Assessing alternative Sources of Financing for Small and Medium Scale enterprises in Ghana Case Study of Savings and Loans Companies (S&Ls;) in the Greater Accra Region in Ghana

Type Journal Article - International Journal of Advancements in Research & Technolog
Title Assessing alternative Sources of Financing for Small and Medium Scale enterprises in Ghana Case Study of Savings and Loans Companies (S&Ls;) in the Greater Accra Region in Ghana
Author(s)
Volume 3
Issue 7
Publication (Day/Month/Year) 2014
Page numbers 123-136
URL http://www.ijoart.org/docs/ASSESSING-ALTERNATIVE-SOURCES-OF-FINANCING-FOR-SMALL-MEDIUM-SCALE.pdf
Abstract
The study was undertaken to analyse the alternative sources of finance for Small and Medium Scale Enterprises (SMEs) in Greater Accra Region of Ghana. It specifically identified the role of the non-banking financial institutions, particularly savings and loan companies as a reliable and alternative source of finance for SMEs in Greater Accra Region. In undertaking the research, questionnaires were distributed to one hundred and twenty (120) SME operators selected using the convenience sampling procedure of which one hundred (100) questionnaires were retrieved. A purposive sampling technique was used to select fifteen (15) savings and loan companies and questionnaires administered therefore; of which thirteen (13) of them was fully answered and retrieved. From the research, it was found out that SMEs contribute immensely to job creation and other sectors of the economy. However, the study revealed that SMEs have very limited access to deposit and credit facilities provided by formal financial institutions. The study further revealed that non-bank financial institutions like savings and loan companies have considered the neglect of SMEs’ financial needs of banks as an opportunity to serve the informal sector businesses. The research also determined some of the challenges encountered by savings and loan companies in lending to SMEs which included asymmetry of information, high informal nature of business ownership and high level of managerial as well as financial illiteracy. The study concludes with some recommendations to improve credit to the SME sector by savings and loan companies. Among the recommendations were savings and loan companies should accept other forms of collateral security apart from land collateral security, train operators of SMEs on proper business practices and SMEs should improve their business management skills as well as be transparent in the providing business records and information in order to avoid information asymmetry.

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