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Factors That Hinder Access to Credit by Small and Medium Scale Enterprises despite the Financial Sector Liberalisation in Ghana

Author

Listed:
  • Christine Avortri
  • Alhassan Bunyaminu
  • T. B. Wereko

Abstract

This study sought to identify factors, which perennially hinder Small and Medium Scale enterprises (SMEs) access to credit under the financial sector liberalisation policy in Ghana. The sample of 100 SMEs from the Accra metropolis was selected to represent the SME sector in the country. Data collection was originally facilitated by administering questioners to the target groups of clients, staff and management of SMEs both Countrywide and then in the Accra metropolis. The STEPWISE method of Regression Analysis was used to establish the inter-relationship between the dependent variable, which is access of credit by the SMEs and a number of explanatory, or independent variables such as Security requirement, Absence of accounting records, Difficulty in getting personal guarantors, Risk averse, Repayment terms, Banks lending policy. The study revealed that though availability of credit has improved a large number of the SMEs do not source for funds from the financial Institutions. As a result, the growth of the sector remains stunted. The Regression analysis established Security requirement, difficulty in getting personal guarantors, absence of accounting records and Risk averse as the most significant variables, in the order, which they impede access to credit of the SME sector.

Suggested Citation

  • Christine Avortri & Alhassan Bunyaminu & T. B. Wereko, 2013. "Factors That Hinder Access to Credit by Small and Medium Scale Enterprises despite the Financial Sector Liberalisation in Ghana," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 1(10), pages 386-404.
    • Handle: RePEc:rss:jnljms:v1i10p3
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    References listed on IDEAS

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    1. Mead, Donald C. & Liedholm, Carl, 1998. "The dynamics of micro and small enterprises in developing countries," World Development, Elsevier, vol. 26(1), pages 61-74, January.
    2. Charles Ackah, 2005. "Working Paper 78 - Trade Policy and Performance in Sub - Saharan Africa since the 1980s," Working Paper Series 213, African Development Bank.
    3. Joshua Abor, 2007. "Industry classification and the capital structure of Ghanaian SMEs," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 24(3), pages 207-219, August.
    4. AfDB AfDB, 2005. "Working Paper 77 - Enhancing Africa’s Trade: From Marginalization to an Export - Led Approach to Development," Working Paper Series 2291, African Development Bank.
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    Cited by:

    1. Enock Kojo Ayesu, 2020. "Empirical Determinants of Traders Access to Credit in Ghana: Does Literacy Level Matter?," Economics Literature, WERI-World Economic Research Institute, vol. 2(1), pages 57-70, June.

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