The Impact of Small Scale Enterprises Financing in Improving the Social Economic Well Being of Ghana

THE IMPACT OF SMALL SCALE
ENTERPRISES FINANCING IN
IMPROVING THE SOCIAL
ECONOMIC WELL BEING OF
GHANA

Table of Contents
Topic:...............................................................................................................................................1
INTRODUCTION...........................................................................................................................1
Overview of Research............................................................................................................1
Background of Research.........................................................................................................1
Rationale of Research.............................................................................................................2
Research Aim.........................................................................................................................2
Research Objectives...............................................................................................................2
Research Questions................................................................................................................2
LITERATURE REVIEW................................................................................................................3
CHAPTER 3: RESEARCH METHODOLOGY.............................................................................8
CHAPTER 4: DATA ANALYSIS................................................................................................11
CHAPTER 5: DISCUSSION.........................................................................................................24
Chapter 6: Conclusion and recommendation.................................................................................26
Chapter 7: Alternative method and reflection................................................................................28
REFERENCES .............................................................................................................................29

Topic:
“The impact of small scale enterprises financing in improving the social economic well
being of Ghana”.
INTRODUCTION
Overview of Research
In present time, the extension of medium and small businesses are significant for the
comprehensive development and reduction of poverty (Schwerhoff and Sy, 2017). As each
company or new business needs finance resources to run their activities and operation which help
in reaching the desired objective within specific time period. Small business financing is also
recognised as start up financing which means investing a specific amount in the new business
which benefit the economy as well. Globally SMEs are noted for empowering the economic and
citizens in different countries such as Asia, Europe and North America. The primary focus of
such a study is to examine the existence and attributes of small and medium-sized enterprises
along with the financial restrictions they face. The research is focused mainly on the economic
growth of Ghana because of SMEs financing and is also covers the issues of SMEs in many
other regions of the world of the same primary purpose as this research. In addition, both
quantitative and qualitative is really the existence of the data gathered for such a project.
Questionnaires and surveys are important data-gathering methods. It also reviews relevant
literature.
Background of Research
Small and medium-sized businesses are, internationally, a resource for motivating people
and for economic development. SMEs are linked to economic growth in the Asian and North
American nations and also play a significant role growth of developed nations like the USA. In
Africa, the small and medium enterprise are consider to be most important sectors which account
almost 90 % of total business in urban and rural areas. SMEs are really a significant option for
people to work and induce nations advancement by fostering entrepreneurial as well as
leadership skills between many populations living within a specific country (Savitz, 2013).
Governments in Ghana has enabled attempts to reduce deprivation and stimulate economic
development by growing foreign investment, expanding the economy, developing policy
mechanisms that encourage small company entrepreneurship and at most implementing
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initiatives for jobs and innovation. To order to be listed as a SME or a micro-enterprise, an
organization must meet the conditions for the number of workers and is one of the specific
financial standards, i.e. whether the net attrition or the current balance sheet total. In addition, it
is also stated that firms must be independent which clarify that if 255 is owned by single party is
just out of the definition of SME.
Rationale of Research
The main reason for conducting research on the impact of SMEs contribution on
economic development in Ghana was because of general interest of participant's (Adusah-
Karikari 2015). All small business have be to be financed equally as they have special operation
which gives an immense satisfaction to the customer and help in developing nation economy
(Sakyi, Commodore and Opoku, 2015). It is also regarded that SMEs are crucial for economic
development as they promote entrepreneurship, reduce poverty and provide more employment
which is essential need for every developing country. Throughout the Ghanaian background, the
National Board for Small Scale Industry (NBSSI) categorizes SME as a company with sales
below US$ 200,000 and equal to no higher that US$ 5 million.
Research Aim
“The impact of small scale enterprises financing in improving the social economic well
being of Ghana”. In the context of the importance of small business financing in Ghana, the
research aim is to determine the contribution of SMEs to the economic development on nation.
Research Objectives
 To ascertain the concepts of SMEs financing to improve the social economy of Ghana.
 To recognise the contribution of Small business financing on development of Ghana
economics.
 To figure out the Constraints of small business success and growth.
Research Questions
 What is the main concept of Small business financing?
