Assess the Financial Challenges that Confront Small and Medium Entities Located in Rural Areas such as the East Mamprusi Municipal Assembly of Ghana (original) (raw)
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American Journal of Industrial and Business Management, 2015
Micro, Small and Medium Scale Enterprises (MSMEs) contribute immensely to job creation, income generation and poverty reduction in emerging economies like that of Ghana. These positive contributions notwithstanding, most MSMEs in these economies have been performing poorly. This study therefore seeks to identify and analyze the challenges faced by MSMEs and proposed by appropriate measures that will enhance and sustain the vibrancy of MSMEs in order for them to perform their expected roles in the economic development process of Ghana. To be able to delve into the challenges of MSMEs in Ghana, a conceptual and theoretical framework is designed to guide the preparation of data collection instruments to suit the study. This involves a combination of survey and case study methods of data collection and analysis. The present study reveals that MSMEs are dominated by youth and female operators usually with low level of education. A further revelation is that majority of MSMEs lack qualified personnel; have poor access to credit and are usually self-financed. Based on the above, the study recommends the establishment of a common board to oversee the activities of support institutions for MSMEs. The study again proposes for the creation of MSMEs fund at all district, municipal and metropolitan areas to support MSMEs activities. Furthermore, the study is proposed for Bank of Ghana to create MSMEs bank to provide funds specifically for MSMEs development. Finally, effective implementation of the recommendation can lead to growth of MSME's sector in Kumasi metropolis and eventually results in creation of employment as well as poverty reduction. A. Kusi et al.
Financing small and medium scale enterprises in Ghana: A study of SMEs in the Techiman municipality
It is believed that access to financial resources is a major concern for small and medium enterprises. Hence, small and medium businesses face a major challenge in their quest for growth and development. The study sought to evaluate the funding arrangements available to small and medium enterprises in the Techiman municipality. A descriptive survey design was used for the study, and data were obtained from 98 operators of small and medium enterprises, using questionnaires. The study established that personal savings was the main source of start-up fund for the small and medium enterprises. Further, inadequate working capital and low patronage of services were the main challenges faced by the small and medium enterprises. In spite of the numerous sources of start-up fund available to small and medium enterprises in the Techiman municipality, these businesses principally relied on personal savings as their mainstay. Therefore, it is recommended that the Government of Ghana should encourage small and medium enterprises in the municipality to patronise more government financial schemes.
The mainstay of developing economies is the informal sector. In Ghana, most employment opportunities are largely hinged on the private sector. The contribution of this sector to Ghana’s economic growth through job creation cannot be underestimated. Globally, SMEs are noted for empowering citizens and economic growth of countries in Asia, Europe and North America. Though successive Ghanaian governments after independence in 1957 have made strenuous efforts towards reducing poverty and accelerating economic growth through formulating policies that favor SMEs, there is still a lag in knowledge regarding the presence of SMEs and level of development in rural settings in Northern Ghana. The study sought to find out if the presence of SMEs could be linked to rapid infrastructural development, whether significant number of people is gainfully employed in the sector, and if SMEs have attracted the needed financial institutions through increased in credit facilities. By extension we also explored inherent challenges confronting SMEs and provided recommendations for entrepreneurs and policy makers to improve the sector in Ghana. The study employed a descriptive cross-sectional study design and data was collected between April and August, 2013. Simple random sampling was used to select One hundred and sixty (160) SMEs respondents at 92% confidence interval (C.I) at 0.08 error margin. To achieve the set objective, the study employed both primary (questionnaires and observation) and secondary (documented evidence, internets materials etc) data collection techniques. The study revealed that SMEs do not play significant role in employing youth in the District though most SMEs rely on free family labour to minimize cost. Some infrastructural development like roads constructions could not be associated with the presence of SMEs. 15% of respondents attributed SMEs presence to housing and electricity extension to selected areas. Onion cultivation dominated other crops production in the area and generated appreciable profits. Limited access to credit, Infrastructural development deficits such as decent roads, Onions storage facilities and irrigation dams for all year round cultivation were among key challenges outline as hindering SMEs development in the area. It is recommended that, entrepreneurs should be encouraged to form cooperatives to enable them access bank credits since most financial institutions hold the view that, group lending minimizes the risk of loan default. Also, occasional capacity training sessions should be organized for SMEs on basic records keeping and entrepreneurial management skills.
