What Are Repurchase Agreements?
Repurchase agreements (repos) are contracts where a company agrees to buy back securities or assets from investors at a predetermined price and date. This provides investors with a guaranteed exit strategy while giving companies flexible financing options.
In Ghana's investment landscape, repurchase agreements offer lower-risk opportunities with defined returns and exit timelines, making them attractive for conservative investors.
How You Earn Returns
Fixed Repurchase Price
Company agrees to repurchase at predetermined price, ensuring known returns.
Interest Component
Repurchase price includes agreed interest or premium over original price.
Example Return Calculation
Invest GHS 100,000 with 2-year repurchase agreement at 15% premium. Company buys back investment for GHS 115,000 after 2 years, providing GHS 15,000 profit (15% total return, 7.5% annualized).
Key Features
Guaranteed Exit
Company legally obligated to repurchase at set date
Predictable Returns
Known returns from the beginning of investment
Collateral Protection
Assets or securities serve as collateral
Short to Medium Term
Typically 6 months to 3 year durations
Common Applications
Working Capital
Short-term financing for inventory or operations
Project Finance
Specific project funding with defined completion
Bridge Financing
Temporary funding until longer-term financing secured
ESOP Financing
Employee stock ownership plan funding
Risks to Consider
Counterparty Risk
Company may default on repurchase obligation.
Collateral Depreciation
Value of collateral may decline below repurchase price.
Liquidity Risk
Difficulty selling position before repurchase date.
Quick Facts
Legal Framework
Repurchase agreements in Ghana are governed by:
- • Companies Act, 2019 (Act 992)
- • Securities Industry Act, 2016
- • Contract Act, 1960
- • Borrowers and Lenders Act, 2020