An Assessment of the Role of Financial Institutions in Financing Small and Medium Enterprises (SME’s) in Ghana
The main objective of the study is to assess the roles and contributions of financial institutions in financing SME’s in Ghana. In most jurisdictions, commercial banks as a group are the main source of external finance for SMEs. However there are a number of rigidities of a macroeconomic, institutional and regulatory nature that may bias the entire banking system against lending to SMEs. The commercial banks are most often unwilling to increase loan funding without an increase in the security given thereby leading to stagnation of growth of the SMEs and therefore unable to serve as an engine of national growth and development.
The research design of this project was a non-experimental or a survey, one which determined the perceived level of involvement of commercial banks in the financing of SME’s in the Wa municipality.
Findings from the study confirmed that commercial banks have the ability to improve the activities of SME’s, and this can only be possible if the SME’s plan their businesses and manage their finances well. It was recommended that banks should create a separate department for the SMEs; the establishment of a common fund by the government for SMEs; there should be a national policy on SMEs by the government to educate the owners and managers of SMEs in the efficient and effective financial management of their businesses in order to sustain the SME’s to grow into much bigger industries in the near future.
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