2013
This study investigated the constraints facing new and existing Small and Medium-Scale Enterprises (SMEs) in Greater Accra Region of Ghana. The study used semi-structured questionnaires to collect data from management members of 30 new SMEs and 40 existing SMEs. Descriptive statistics such as pie chart, bar chart, frequency tables and percentages where used to present the results o f the data. The study identified high cost of renting premises, as the commonest constraint facing new SMEs. Meanwhile, low income is the commonest constriant that affects existing SMEs. This study recommends that government should regulate the amount of rent charged by shop owners. New SMEs should contact existing SMEs so as to adopt the coping strategies that they are using to succeed in spite of the numerous constraints identified. Additionally, the formation of business associations should be intensifi ed to help give credit to the member SMEs to expand their business .
Small enterprises and banking in rural Ghana
International Journal of Research In Business and Social Science, 2020
This study aim is to explore owners of small enterprises' appreciation of bank’s role in developing their businesses and the challenges that come along in accessing banking services in the context of Sefwi-Bekwai which is a rural community. Questionnaires were used to solicit information from the owners while descriptive statistics aided the data analysis. The study found that the main source of start-up capital is the owner’s funds whiles saving was recorded as the key benefit of banking. It further revealed that the high-interest rate charged was a barrier in accessing loans and the effect of bank relations was sound financial management for the SME’s operations. The paper suggests the need for small enterprise owners in the rural communities to form an association for their benefit in terms of taking advantage of group lending and demanding support and relief from relevant authorities. Improved institutional support would also give small enterprises better access to the infor...
The backbone of every economy is the private informal sector (SMEs) and most employment in Ghana largely focuses on small and medium–scale enterprises (SMEs). Hence, the contributions the sector makes to economic growth and development through job creation cannot be overemphasized. However, SMEs are almost entirely expelled from the formal financial sector in Ghana. They face difficulties in accessing financial opportunities, enterprise development skills; face unfavourable regulatory bottlenecks and inappropriate market structures and these therefore has poses serious restriction to their growth and development in the economy. More so, when microfinance is properly harness can make significant contributions to economic growth and development because it promotes higher investment leading to economic empowerment, which in turn promotes confidence, self esteem and build capacities, particularly for the vulnerable. In other words it creates access to productive capital for the poor and reduces poverty. This research was carried out to examine the financial accessibility and the roles it play to the SMEs sectors in the WA municipality in the Upper West Region of Ghana. The study objective was to examine the extent to which microfinance is accessible to SMEs and the roles it has played in the SME sectors and the impacts on poverty reduction in Ghana. The whole research covered one hundred and thirty (130) SMEs and ten (10) financial institutions. The needed data for the study were generated from both primary and secondary sources. The research tools used to generate the primary data include informal conversations, questionnaires, personal and key informant interviews. However secondary data were extracted from books, articles, journals, presentation papers and news publications. Mixed model research approach was used to analyze the data-qualitative and quantitative. For the quantitative, SPSS was use in making the analysis and the drawing of the tables and charts. Critical analyses were made for the qualitative aspect. The findings of the study revealed that financial accessibility plays imperative roles in the SMEs sector and poverty reduction because it improves SMEs performance, creates employment, promotes growth, expansion, improvement and development of businesses. It further enhances income and facilitates the affordability of some basic necessities of life such as; education, shelter, health, good nutrition, clothing, potable drinking water and other essential requirements of life like vehicles, motorcycles, bicycles, decent houses and marriage contractions. These have consequently improved the standard of living of many which is translated as poverty reduction, since capacities have been built; self esteems and confidence among the vulnerable in society have been established allowing participation in decision making. Accordingly, the research also came out with some major barriers to the rapid development of the SMEs sector as the poor access to both debt and equity financing, principally debt financing and most particularly credit access. This poor access is as a result of the criteria for selection to credit facilities, processes, procedures, requirements, and demands of unnecessary documents (business plans, utility bills etc), guarantors and collateral demands and the high cost of borrowing and rigidities interest rates. It also became clear that there is poor access to other support systems such as; training, workshops, personal advice, management and low level of technological skill and developments due to the fact that it is not available to most needed people. It also became evident that policies/rules/regulations frameworks are other constraints to SMEs growth in the municipality because of the high and inproportionate apportionment of premiums, long and bureaucratic processes and procedures and harassments from tax collectors. It was therefore noted that microfinance beneficiaries were the economically active poor engaged in all kinds of businesses, but majority were women because they are well-known for vulnerability, willingness and prompt repayment of loans and also use the financial support for the intended purposes. Therefore, it is generally suggested that government and policymakers interested in the private sector development especially SMEs to lead the wealth creation effort which will enable Ghana attain the middle income status by 2015 must critically look into these problems with particular attention to financial accessibility principally credit facilities, market structures both local and international, policies/rules/regulations, support systems and linkages of SMEs to other bigger firms with seriousness.
