR SMALL & MEDIUM- SCALE ENTERPRISES (SMEs)

BACKGROUND
The small and medium enterprise (SME) sector constitutes in excess of 90% of Ghana’s economy. The need therefore, to provide a secured source of financing for this sector cannot be over emphasized.  SMEs, if properly structured and capitalized have the potential to grow and spearhead accelerated growth of this economy into the desired middle income status. Unfortunately, since there is a dearth of long term investment funds for SMEs ( as a consequence of the banks and securities market shying away from high risk investments in these sectors), it became imperative for the Government to set up a scheme that will provide long term funds for the investment needs of the SME sector.
 

The Government thus set-up the Venture Capital Trust Fund under a Parliamentary Act, (Act 680) passed in November 2004. The object of the Act is to establish a venture capital trust fund aimed at providing low cost investment capital to small and medium scale enterprises and also help in the development and promotion of venture capital financing in the country. The foregoing is expected to enrich businesses with enough resources to create jobs and in so doing enhance Government revenues through increased tax inflows.  
 

ACTIVITY VENTURE FINANCE COMPANY (AVFC)
In order to achieve the above objective, the Venture Capital Trust Fund Act recommended the setting up of Venture Capital Financing Companies to apply for funding from the Trust Fund and in turn provide credit and/or equity financing to SMEs.
Activity Venture Finance Company is the first Venture Finance Company to satisfy all the conditions specified under section 16 of the Venture Capital Trust Fund Act 2004 (Act 680) to qualify for funding from the Trust Fund.
AVFC is a limited liability company incorporated under the companies code 1963 (Act 179) with the sole authorized business of assisting in the development of SMEs by making available for their use, equity and quasi-equity financing and providing them business and management expertise.
AVFC is owned by the Agricultural Development Bank, the Ghana Commercial Bank and the Venture Capital Trust Fund and managed by JCS Investment Limited.

The Functions of Activity Venture Finance Company
The functions of AVFC include the following:
·        Provision of credit and/or equity financing to eligible SME’s

·        Monitoring of activities of SME’s financed by Activity Venture Finance Company with the aim of improving their  profitability
·        Coordination and provision of post investment assistance to investee companies especially relating to capacity building.
·        Helping to improve standards of corporate governance, financial reporting, transparency and internal controls of investee companies
·        Assisting investee companies to develop and refine their business strategies for expansion and other strategic purpose.
 

By the above functions, AVFC is actualizing the Government’s vision of putting in place an effective mechanism for making low cost financing available to small and medium scale businesses to facilitate growth in productive sectors and subsequently create more jobs and generate wealth, which will ultimately go to replenish pool of funds available to be down-streamed to businesses for re-investment.

This definitely is a win- win cycle.

AVFC investment in businesses

Business growth

Job creation & wealth

More money for the trust fund

Increase in employment

Increase in revenue

Accessing funds from AVFC
Business entities or individuals who need financing to establish or run businesses can access funds from AVFC.  However, to enable us evaluate proposals of potential investee companies, applicants are to ensure that they submit the following:
·        An application letter
·        3 Hard copies of the business proposal
·        1 soft copy of the business proposal
·        Tax clearance certificate.

Establishment of more Venture Capital Finance Companies

As part of Venture Capital Trust Fund’s objective in developing the Venture Capital industry in the country, more venture capital finance companies are being established to facilitate  the disbursement of venture capital funds to Small and Medium Enterprises (SMEs).
 
The New  Venture Finance companies that would soon open their doors to the public are:

• Bedrock Venture Capital Finance Company, to start operations on April 15^th 2007 with total funds of $10 million (US Dollars).
  
• Gold Venture Capital Company Limited with $4 million(US Dollars) will start operations at the end of April 2007.
  
• Fidelity Fund II, a partnership between Venture Capital Trust Fund (VCTF), Social Security and National Insurance Trust (SSNIT), Fidelity, and Two Overseas Partners, will commerce operations by end of April 2007, with a total fund of $25 million(US Dollars) for disbursements to Small and Medium Enterprises (SMEs).