Our Real Commitment to SMEs Development in Ghana

The reality: are we really committed to SMEs development?

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In recent years, much attention have been devoted towards engineering initiatives and development efforts to usher the SMEs as the real engine of growth of Ghana’s economy.

Averagely, in every month, an initiative is launched with the objective of helping or giving support to SMEs in key areas of the economy, such as; agribusiness, housing and hospitality, private education, health and related services, financial services (other than banking), food services and packaging.

Just last week, another initiative was launched by Oasis Capital Ghana, which is a branch of the Oasis Africa Fund, to help SMEs with funding opportunities for expansion.
This initiative adds to a number of already launched and operational support schemes either governmental or non-governmental with some private venture capital and private equity funds trying to empower start-up SMEs and existing businesses.

Meanwhile, other initiatives which were launched with very positive and mouth-watering ideas fizzled out of the system with trace of them anymore.
The Oasis Africa Fund launched in 2013 to support Small and Medium scale Enterprises (SMEs) in some selected West African countries that provide essential services in the key areas of housing and hospitality, private education, health and related services, financial services (other than banking) and food services.

The Fund has now raised US$27 million from investors and partners ready to support these SMEs.
About 15 SMEs in Ghana and Ivory Coast are expected to benefit from a US$50 million fund by private equity firm Oasis Capital.

According to Chief Executive of Oasis Capital, Matthew Boadu Adjei businesses with a turnover not exceeding an equivalent of US$50 million, employing not more than 250 people and with assets not exceeding US$15 million are eligible to apply.

“They would have access to patient capital and that is particularly important in an environment where interest rates for small institutions are very high”, he added.

However, at the launch of the Fund, Governor of the Bank of Ghana, Dr Abdul-Nashiru Issahaku, who has shown considerable commitment towards SMEs development, emphasized the crucial role SMEs play in the quest for economic development, hence the need to support them.

The Governor also commended Oasis Capital on the initiative taken.

“Private equity plays a lead role in the growth and development of every nation. The Malaysians, Taiwanese, and other Asian tigers are all where they are because the private took charge of the developmental drive of their economy”, he noted.

Without withstanding the effort of Oasis, a number of initiatives and progresses are being made to help put our SMEs into full control of the economy as the engine of growth.
In light of this, an expert in Quality Management, Professor Goski Alarbi has called for a comprehensive national strategy aimed at improving the businesses of small and medium scale enterprises (SMEs).

These businesses are in the spotlight following greater awareness of their contribution to the country’s economic development.

Professor Alarbi has therefore tasked the Ministry of Trade and Industry to spearhead the task of empowering SMEs.

The Economy Times, recently in a publication titled “SMEs targeted for growth” noted that, despite all factual and empirical evidences attesting that, small and medium scale enterprises (SMEs) are the engine of growth of every economy all around the world, Ghana is yet to experience the heaviest wave of growth propelled by these SMEs.

All this while, the economy of Ghana has leaped-frogged on the agricultural and extractive sectors for its growth, until recent significant contribution of the services sector of the economy.
The manufacturing sector has virtually contributed negatively in growth to the economic growth since independence of the country.

These SMEs which have shown great deal of continuous commitment to pursue expansion and creation of new enterprises to help contribute significantly towards the country’s industrialized economy agenda.

But, have persistently cry for government’s intervention to ensure that the macroeconomic indicators and other factors of the economic management are strengthened to provide conducive business environment.

They have continuously complained of high interest and inflation rates, high taxation, unpredictable forex exchange rate, unstable power supply and unfavorable market competition due to flooding of the market with relative cheaper competitive imported products and unavailability of raw materials.

It was therefore apparent for key players of the economy and policy makers to stick to decisions and policy recommendations that will put the SMEs on the right path of massive expansion and growth.

In advocating for more policy direction and consideration and resource allocation to help grow the SMEs in the country, Professor Imoro Brimah, has urged the government to focus more attention on small businesses to turn around the fortunes of the country’s economy.

The Provost of Humanities and Social Science of the Kwame Nkrumah University of Science and Technology (KNUST), Prof. Brimah agreed that, the survival of the economy against the world giants and emerging markets depended largely on individual and small scale businesses with great innovation that could be translated into giant businesses to compete favourably in the global market place.

He wants Ghana to learn from China by empowering and promoting innovation and doing businesses that are different from the rest of the world.

He said, Ghana needed to design its own unique style of production which could also fit perfectly into the world market to compete and possibly overtake some of the giants in the next 10 years.
‘It is possible for us to produce the likes of Dangotey of Nigeria fame and others in the next 10 years,’ he said.

