Relationship between Determinants of Financial Assistance and Credit Accessibility of Small and Medium-Enterprises (SME's): A Case Study of SME's in Takoradi Metropolis in the Western Region of Ghana (original) (raw)
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Socio-Economic Determinants of Small and Medium Enterprises’ (Smes) Access to Credit
A review of the literature dealing with financing small and medium-scale enterprises (SMEs) indicates there is a significant gap in knowledge of the determinants of access to finance by the SMEs in Ghana. Therefore, this study examined the socio-economic factors that determine access to bank finance by SMEs in Tamale, Ghana. The population for the study was members Project Officer of macrofinance and small loan centre (MASLOC) .The results indicated that, the number of employees, experience in credit use, number of fixed assets possessed, attitude towards risk, business size, form of business and sector of business in the economy are the critical success factors in accessing bank finance. The study also identified Management expertise, high default rate and monitoring as the challenges banks faced in giving credit to SMEs. In terms of policy, the findings of this study will provide banks, training institutions and policy makers with new insights on investigation of loan evaluation process, tailoring new training programmes for entrepreneurs and developing relationships with business associations.
A review of the literature dealing with financing small and medium-scale enterprises (SMEs) indicates there is a significant gap in knowledge of the determinants of access to finance by the SMEs in Ghana. Therefore, this study examined the socio-economic factors that determine access to bank finance by SMEs in Tamale, Ghana. The population for the study was members of the Association of Small Scale Industries (ASSI), the branch Manager and credit officer of the Barclays bank Tamale, the Regional Manager and Accountant of National Board for Small Scale Industries and a Project Officer of macrofinance and small loan centre (MASLOC) .The results indicated that, the number of employees, experience in credit use, number of fixed assets possessed, attitude towards risk, business size, form of business and sector of business in the economy are the critical success factors in accessing bank finance. The study also identified Management expertise, high default rate and monitoring as the challenges banks faced in giving credit to SMEs. In terms of policy, the findings of this study will provide banks, training institutions and policy makers with new insights on investigation of loan evaluation process, tailoring new training programmes for entrepreneurs and developing relationships with business associations. Key words: Enterprises, Small-scale, Medium-scale, Tamale, Barclays Bank and Entrepreneurs
2013
Access to credit is crucial for the growth and survival of Small and Medium-sized Enterprises (SMEs). Thus policy makers attempt to pursue financial sector policies to propel financial intermediaries to extend more credit to SMEs. Access to credit still remains a challenge to SMEs especially those in developing economies and continues to dominate discussions both within business circles and at the corridor of various governments. In Ghana, for instance, a survey by the Association of Ghana Industries (AGI) for the second quarter of 2011 indicated that lack of adequate access to credit topped the factors hampering the growth of small businesses in Ghana. The ability of SME’s to grow depends highly on their potentials to invest in restructuring, innovation etc. All of these investments need capital, and therefore access to finance. Against this background the consistently repeated complaint of SME’s about their problems regarding access to finance is a highly relevant constraint that ...
Published in Bingham Journal of Economics and Allied Studies(BJEAS),, 2018
The study examined the relationship between access to credit and SMEs growth in Gboko metropolis of Benue State. The research design adopted for the study is descriptive survey with a population of 102 SMEs and a sample size of 102 SMEs was retained through census sampling technique and the primary data was collected via the researcher's designed questionnaire. The study uses regression analysis to test the hypotheses with the aid of Statistical Package for Social Sciences (SPSS). The study found that; there is a significant positive relationship between access to credit and firm size and same relationship with firm-financial institution relationship. However, access to credit has a negative relationship with loan interest rate. It concludes that the bigger the size of a firm and the closer firms relationship with a financial institution the higher its chances of accesing credit, hence influencing SME growth by boosting the operations of Small and Medium Enterprises (SMEs) through increased productivity, while high loan interest constrains access to credit. The study recommends; lowering of loan interest rates by financial institutions, conscious efforts by entrepreneurs to maintain a close relation with financial institutions and careful planning by entrepreneurs to grow the size of their ventures to enhance their access credit.
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.
Journal of Business and Enterprise Development, 2017
This paper discusses the factors which affect access to financial support by small and medium enterprise (SMEs) in Sekondi-Takoradi. Financial resources are crucial in the life of all businesses including SMEs. However, access to financial support comes with the problems of information asymmetry, moral hazard and adverse selection. The factors that influence access to financial support are investigated using a non-interventional cross-sectional study design. Quantitative data were collected from 303 randomly selected SMEs using interview schedules, while qualitative data, using an interview guide, were obtained from 21 institutions offering financial support to SMEs in Sekondi- Takoradi. With the use of interpretations of the qualitative data, and descriptive statistics including cross tabulations, the results showed that interest rates, collateral, guarantors and, business and financial information, and financial literacy play a role in the access of institutional financial support...
