Are SMEs driving the economy? (Cont'd)

Yet, Ghana has been unable to create and maintain the favourable environment needed to foster SME development. There are many barriers which entrepreneurs in the country face. Among many challenges are inadequate financial support, lack of a legal framework and infrastructural deficit. Some SMEs are unable to state and maintain businesses, especially in some areas where roads are not constructed. Also, administrative burden on entrepreneurial activities regarding registration of businesses and coordination among their agencies to ensure that the necessary resources are directed need flexible legal terms with the operation of SMEs. Notwithstanding the challenges, SMEs in the country lack financial support either from banks or non-bank financial institutions. Obtaining credit in the form of accessing loans, either in equity or debt from financial institutions (banks and non-banks alike), to undertake various activities, all in the name of fulfilling the objectives as being job creators and helping to reduce poverty has proven futile. The capital base, as well as the profit margin of SMEs in the country, is relatively low. Financial institutions are, therefore, unwilling to invest into a risky business which as no guarantee. Funding relief In recent times, there have been a lot of credit schemes in the system aimed at supporting SMEs in the country and providing cheaper sources of funding for SMEs. These come at a time when interest rates on bank facilities are surging. Experts say these SMEs need to bring formality into their operations through addressing their governance weaknesses, improving record keeping and honouring obligations promptly to attract the services of banks. SMEs housed many companies and provided employment to several people and were also a major driving force of development for any economy, hence the need for them to reform their operations to improve their business. Way forward Despite the attempt by the government to make available some funds to support SMEs through EximGuaranty Company Limited, entrepreneurs will still complain of going through the normal and difficult routine in securing seed money or capital. Therefore, the policies and lending portfolios of the traditional banks to SMEs should be revised to address their capital challenges. In addition to bank lending, it is imperative start-ups have a better access to alternative sources of finance. Besides venture capital, the potential of informal investments such as family, friends or business angles should be further explored. Risks sharing between banks and investors in the private sector and public financial institutions who have specialised in SMEs, or through mutual guarantee societies, will be an efficient way of leveraging rare public funds. As the adage goes, “once bitten, twice shy.” A failed entrepreneur faces the stigma of failure. Young and potential entrepreneurs are to note that failure is a fundamental part of economic life in businesses. The proportion of entrepreneurs going bankrupt can be an attribute to lack of competitiveness in the market and insolvent laws. These laws could be reviewed to reduce barriers to making a fresh start for honest entrepreneurs. Should all these policies work for their achievements, people will be more willing to accept the risk of entrepreneurship with compensated prospect of reward in the event of success. A recent trend to leverage tax levels on self-employed and small businesses has been observed in the country’s financial sector. The previous and recent budgets have attempted to provide some tax incentives to attract entrepreneurs but this has not reaped the desired results, hence something in the form of a total tax holiday or otherwise to all promising entrepreneurs should be looked at. This will enable them to expand their businesses and capacity base and employ more people to curb the unemployment issue in the country.