Performance and Constraints of Small Scale Enterprises in the Accra Metropolitan Area of Ghana
Small Scale Enterprises play a crucial role in the development of entrepreneurial capabilities and indigenous technology which generate employment. Promotion of such enterprises in developing economies like Ghana is of paramount importance as it brings about a great distribution of benefits. The study seeks to quantify the determinants of the factors influencing performance of small scale enterprises in Accra Metropolitan Area of Ghana. Kendall's coefficient of concordance was used to test the agreement between the ranked constraints of the small scale enterprises in relation to performance. The study uses structured questionnaire to interview 150 small scale entrepreneurs in Accra Metropolitan Area (AMA). Data collected was analyzed using Statistical Package for Social Science (SPSS) and Econometric views (E-views). Results of the analysis indicate that age of entrepreneur is the most influential determinant of performance of small scale enterprises. The Kendall's coefficient of concordance indicates that there is 91 percent agreement between the respondents in the ranking of the constraints in relation to performance. High cost of borrowing is the most important constraint faced by the small scale entrepreneurs. Based on the results, we recommend a flexible policy geared towards helping young entrepreneurs, as well as reducing the high interest charges on loans.
Key Success Factors of Small and Medium Scale Enterprises: A Ghanaian Perspective
The International Journal of Business & Management, 2020
Introduction Earlier research documented the role of Small and Medium Enterprises (SMEs) in a country's economy. Schröder and Rodermund (2006) stated that the performance of SMEs is related to the wealth of a nation and growth of economies. SMEs are simpler with centralized decision-making structures with short-term planning as opposed to larger firms (Rohde, 2004). The SME sector determines whether a nation is successful or not with regards to job creation (Wiese, 2014). SMEs play major roles in economic development in emerging countries (Kongolo, 2010). SMEs are of paramount importance all over the world in terms of job creation (Amoah-Mensah, 2013). Eventually, SME sector influences a nation's economic development. Amidst the significance of SMEs, they encounter a number of problems, which are caused by complex and interwoven factors. In Ghana, athird out of five SMEs fail in the first couple of months (Mensah,2004).Empirical studies show that major constraints to SMEs' expansion include the following: lack of access to finance, labour and management, low demand for output, technology, raw materials, infrastructure, marketing and business environment problems (Kayanula and Quartey, 2000). Given the significant role that SMEs play within the national economy as stated by (Nieman, 2006; Schröder and Rodermund, 2006; Wiese, 2014), it is important that the necessary policy attention is given to them to ensure that the sector overcomes the several challenges they are exposed to. Small enterprises are a major source of livelihood for most people in the developing world. Their ability to grow is however, undermined by credit constraints (Domeher et al., 2013). Research on SMEs in Ghana cuts across a wide spectrum, with some researchers for example (Mensah, 2004; Adomako-Ansah, 2012; Nkuah et al, 2013)investigating financing issues whilst others for example(Adom, 2015) have also looked at SMEs from the perspective of gender. Other researchers focused on growth and performance of SMEs for example (Alhassan et al., 2016). Admittedly there are some studies for example (Alimo, 2015) on key success and failure factors on SMEs. Empirical research provides evidence of how previous studies have focused on individual sectors such as construction, tourism and garment industry. The Ghana Banking Survey (GBS, 2016) identified that in Ghana, the services sector including restaurants, hotels, business and transport form the majority of SMEs. The industry part includes electricity, water and sewerage, mining, manufacturing and construction. The services sector remains the largest in terms of contribution to GDP with a GDP increase from (51.95%) in 2014 to (54.4%) in 2015; Industry (25.3%) and agriculture (20.3%) by year end 2015 (GBS, 2016). Generally, the GDP growth rate has fallen consistently from (9.3%) in 2012 to (3.9%) in 2015(GBS, 2016). Infrastructural and capital investment by government instead of consumption and the energy crisis saga resulted in a fall of GDP over the last few years (GBS, 2016).