Financial Challenges Facing Urban SMEs under Financial Sector Liberalization in Ghana

Authors: Tagoe, Noel¹; Nyarko, Ernest²; Anuwa-Amarh, Ebenezer³

Source: Journal of Small Business Management, Volume 43, Number 3, July 2005 , pp. 331-343(13)

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Abstract:

The paper examines the impact of financial sector liberalization (FSL) policies on the financial management of small and medium-sized enterprises (SME) in Ghana, using six case studies. Its findings, which confirm and extend the conclusions of previous studies, are integrated into a framework that explains the impact of FSL and the factors at work. The main financial challenge facing SMEs is access to affordable credit over a reasonable period. This is determined by the financing needs of SMEs and the action of investors. SME financing needs reflect their operational requirements, while the action of investors depends on their risk perception and the attractiveness of alternative investment (which affects their willingness to invest). Government borrowing, the general economic climate, availability of collateral, quality of SME record keeping, and SME investor relations skills affect the way in which this challenge is managed. The impact of the activities and potential of enterprise development agencies are also discussed.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1540-627X.2005.00140.x

Affiliations: 1: Michael Smurfit Graduate School of Business, University College Dublin. 2: Fidelity Capital Partners Limited. 3: Catholic Relief Services–Ghana.

Publication date: 2005-07-01