However, in a notable and positive responsive to the call, the new Governor of the Bank of Ghana, Dr. Abdul-Nashiru Issahaku, has guaranteed to a swift and immediate solutions to help create and grow more SMEs in the country.

However, the practicality and realization of this assurances have been the major disheartening moments when one sits to reflect back and counting number of times such guarantees have been given but at the end no any positive accounts are rendered.

Yet, the seemingly promising young Governor has vowed his commitment to collaborate with banks in pursuing policies that will contribute to growing the country’s small and medium size companies, and provide incentives to encourage lending to productive sectors of the economy.

“The Bank of Ghana remains committed to promoting and scaling-up real sector lending to boost growth. While focusing on ensuring stability of the economy, the Bank will continue to pursue policies that contribute to growth by working with banks to provide incentives and encourage lending to productive sectors of the economy; and most importantly for banks to lend at reasonable rates, especially to SMEs,” he said.

Dr. Issahaku speaking at the maiden SME fair under the theme ‘SME Financing in Ghana; Enhancing Access and Reducing Costs’ explained that, “Given the dynamic business environment in which the SMEs operate, it should be a matter of priority for us to respond creatively by facilitating new financing modalities, or special windows, to complement the traditional financing options”.

Also, confirming how the SMEs continue to play a critical role in promoting economic growth and sustaining economies globally, he noted that the sector stimulates domestic demand through job-creation, innovation, and competition; thus, they are often a driving force behind any resilient national economy.

“Prioritising SME development is critical for promoting inclusive economic growth, and that is why we continually urge banks to revise and develop new banking solutions and models to serve this market segment to engender greater financial inclusion,” he said.

Additionally, Hon. Rashid Pelpuo, Minister of State in charge of Private Sector Development and Public Private Partnership, had noted that the government plans to develop and grow SME businesses into becoming global companies. Adding that, “The engagement and feedback of stakeholders in the just ended SMEs fair will be instrumental in designing policy solutions for enhancing SMEs’ access to finance, their growth, and hence their contribution to economic development,” he remarked.

Highlighting on some other specific policy directions, Dr. Issahaku indicated that the Bank, in collaboration with the Ministry of Food and Agriculture (MOFA) and AGRA, has been working tirelessly to design and implement a Ghana Incentive-Based Risk Sharing System for Agricultural Lending (GIRSAL).

This scheme, he said, was originally developed by AGRA and has already been piloted successfully in Kenya and Nigeria. It will have a number of strategic pillars based on risk sharing, technical assistance, insurance, bank incentive mechanisms, bank rating, digital financing and non-financial services.

The broad aim is to leverage substantial flows of investment funds in support of agriculture across the value chain. The modalities toward implementation are currently being designed within a framework of consultations with stakeholders such as AGRA, Ministry of Food and Agriculture (MOFA), Ministry of Finance (MoF), Ministry of Agriculture, FINGAP, APSP etc.

It is expected that GIRSAL will have several benefits, such as increased agricultural productivity and production, thus reducing the food import bill and saving foreign exchange; increased exports of agricultural products to generate additional foreign exchange, reductions in poverty and ensuring food security, as well as increased incomes for farmers and other value chain actors.

Again, regarding how to reduce the cost of financing, Dr. Issahaku noted, a uniform base rate model has been introduced as a guide for all banks in a bid to improve the framework within which they set their lending rates. This has resulted in more transparency and uniformity in the way base rates of banks are quoted.

“As we work to restore macroeconomic stability with fiscal consolidation, government borrowing rates will continue to decline; and this will help drive down the high lending rates among banks.
“We, on our part, will continue implementing measures to promote healthy competition in the banking system, driven by appropriate business models that can address financing needs of the banking public, especially SMEs.”

He added that the Bank’s emphasis over the years has been to build an appropriate credit infrastructure to support credit delivery, which should in turn help lower the ratio of impaired loans and address the risks in lending to SMEs. These include establishment of the collateral registry, licencing of Credit Reference Bureaus, and the establishment of Commercial Courts.
“The Bank of Ghana has equally been involved in a number of direct initiatives for SMEs in collaboration with the Ministry of Finance.

“These include the provision of subsidised lending schemes for SMEs, and the establishment of investment funds to be accessed by SMEs,” he stated.

Despite, all assurances from initiators of this good ideas to empower SMEs to add up to the accelerated economic development of the country, there are still doubt in the minds of some Ghanaian.
The trust and faith in these initiative are on high rate of diminishing due to scrupulous inventors of similar initiatives just to pave way for their donors to hit their accounts with huge sums of money but later disappear like thin air leaving prospective beneficiaries in despair.

The question as to whether the initiators of SMEs support schemes are we really committed to SMEs development still lingers around in the minds of victims of previous defunct schemes.

-Adnan Adams Mohammed

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