Venture capital financing of small and medium scale enterprises in Ghana

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The centrality of finance for enhancing development and growth even in developing countries is well established. In the United States of America, venture capital industry has been in existence since the end of World War II. It has helped to create many of today's global enterprises and a recent report confirms that companies supported by venture capital in their formative years outperformed those that were not on many parameters. Venture capital has emerged as an important intermediary in financial markets, providing capital to young promising firms that might have otherwise gone unfunded. Venture capital focuses on enterprises that can generate high-growth and become at least regional, if not global, players providing employment to a large number of workers. « There is therefore the need to assess the contributions of venture capital trust fund (VCTF) to the economy of Ghana and thereby acknowledge its importance and how best to harness its benefits to the country's economic development. The main objective of the study is to examine the role of venture capital financing in promoting and maintaining small and medium scale enterprises (SMEs) in Ghana. The study is intended to provide information to assist venture capital financing companies and small and medium scale operators to identify their unique roles and perform them better. Using the conventional questionnaire administration and interviews, analysis of data collected from the VCTF and SMEs assisted by venture capitalists (VCs) revealed that venture capital contributes immensely in the area of fresh capital inflow and also is accompanied by the process of value-adding which provides the company with monitoring, skills, expertise, help and basically reputation for further finance. The findings also show that SMEs that have access to venture capital financing program gained an increase in employment, revenue, and business expansion compared to those which did not participate. Lack of information on venture capital activities was identified as a major hindrance to SMEs. The study recommended that extensive services in collaboration with VCTF should develop an educational and information program on venture capital support in order to disseminate needed information to as many people as « possible. Again it was recommended that the government should reduce her involvement in managing venture capital financing and rather increase private sector participation as this will curtail unreasonable expectations from government officials.
A Thesis submitted to the Department of Marketing and Corporate Strategy, Kwame Nkrumah University of Science and Technology in partial fulfillment of the requirements for the degree of Master of Philosophy in Business Administration, 2008