Enhancing informal sector financing of small-scale industries in Atebubu District

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Small-scale industries, under the broad umbrella of the private sector, have been earmarked as the engine of growth in Ghana. For most of the District Assemblies, particularly the newly created ones and those in the rural areas, the outlook on the promotion of small-scale industries has been to diversify their local economies, and also effect rapid growth and development. The development of the small-sector is largely dependent on the financial capacity of the entrepreneur, or funds available for his operation. Attempts at financing small-scale industries through the formal banking institutions have not been complimentary, due to strict conditionalities viz, collateral, high interest rates and the highly centralised forms of operation. Small-scale industries have become largely dependent on the informal financial sector for their capitalization. The capital base of this sector is however inadequate and unable to meet the demands. The micro and small-scale industries at Atebubu District are constrained by similar financial handicaps, as a result of which the industries are unable to grow. The study set out therefore to analyse how best the informal financial avenues could be developed. It was revealed that some of the informal financial sources in the district had good prospects for development, particularly the susu, the rotating savings system, the non-rotating credit scheme, as well as trade credits. These sources are however constrained in development by “individualism” on the part of industrialists; which inhabits the pooling of resources, and also reliance on mutual trust by the financial intermediaries which gives room for default, and abuse of privileges. To enhance the operations of these sources, the policy guidelines rest primarily on strengthening the financial mobilisation avenues through group action, instituting security measures with legal backing, and also improving on entrepreneurial skills of the industrialists. The small-scale industry supporting institutions, particularly the National Board for Small-Scale Industries (NBSSI) have a central role to play as facilitators, in operationalising the measures. These policies could work at ameliorating the financial constraints of the industries, and also work towards their development.
A thesis submitted to the Board of Postgraduate Studies, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfilment of the requirement for the award of the Degree of Master of Science in Development Planning and Management, 1997