The impact of lending practices of Ghanaian banks on the financing of small and medium enterprise (SMEs): The Case of Amalgamated Bank Ltd, Accra.

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The dynamic role of small and medium scale enterprises (SMEs) in Ghana and for that matter the developing countries cannot be underestimated. However, the SME sector of the Ghanaian economy faces the problem of inadequate access to credit from the banks. This study, therefore, fully explores the impact of leading practices of Ghanaian banks on the financing of SMEs. The researcher uses Amalgamated bank Ltd as the case study of this research. Interview was used as the data collection instrument to obtain both primary and secondary data from the credit department of the bank. Some SME customers of the bank were also interviewed as well as SME operators who do not access loans from banks. Among the major findings of the study are as follows: the major problem that discourages SMEs from accessing credit form the bank is lack of adequate collateral. Also, the SMEs do not keep proper information pertaining to their operations to qualify them for credit from banks. Another finding is that banks always grant short-term loans to the SME sector since it is considered as a risky sector. Moreover, the banks charge different interest rates on loans to business upon the credit appraisal results, even though the bank uses the same lending technique for both SME sector and the large scale enterprises. In addition, another finding from the study indicates that there is no significant relationship between rejection of SMEs loan applications and type of business.
A dissertation submitted to the Department of Accounting and Finance, School of Business, Kwame Nkrumah University of Science and Technology, In partial fulfillment of the requirements for the degree of Master of Business Administration, 2008