Financing micro and small scale enterprises in Ghana- problems and prospects

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Research has shown that at the heart of any successful enterprise development among other factors is small enterprise financing. Without finance it is almost impossible to realize the dream of enterprise however well thought over the plans are. Finance therefore has pivotal role in enterprise promotion. The economy of Ghana is dominated by many small-scale enterprises. Ghana’s economic progress will very much depend on the development and nurturing of these small scale enterprises to the level where they can contribute to the generation of employment to absorb the abundant labour which this country is blessed with, to produce goods to meet local demand and above all to fulfill export requirements of our balance of payment. The study therefore seeks to identify the problems associated with financing small and micro enterprises. It considers the role some selected credit institutions play in making credit and other supports available to small and micro industries. The objectives of this study are to appraise the various sources of finance to micro and small-scale enterprises in Ghana, and to establish an empirical justification for the failure of the informal sector to finance small and micro enterprises. The research methodology adopted to collect the data in the field concerning the problem included questionnaire, interviews, and personal observations. The outcome of the study revealed that the informal sector has not made any significant strive in making credit available to micro and small scale industries. This is shown by the fact that apart from their small loan sizes, most of them do not provide initial capital and is also not accessible to most small-scale entrepreneurs. The study also revealed that among the problems of lending to small businesses include high delinquency and default, high cost of credit, lack of collateral, government policies among others. Suggestions were make on way of reducing some of the problem confronting the credit institutions to help develop the interest and capability of financing small and micro enterprises.
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 Arts in Industrial Management, 1999