Dr. Andrews Ayiku, an SME coach and lecturer at the University of Professional Studies Accra (UPSA), has suggested that the Ghanaian government should consider implementing interest rate caps on loans extended to small and medium-sized enterprises (SMEs) by financial institutions in the country. The proposal is aimed at facilitating easier access to capital for SMEs, which contribute around 60% of the nation’s GDP. The recommendation was made during the second edition of the Graphic Business Twitter Dialogue Series, focused on SME finance in challenging times.
SMEs play a vital role in Ghana’s economy, accounting for approximately 90% of registered businesses and 80% of employment. However, they face challenges in accessing finance, exacerbated by factors such as high interest rates and economic uncertainties including the impact of the COVID-19 pandemic and the Domestic Debt Exchange Programme.
Dr. Ayiku emphasized the need for targeted policies to promote access to affordable credit for SMEs. He proposed introducing interest rate caps for registered SMEs, ensuring that banks do not provide loans with interest rates exceeding the cap. He also suggested that the government establish its own loan programs with subsidized interest rates for SMEs. Additionally, Dr. Ayiku recommended the creation of credit guarantee schemes, public/private partnerships, and awareness campaigns to inform SMEs about available financial programs and products.
He acknowledged that SMEs face difficulties due to perceptions of high risk and collateral constraints, which deter financial institutions from providing funding. Dr. Ayiku encouraged SMEs to explore alternative funding sources, such as angel investors, and consider accessing pension funds through venture capital firms and private equity firms that specialize in supporting SMEs.
The proposal highlights the ongoing efforts to address financing challenges and promote sustainable growth within the SME sector in Ghana.
Source : Graphic News