 What is the primary contribution of Small business financing on development of Ghana
economics?
 What are the major Constraints of small business success and growth?
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LITERATURE REVIEW
Literature review is defined as the crucial part of a research study in which significant
information from different sources are collected for making user to easily gets the grasp
understanding about the research topic (Pretty, 2013). A review of literary works is an important
but in-depth assessment of previous research. It is a description and analysis of a specific
research field and helps anyone to read the report and decide how you are doing this particular
work. A thorough review of the literature builds on the factors for choosing a specific research
issue.
To ascertain the concepts of SMEs financing to improve the social economy of Ghana.
There are many factors that keep the company tiny and differentiate it from other
companies. Identifying these companies could be problematic, so throughout this study the main
aim is to explain the reason behind the establishment of small companies as well as small
companies which operating in present time to improve the living standard of people and raise the
social environment. the It is stated that there have been large literature on small business and
their impact on national development in particular time frame. According to EU a firm with
strength of 250 worker, actual turnover of 50 million GBP and have 43 billion GBP on balance
sheet is consider as SME. Many SMEs are already engaged in globalisation, particularly in this
21st century, if they function locally or worldwide. Discussing the growth of SMEs without
trying to make a connection to the globalisation of the economies and hence of the industry is
becoming extremely difficult in the last few decades (Ofori, 2013). This includes small and
medium-sized businesses which are the primary source of individual's jobs and drive countries. It
also enable the growth through encouraging innovation and business knowledge among
populations and expanding both the local manufacturing market and the entire industry. While
subsequent Ghanaian administrations rendered heavy efforts since freedom in 1957 to reduce
poverty and promote economic development by formulating laws that benefit small and medium-
sized enterprises, awareness about the role of SMEs as well as the stage of development in rural
environments in Northern Ghana remains behind. SMEs are the largest industry and constitute
approximately 90 per cent of all rural and urban businesses. These are consider to be a huge
opportunity to work and promote countries' growth by fostering entrepreneurship and leadership
skills within societies
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Most businesses remain small and casual and then use basic technology which does not
require extensive use of another vital infrastructure. SMEs encourage new ideas and new
innovations, experience economies of scale, variety environments, industry competitiveness,
control power and longevity, and the ability to recruit and maintain talented staff usually rely on
modest growth. It is also stated that there cannot be any emphasize on providing a stable funding
source for SMEs business. If properly constructed and capitalized, small and medium-sized
enterprises have the ability to grow and lead the change with the rapid growth of financial system
of a nation. As per Gill and Biter, (2012) viewpoints there must be enough finance which have a
essential positive impact on the existence and development of small companies and due to their
lack new businesses are not able to succeed (Gill and Biger, 2012). Financial institutions are
essential to Ghana's economic growth, principally through their double mobilizing and resource
allocation functions (Allison, McKenny and Short, 2013). Capital mobilization includes the
collection and regulate of a pool of national and international investments, whereas the capital
allocation method aims at channelling these investments for their most efficient use. This enables
the manager or owner of small business to find the most suitable option of financing which
support in running and managing different business operation (Ochieng, Visseren-Hamakers and
Nketiah, 2013). Manager also make sure that these financing option would be effective enough
that would not be a burden for them in future.
In Africa, the small and medium-sized businesses industry accounts for nearly 90% of all
companies based in both developed and developing countries, offering a more balanced
distribution of income across all regions of the country. SMEs in Africa were thus viewed as a
very significant driver for meeting regional development targets, like poverty reduction and
economic expansion. In Ghana, small and medium-sized businesses are generally categorized as
rural or urban. Rural businesses are person craftsmen, pottery individuals, basket weavers, and
embroidery factions. Include bakery, woodworking, fabrics and clothing services.
To recognise the contribution of Small business financing on development of Ghana
economics.
