Financing Gaps Reducing Potentials of SMEs – Consultant

Mr Mawuko Williams, a Consultant with the Frankfurt School of Finance and Management, on Monday said huge financing gaps were reducing the job creation potentials of Small and Medium Scale Enterprises (SMEs).

He said many SMEs that were providing jobs for a larger segment of the population were unable to access credit from lending institutions to create bigger businesses, improve productivity and enhance capacity.

That gap, he noted, could be bridged if various credit infrastructure were strengthened and the public educated about the existence of the tools they could use to access it.

Mr Williams, who is also an SME expert, made this known in an interview with the Ghana News Agency in Tamale during a training programme for journalists organised by the Bank of Ghana (BoG) in collaboration with Trans Media Network on Financial Literacy.

The training was part of a Financial Literacy Campaign started by the BoG to educate the public on Credit Referencing and Collateral Registry tools, which deal with how to access credit, especially by SMEs and farmers, to improve on their businesses.

In an earlier presentation, the Consultant said SMEs fell short of $80 billion of funds, with micro enterprises found in financial gap of $50 million globally.

Currently only four million SMEs and 36 million informal micro businesses existed in Africa, he said.

Mr Williams said Africa was expected to create about 350 billion jobs in the next 20 years but the financing gaps militated against the growth and development of such businesses.

He said if banks could give out credit to SMEs that were expected to contribute 50 per cent to Ghana’s Gross Domestic Product, there would be a multiplier effect since they would be able to create, employ and meet their tax obligations and above all reduce poverty.

“Credit Infrastructure is key and an enabler of responsible credit system,” he stated.

Mr Godfred Cudjoe of the Financial Stability Department of BoG, who advocated the need for businesses and individuals to take advantage of the new tools, outlined the objective of the Credit Referencing Bureau (CRB) for improved lending.

He said CRB provided knowledge about loan applicants’ borrowing characteristics and permitted a more accurate prediction of their repayment possibilities.

Mr Cudjoe said banks were not giving loans to SMEs because of risks adding that the availability of such reports about applicants helped to facilitate loan provision.

He said information on the system was shared with lending institutions requiring credit history on a loan applicant.

Mr Cudjoe noted that individuals and businesses were required to have credit history and should constantly check on their data from the CRBs at the banks to avoid fraudsters using information about them to access loans from financial institutions.

Mr Ernest Awuah of the Collateral Division of BoG said the Division   had established the Collateral Registry in pursuance of Act 773 (2008) to register collaterals of borrowers and allow the public to access at a fee of GH¢5.00.

He said the tendency of lenders to confiscate property of borrowers was reduced since the Registry provided every lender with information on registered property, which increased the chances of loans and reduced fraud.

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