SMEs require long term funding - IFC consultant advocates ahead of GRAPHIC BUSINESS/Stanbic Bank forum
Small and Medium Scale Enterprises (SME’s) operating in the country could be more established to thrive if they had access to more patient funding, an experienced business and investment analyst, Mr Neustadt Amarteifio has said.
Mr Amarteifio, who has many years of experience in the preparation of business plans and investments, said the type of funding needed to grow SMEs was funds that would be available for their operations over a long-term.
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Aside coming without pressure to be repaid within the short-term, the funds must also not come at a high cost of interest rate, Mr Amarteifio told the Daily Graphic ahead of the Graphic Business/Stanbic Bank Breakfast meeting today at the Omanye Hall, Labadi Beach Hotel in Accra.
“Such funds include grant funds which are made available to SMEs at near zero cost and do not need to be repaid. Such funds are critical to the SMEs at the critical early stages of their life cycle to facilitate business set up and start up,” he said.
Market reality
He noted that the financing environment for SMEs in the country was limited to short-term loans, leases and overdrafts which did not support long-term investments such as building small businesses.
Although SMEs are engaged in multiple economic activities at different levels of the economic hierarchy and therefore, contribute significantly to growth, he said, “Long-term loans with tenures of three-five years are quite rare or difficult to obtain.”
Comparing the ideal situation to what pertains in the market, Mr Amarteifio said the general high cost of financing was a challenge that confronted SMEs and stifle the growth of the sector.
“This is true for both debt financing, as well as for lease financing,” he said.
Ideal financing
However, Mr Amarteifio noted that equity financing, which could be an ideal financing scheme for SME’s, was limited in the country.
He said although equity financing had been known in the country for a while, its availability was limited because the funding to back it was also limited.
“Equity financing for SMEs is available in Ghana through the alternative window of the Ghana Stock Exchange (GAX) or from the Ghana Venture Capital Trust Fund and a limited number of venture capital companies now operating in the country, he said.”
The breakfast meeting
As a result, the Graphic Business/Stanbic Bank Ghana breakfast meeting today is expected to bring together experts from academia, policy think tanks and Civil Society Organisations (CSOs) to fashion out how the country can build an equity fund to address the finance challenges of SMEs.
It will be held on the theme: “Building a national equity fund to support small and medium enterprises”.
Speakers for the forum include the Dean of the University of Ghana Business School, Professor J. Nyingma Bawole; the General Manager Operations of the Kina Group, Mr Nuamah Eshun-Famiyeh; Partner/Director at PWC, Private Company Services Leader for West Africa Region, Mr Edward Gomado and a Consultant to the International Finance Corporation, Mr Neustadt Amarteifio.