In the opinion of Schaper (2002), nations which have created financial advances in the
last two generations show without doubt that the growth of entrepreneurialism was the main back
bone of economic development and growth. Growth is fundamentally about increasing social
well-being, reducing poverty and hunger, and providing sustainable and meaningful jobs for all
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people (Nyame and Grant, 2012). Small businesses are consider to be the main and most
important factor behind a huge number of invention and contribution to the economic
development. It has direct relation with the expansion of national economy of a country as it help
to develop more and more option of job of young generation, includes more Foreign direct
investment and increase the export ratio. In present time, it has been determined that there are
number of beneficial scheme which are launched by governance of different nation with the only
motive to increase the SMEs. For example Twaiwan governance have launched "Branding
Taiwan Program" is a seven-year plan intended to help aspiring small to medium enterprises
(SMEs) establish their unique brand. It was launched with full knowledge of SMEs driving
ability the economic system especially in the medium to long term. Similarly government Ghana
can also certain plans and scheme to reduce the different problems faced by local people and rise
the social economic environment. Despite the vital position that small and medium-sized
businesses play in promoting global balanced industrial growth, Africa also needs to catch up
with the world. Private sector growth is extremely volatile across Africa. SMEs in South Africa,
Mauritius and North Africa are developing because of transparent and advance financial system
and financing option as well as policies of governance which help in developing SMEs. The
corporate market in Africa is essentially uncontrolled micro-enterprises, working alongside big
companies. Many businesses remain tiny since the corporate market is young and that there are
legal and financial barriers to capital accumulation (Adom, 2014). The lack of availability to
financial products is a vital restriction to most small companies in Ghana. In Africa, the option of
SMEs within the industrial segments are depended upon the different propositions such as large
scale industry, Small and medium scale companies and must be labour intensive, making work of
more worker per unit. Interestingly small businesses make greater use of limited resources than
big-scale companies. The explanation for that is not hard seeing, SMEs are employment-
intensive with little invested capital. Therefore, it's been claimed that fostering the SCE industry
in underdeveloped countries like Ghana would generate further job opportunities, contribute
towards a more equal distribution of income and achieve higher productivity through improved
technology. Consequently, they appear to experience higher productivity of wealth which is also
an economically sensible expenditure (Konadu-Agyemang, 2018).
The NBSSI is the main governance regulatory body in Ghana which is responsible for the
expansion and growth of medium and small scale companies. The government considers the
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industry as having the ability to make a significant contribution to lowering high unemployment
and to the development of Ghana's economies. SMEs make up a significant portion of Ghana's
business activity and can play a major role in reaching the output goals and objectives. The long-
term objective is for small and medium companies to optimize their participation to the
economic and social development of the nation in terms of manufacturing, distribution of income
and employability, and the greater integration of people and women with the nation's economy in
rural communities. Though established world markets might be declining because of the current
economic and financial problems. Ghana's size of the market is increasing and prospects
throughout Africa are indeed starting to look promising for small and medium-sized businesses
in the retail, food service, pharmacy, IT, agriculture and manufacturing industries. SMEs in
Ghana's main responsibilities are in agricultural production, production, trade and service.
Consequently, small and medium-sized enterprises have an important major role in promoting
growth, creating employment and helping alleviate poverty in Ghana. It is also stated that Ghana
has reported that small and medium-sized businesses compensate for 92 per cent of all
companies in Ghana and generate around 70 per cent of the country's GDP. Today, SMEs
compensate for more than 75 per cent of total jobs in the nation. Given the introduction of oil
and gas in Ghana, the percentage of SMEs is rising. This is because in the recent time there have
been number of policies and standeard which are made by the governance of Ghana for
companies which are dealing in oil production activities. In recent time, September 2019 Ghana
produced 203 thousand barrels of crude oil a day. Ghana's crude oil production rose from
110,000 barrels per day in October 2014 to 203,000 barrels per day in September 2019,
increasing at an annual average pace of 2.86%.
To figure out the Constraints of small business success and growth.
Due to the vast market reforms in the African region, small and medium-sized enterprises
face a range of limitations such as Lack of scope and scale in main development variables, and
higher production cost of operation to smaller companies (Glemarec, 2012). Some of the main
constraints are discussed underneath:
 Input Constraints: SMEs experience a number of restrictions on their factor market.
However, the many important restrictions have been the supply and expense factor. The
particular problems varied by region, but many of them were linked, depending on
whether the client considered their access, quality or cost to be the most important issue
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