Exploring Challenges To Accessing Finance By Small And Medium Scale Enterprises In Ghana

Abstract

The purpose of the study was to explore the challenges to accessing finance by small business operators in Sekyere East District of Ashanti Region, Ghana. The specific objectives of the study were to; assess the sources of funding for small businesses in Sekyere East District, examine the challenges faced by small businesses in Sekyere East District in accessing funds from Banks and assess the effect of barriers to access to finance on small businesses in Sekyere East District. The researcher adopted a descriptive design for the study. The target population of this study comprised ten (10) different SMEs engaged in different types of business in Sekyere East District. A simple random sampling technique was used to select one-hundred (100) respondents for the study. The study adopted the questionnaires as the main research instruments used in collecting primary data. Findings revealed that revealed the owners of SMEs themselves, friends, family, business partners, financial institutions, credit unions and the various religious institutions as the main source of finance for SMEs in the Sekyere East District. Findings also revealed high lending rates, the collateral requirements of the Bank, the bureaucratic or sometimes cumbersome processes involved in loan application as the challenges faced by SME operators in the Sekyere East District in accessing finance from the Banks. Further findings revealed that barriers to access to finance of small business in Sekyere East District tends to limit the number of people to be employed by these SMEs. It further limits the business expansion potentials of small business operators in Sekyere East District. It was therefore recommended that financial institutions like the Banks reduce their interest rates for loans to SMEs, make procedures for loan application for SMEs less cumbersome and also make collateral security requirement flexible for SMEs.