Positioning SMEs in Ghana for growth and Development

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All around the world, small and medium enterprises (SMEs) play an active role in the development of economies.

Also globally, SMEs account for about 90% of businesses as well as more than 50% of employment and are regarded as important contributors to job creation and economic development.

In emerging economies, SMEs make more impact as they contribute up to 40% to the Gross domestic product (GDP).

Ghana is an emerging economy with an informal sector under which SMEs are found to dominate about 70% of the economy.

SMEs in Ghana provide about 85% of manufacturing employment for Ghanaians and also contribute about 70% to the country’s GDP.

It is also on record that around 90% of registered businesses in Ghana are SMEs and their operations have contributed immensely to the development of the economy.

Being an integral part of the society, their effectiveness however depends on the functionality of the country’s economic environment which has largely been characterised by different challenges.

It has been established that SMEs in Ghana like most other African countries, face some challenges which have hindered their effectiveness as well as limited their scope.

Prominent among these challenges are lack of access to finance/credit facilities and high-interest rates. These issues have created a huge gap between the few big corporations and the many SMEs as most small-business lack the requirements to facilitate loans from financial institutions to grow their businesses.

Also inhibiting the growth of SMEs are factors like inadequate infrastructure, lack of technological know-how, and weak institutional and regulatory framework which have over time limited their expansions.

However, to get the best from the SME’s sub-sector and make it more effective for overall development, authorities in Ghana are strategizing on measures to strengthen the SMEs.

To achieve this, the government of Ghana launched the Development Bank Ghana as a development finance institution to provide loans to commercial banks and other financial institutions for on-lending to SMEs.

The activities of the Bank are expected to help relieve the challenges that have hindered the availability of long-term, competitively priced loans to sectors such as agribusiness and manufacturing which dominate the Ghanaian SME’s sub-sector.

With an initial $760 million in its coffers, the Bank which received funding support from International Development institutions will through Ghanaian financial institutions provide medium to long-term loans with tenors greater than three years.

It is expected that the coming on board of the bank alongside other measures by relevant government agencies in the country will help bridge the financing gap that exists between financial institutions and small businesses.

Another laudable initiative by the government targeted at repositioning the SMEs spread across the country is the You-Start Initiative under the Ghana CARES programme.

The initiative which is in part targeted at building an entrepreneurial nation and creating at least 1 million jobs for the youth in the next 3 years ( 2022- 2025 ) also aims to address the challenges faced by existing and young entrepreneurs.

YouStart will serve as a vehicle for young entrepreneurs to access capital, training, technical skills, and mentoring to launch and operate their businesses.

Among other things, the government through the plan intends to align its training with the needs of sectors that would drive the growth and socio-economic transformation of the country.

The YouStart initiative, as captured in Ghana’s 2022 Budget would support youth-led enterprises with, soft loans of up to GH¢50,000 for individuals and GH¢100,000 for associations and groups and a standardised loan package of between GH¢100,000 to

GH¢400,000 at concessional rates for SMEs from financial institutions.

Also out to bridge the technological gap which makes it difficult for small business owners to scale up sustainability is Meltwater Entrepreneurial School of Technology(MEST) through its training programme, MEST Scale.

The programme which is a venture acceleration program is designed to help Small and Growing Businesses strengthen their operations by boosting their capacity with key technology ideas needed to scale their growth.

Alongside other training in that line, the MEST Scale programme is expected to lead business owners on the path of adopting technology for their businesses especially as the world is thriving in e-commerce.

E-commerce plays an integral part in building good portfolios for SMEs making it possible for them to reach a wider audience and get increased sales.

The SMEs can leverage the tech exposure and knowledge from the e-commerce platform to grow further and expand for more impact.

While there are so many ongoing measures both by the government and the private sector to get Ghanaian SMEs in the best position, there are still a lot of issues that need to be addressed. Some of these issues are highlighted herein.

Capacity building- this is crucial for the survival of SMEs because most business units are usually managed by the owners with little or no managerial expertise, hence to ensure the business is sustained and has meaningful impacts, such owners need adequate training and retraining.

Business owners and managers of SMEs must be educated, not necessarily formally but they must periodically attend seminars and workshops to obtain the requisite knowledge and update their skills to advance their business growth.

Issues such as right business ethics, customer service, and legal rights such as patents, copyright or contractual agreements must be enforced as they are key to the success of SMEs.

The Business owners for their part also need to create channels of redress for customers to address issues of dissatisfaction or complaints in whatever form for the growth of the business.

In addition to all of that, SMEs need to be integrated into a global network of doing business and made to look beyond the local market.

Currently, Ghana’s intra-African exports which come mainly from manufactured goods account for about 34.2 per cent of her total goods exports with the major contributions coming from the SMEs.

The country can only get better by supporting the SMEs for increased participation and active representation on the continental level.

With the AfCFTA, the SMEs can leverage for expansion and benefit from the trade integration which would enable sustainable economic growth for Ghana.

This will also give a platform for SMEs to penetrate global markets by exporting through clusters, joining global value chains (GVCs), and exporting directly or indirectly.

To achieve this, SMEs need all the support they can get from individuals, organisations, development partners, the private sector and the Ghanaian government to exploit opportunities offered by clusters and GVCs which present alternatives to penetrate markets and learn through the various levels of information and knowledge available at their disposal.

With this participation, SMEs can help to strengthen their contributions to economic development and social well-being as well as make use of available opportunities to scale up, accelerate innovation and enhance productivity.

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