Are SMEs driving the economy?

Statistics from the Registrar General's Department suggests that about 90 per cent of companies registered in Ghana are micro, small and medium enterprises. SMEs are said to provide about 85 per cent of manufacturing employment, contribute about 70 per cent to Ghana's Gross Domestic Product (GDP) and, therefore, have an impact on economic growth, income and employment. Development experts say that the growth of an economy is in question if it cannot create jobs for its people, hence the need for investment by public and private investors. By doing so, economic opportunities will widen to transform Ghana’s economy and develop the private sector to be able to create jobs and enhance livelihoods. There is growing evidence of a significant causal relationship between entrepreneurship, economic growth and poverty reduction. Fostering the development of SMEs to help people employ themselves and others may offer the best hope for breaking the poverty cycle in countries and disadvantaged communities. Relevance of SMEs SMEs are undoubtedly vital and crucial stakeholders in the government’s commitment to moving the country from a labour-intensive economy to a skills-intensive one – a country that is self-reliant and exploiting its own resources with hard work, enterprise and creativity. There is also a clear indication that SMEs are the backbone of the private sector in most developing countries, creating jobs and providing a tax base for local revenue mobilisation. Since the government is no longer able to set up industries to absorb the growing number of unemployed citizens, it is imperative to push the private sector to get hands-on supports so that they can realise their objectives. However, funds created to address their limited access to financing and reducing the cost of borrowing have not been sustainable. Challenges in accessing funds Financial institutions and banks have often been encouraged to give the needed attention to the SMEs. Though some claim to have opened to these SMEs, majority do not seem to be doing anything to support their growth. Also, SMEs themselves do not seem ready to be supported. Issues of poor governance practices, lack of risk management practices, poor record keeping and the fusion of business with personal ownership are some of the common challenges associated with entrepreneurship in Ghana. The establishment of agencies such as the Venture Capital Trust Fund (VCTF) which was established by VCTF Act, 2004, (ACT 680) to provide financing to SMEs is evident of the fact that the government was committed to supporting SMEs for an inclusive growth.