Financing Small and Medium Enterprises (SMEs) in Ghana
Journal of African Business, 2003
The paper assesses the financing of SMEs in Gombe metropolis with special reference to rice processing mills. The population of the study comprises all the rice processing mills operating within Gombe metropolis. The unlimited nature of the population compels the researcher to employ convenient sampling technique to select a sample of 60 respondents. Simple percentages and chi square techniques were used in analyzing the data and testing of hypothesis using SPSS. Structured questionnaire was used in sourcing the data. The study finds that the financing of SMEs in Gombe has not improved as most of the SMEs are not even aware of Government Interventions not to talk of benefiting from any. Also majority of the owners don't have access to credit facilities, so they use the little they have for their businesses. The study therefore recommend thus: Government should embark on awareness programmes to further enlighten the owners and managers of SMEs in Gombe metropolis on the importance of its intervention programmes. This should be done through the media, organizing workshops, seminars and so on. This will be among the easiest ways of accessing government funding/support by the SMEs.
An Empirical Assessment of SMEs’ Financing Risks in Ghana
Research Journal of Finance and Accounting, 2020
As complex challenges continue to hamper the rapid development of Small and Medium sized Enterprises (SME), it is important that these challenges are identified and mitigated. The major issue identified is shortage of debt financing. The difficulties that SMEs experience stem from several sources. The financial institutions hardly provide any financial products and services for SMEs. The lack of appropriate financing mechanisms emanates from a variety of reasons, such as regulatory rigidities, gaps in the legal framework, cost of credit and lack of trust between financial institutions and SMEs'. The difficulty in obtaining debt financing by SMEs' is compounded by the lack of transparency in the socioeconomic and business environment. This paper presents the findings of an empirical assessment on SMEs, it investigated on how risk associated with access to finance, inflation, customer services, rain failure, fertilizer and veterinary services affect the Agro processing, Agriculture, Trade and Textile industries and the perceptions of financial institutions on providing financing to SMEs. The results indicated that access to finance and inflation are the most critical risks and cut across all industries. A greater proportion of the financial institutions (68.75%) attributed default in loan repayment and misapplications of loans by SMEs as reasons for the SMEs not attracting loans from banks. The rest (31.25%) said mismanagement and lack of managerial skills by SMEs. These findings provide an important baseline data for further research and industry collaborations exploring education with debt financing potentials for SMEs by financial institutions.
Factors Affecting Access to Credit By Small and Medium Enterprises: A Case of Kitale Town
The International Journal of Social Sciences and Humanities Invention, 2016
The study sought to establish the factors influencing access to credit among small and mediumscale enterprises in Kitale Municipality. The study was guided by the following objectives: to find out how lending procedures affect access to credit by small and medium scale enterprises; to find out how collateral requirements influence access to credit by SMEs; to establish the relationship between the credit bureau referencing policies and access to credit by SMEs; and to find out the influence of education and entrepreneur training and access to credit by SMEs. A descriptive survey design method was used to collect data. The target population was made up of the 726 SME's registered with Kitale Municipal Council. Stratified random sampling technique was used to determine the sample size. Using the Krejcie and Morgan formula a sample size of 256 SME's was considered for the study. Data was collected by the use of questionnaires and interviews. Piloting of the study was carried out in the to ascertain the validity and reliability of the instruments. Data analysis included the use of descriptive and inferential statistics. Descriptive statistics involved the use of frequency tables, pie charts, graphs and percentages while inferential statistics involved the use of correlation analysis. The study established that among the factors that lending procedures, collateral requirement, credit bureau referencing policies and training offered by finance Institutions significantly influence access to credit facility by SME from financial institutions. The key recommendation was that information symmetry should be enhanced between CRBs and financial institutions on one hand and SMEs on the other hand.
Chasing Credit: The bane of SMEs in Assin North Municipality,Ghana
This article assesses the institutional arrangements for sourcing credit and constraints facing SMEs in accessing credit to finance their operations in Assin North Municipality of the Central Region, Ghana. A descriptive cross sectional survey research design was employed in the study. A sample size of 80 respondents was drawn for the study and questionnaire was the instrument used for collecting the data. The study reveals that friends or family members were the principal sources of funding available for SMEs. Also, high collateral requirements, high level of taxation and competition from large scale businesses for finance and market were the major constraints facing the growth and expansion of SMEs. These challenges have stifled the growth and expansion of SMEs in the municipality. It is recommended that a special fund be established by the government and other stakeholders in the finance sector to respond solely to the credit needs of SMEs in the municipality.