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The No. 1 Problem Facing SMEs in Ghana and How to Deal With It

Small and medium sized enterprises (SMEs) have been the backbone of Ghana’s economic and social development for the past decades. They are the major driving force for business development, employment creation, production of goods and services and internal income generation in Ghana.

According to the Registrar General’s Department as noted by Graphic Online, 90% of registered businesses in Ghana are SMEs. An SME Research Report by Ghana Web indicated that SMEs contribute an estimated 70% of Ghana’s GDP and account for approximately 85% of employment in the Ghanaian manufacturing sector. It is therefore implicit that to maximize the developmental potential of Ghana, the companies classified as SMEs must be assisted to develop.

So, what is the No. 1 problem facing SMEs in Ghana today?

The No. 1 problem facing SMEs in Ghana today is access to credit.

In Aryeetey E.T’s study (recorded in Garriba Fuseini’s MPhil Economics Thesis) on 133 manufacturing firms in Ghana, he noted that “an overwhelming 60 percent complained of access to credit as the major constraint to expansion”. The study also confirmed the success rate in accessing credit as: 69.1% for medium sized enterprises, 45% for small enterprises and 33.7% for microenterprises.

Well, why do SMEs need credit?

The answer is simple: To get business projects off the ground, expand operations, invest in technology, employ more labour, increase productivity and improve competitiveness locally and internationally.

So what is the main factor keeping and preventing many SMEs from accessing credit? The lender’s inability to trust SME business management and their ability to pay back loans given to them! The banks, state and NGO financing institutions want to be sure SMEs can manage funds and pay back the loans with the required interest on time.

How then do we deal with the problem of access to credit?

The main way to deal with the problem of accessing credit is to get back to the basics—simply boost lender’s trusts and confidence in SMEs. Banks and Financial institutions are in the business of making good return on investment for their shareholders, so they will only provide financing to SMEs they deem creditworthy.

If you go to the bank for a loan, the first thing they will require of you is your business’s current financial statement. Your financial statement provides a picture of your business performance. The financial statement is a report card that informs lenders that you can pay the loan back on time with the interest.

But you know what?

Over 70% of SMEs in Ghana do not keep proper accounting recordsThey do not take accounting seriously but surprisingly take accessing credit seriously. To bridge this gap, finance houses have moved away from lending based on business performance to collateral based lending. To boost performance based credit worthiness, SME’s must give the lending insight into their business through proper accounting records and accurate financial statements.

To start the journey towards proper book keeping, SMEs must invest in training on business accounting and finance. The more SME business managers are grounded in basic accounting principles and analysis of financial statements, the more they can manage their businesses well, increase credit worthiness and get access to funding.

There is also a need for SMEs to invest in proper accounting software that can automate the accounting and cash management process. Accounting and payroll software help make the business information management process easy so that SME managers can focus on core activities such as  marketing, sales and operations—the integral part of every thriving business.

So to overcome the No. 1 problem facing SMEs in Ghana—access to credit—business managers and SME entrepreneurs must endeavor to keep proper accounting records, engage in training on accounting and financial analysis, invest in quality accounting software to manage the accounting cycle and then keep up to date with statutory reporting requirements of their business. Once the basics are well handled, the rest will take care of itself and accessing funds will be an easy process.

What do you think about the number problem facing SMEs? What was your experience accessing credit for business growth? Share your comments below? You can also contact Multisoft Solutions (email: or call: +233 030 2235149) to get tailored accounting services and software for your business requirements.