FINANCING SMALL AND MEDIUM ENTERPRISES (SMES) IN GHANA: CHALLENGES AND DETERMINANTS IN ACCESSING BANK CREDIT

Abstract

Access to credit is crucial for the growth and survival of Small and Medium-sized Enterprises (SMEs). Thus policy makers attempt to pursue financial sector policies to propel financial intermediaries to extend more credit to SMEs. Access to credit still remains a challenge to SMEs especially those in developing economies and continues to dominate discussions both within business circles and at the corridor of various governments. In Ghana, for instance, a survey by the Association of Ghana Industries (AGI) for the second quarter of 2011 indicated that lack of adequate access to credit topped the factors hampering the growth of small businesses in Ghana. The ability of SME’s to grow depends highly on their potentials to invest in restructuring, innovation etc. All of these investments need capital, and therefore access to finance. Against this background the consistently repeated complaint of SME’s about their problems regarding access to finance is a highly relevant constraint that endangers the economic growth of countries. The general objective of this study is to examine the challenges and determinants of access to bank credit in Ghana by focusing on SMEs in the Wa Municipality. The study employed the quantitative approach to research in which the probability sampling criteria specifically the stratified and simple random sampling was employed to select eighty entrepreneurs from the Wa Municipality. The major findings for the study indicated that there exist significantly,