The power of micro-credit to small and medium-sized enterprises promotion in ghana: the Case of Techiman Municipality

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In Africa, the Small and Medium-sized Enterprise (SMEs) sector is considered the catalyst for economic growth and poverty reduction. This made the development of the sector critical to the overall economic and sustainable growth of the Ghanaian economy. SMEs diversify economic activities by offering products and services that the market demands at a given point in time, thereby resulting in significant contribution to both internal and external trade. Their development is crucial in Ghana’s pursuit to joining the ranks of middle income economies and the achievement of the Millennium Development Goals (MDGs) by 2015. However, SMEs are facing a number of challenges such as fiancing, low technology and stiff competition from multinational companies after the liberalization of the Ghanaian economy in the 1980s due to international trade ploicy. The situation of finance is worsened by high interest rates and the recent global credit crunch which affected the ability of financial institutions, both government and donor agencies to provide the needed credit support. To survive, SMEs have to revitalize their marketing, promotional strategies and galvanize support from government, NGOs and other stakeholders. The study was conducted in the Techiman Municipality to assess credit facilities offered by the various SMEs promotion institutions/agencies to revitalize the promotional strategies of small and medium-sized enterprise. The findings revealed that though high interest rates, demand for collateral and bureaucracy pose hindrance to credit accessibility and repayment challenges, SMEs with access to more credit facility can expand their operational activities. It also revealed that SMEs are adopting coping strategies such as negotiation for credit inputs supply, resorting to financing from middlemen, group “susu” and arrangement for loans from friends and relatives to enable them have flow of resources (inputs) for production. The study recommend strengthening of Credit Reference Service. Also, promotional institutions/agencies which financially deal directly with SMEs in credit support should collaborate with NBSSI to set-up ‘Care Centres’ at selected locations where they could meet often to address SMEs financing and provide information on requirements for loan, timeframe for dealing with SMEs’ loan applications and disbursement, interest rate applicable and other vital information so that SMEs can make meaningful comparisons with other financial institutions, before taking any decision regarding loans and other services which they may need. This would bridge the information gap between financial institutions and SMEs in their financing. To ensure effectiveness of SMEs support packages, the Techiman Municipal Assembly should support, strenthen and equip the SMEs Sub-committee to monitor and co-ordinate the operations of micro finance institutions and incorporate them in to the Medium Term Development Plan of the Assembly for future planning.
A thesis submitted to the Department of Planning, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfillment of the requirements for the degree of Master of Science in Development Policy and Planning