Small businesses will thrive better under good economic policies – Economist
By Isaac AIDOO, Accra
Beyond ensuring long term funding for Small Medium Enterprises and Micro, Medium and Small Enterprises (MSMEs) in Ghana, a more sustainable way out is to put appropriate economic policies in place, Professor of Finance at the University of Ghana Business School, Prof Lord Mensah has advised.
Prof Mensah welcomes funding support for the small businesses but stresses the need for macroeconomic stability and the building of the capacity of the businesses so they can put the funds to good use.
“The only way we can come out of this situation where funds can be channeled to the MSMEs and SMEs will be through conscious economic policies, “Prof Mensah stated.
He called on managers of the economy to work down lending rates to acceptable levels to make it profitable and reasonable for small businesses to access funds.
Banks have historically been conservative in their lending to MSMEs due to the perceived high risks associated with lending to them.
Prof Mensah maintained that the risks in dealing with small businesses are real, so banks would preferably opt for safer investment instruments such as treasury bills.
“When you look at the interest rate structure in this country, the banks are better off investing in treasury bills rather than giving their funds to small businesses especially when the banks do not have data on the businesses and their inflows among others so they can determine how they can extend funds to them,” he explained.
Most small businesses lack the capacity to keep their books well and as so the UGBS lecturer recommends that they build their capacity, “on how to keep their books to attract funding from the banks.”
The most recent development in the small businesses space has been the commissioning of a study by the Bank of Ghana, the Development Bank Ghana and the University if Ghana Business School to find innovative ways of financing MSMEs.
Credit is critical for every economy, particularly developing economies such as Ghana.
The study will inform policy that will encourage innovation in financing for the critical mass of the Ghanaian economy, the Micro, Medium and Small Enterprises (MSMEs, and by that create employment and spur economic growth.
