Towards The Promotion of Small And Medium- Sized Enterprises: A Study on Challenges of Financing in Ghana

ABSTRACT

Small and Medium-sized Enterprises (SMEs) are largely touted as the means through which a country’s development goals and objectives can be realized. The prospects of SMEs include employment opportunities, sources of income, sources of government revenue. In spite of the prospects that these enterprises offer to the development of any economy, there are hindrances confronting the development and growth of the sector. Literature on SMEs financing illustrates that there is a knowledge gap of the challenges of SME financing in Ghana (Beck and Cull, 2014; Osei-Assibey, 2014). In an effort to substantiate the incidence of the situation, the research attempted to examine the challenges of financing that are faced by SMEs within the Accra metropolis. The case study approach was employed to carry out the research. The study depended on both primary and secondary sources. Data were gathered through interviews with operators of SMEs; Microfinance and Small Loans Centre (MASLOC); and National Board for Small Scale Industries (NBSSI) using interview guide. The study unveiled the sources of capital by SMEs as well as the conditions that facilitated and hindered SMEs’ access to credit facilities. The study found that the sources of funding for SMEs within the study area included personal savings, retained profits, financial support from family and friends, loans from universal banks, loans from non-bank financial institutions, money lenders as well as government support. It was also found that SMEs’ access to credit was influenced by characteristics of the firm as well as that of owners and managers. The study revealed that information asymmetries, poor credit experience, high lending rates, lack of collateral requirement, and lack of personal guarantor were the barriers that hindered the improvement of access to finance by SMEs in the study area.