Analysis of SME Credit Access in Ga East Municipality, Ghana, 2022

This project investigates the factors influencing Small and Medium Enterprises (SMEs) access to credit within the Ga East Municipality of Ghana. It begins by highlighting the importance of SMEs to Ghana's economy, noting their contribution to employment and GDP. The study identifies challenges faced by SMEs in accessing finance, including the focus of financial institutions on larger corporations. The project aims to identify sources of credit available to SMEs, assess the impact of mobile phone access, firm size, and business age on credit accessibility. The research employs various methods and analytical tools to examine these determinants, ultimately providing evidence on the factors influencing credit access for SMEs in the Ga East Municipality and offering recommendations to improve financial inclusion and support for these businesses.

PROJECT WORK SUBMITTED TO THE SCHOOL OF GRADUATE STUDIES
ACCOUNTING DEPARTMENT IN PARTIAL FULFILMENT OF THE AWARD FOR
THE REQUIREMENT OF A MASTER OF BUSINESS ADMINISTRATION IN
ACCOUNTING AND FINANCE.
APRIL 2022

CHAPTER ONE........................................................................................................................5
INTRODUCTION.....................................................................................................................5
1.1 Background of the Study...........................................................................................................5
Project Questions.............................................................................................................................8
1.4 Objectives of the Study..............................................................................................................9
1.4.1 Main Project Objective...........................................................................................................9
1.4.2 Specific Project Objectives.....................................................................................................9
1.5 Scope of the Study.....................................................................................................................9
1.6 Significance of the Study...........................................................................................................9
1.7 Project Outline.........................................................................................................................10
CHAPTER TWO.....................................................................................................................12
LITERATURE REVIEW.......................................................................................................12
2.1 Overview..................................................................................................................................12
2.2 Definition of SMEs..................................................................................................................14
2.3 Characteristics of SMEs..........................................................................................................19
2.3.1 Reliance on few employees..................................................................................................19
2.3.2 Simplicity..............................................................................................................................19
2.3.3 Market Area..........................................................................................................................20
2.3.4 Locations...............................................................................................................................20
2.4 Historical development of credit in Ghana..............................................................................21
2.5 Credit reforms and regulatory framework in Ghana................................................................22
2.6 Importance of SMEs to the economic development in Ghana................................................23
2.8 The Determinants of access to funding by SMEs in Ga East municipality.............................27
2.8.1 Firm’s Age............................................................................................................................28
2.8.2 Industry/Sector of the Firm...................................................................................................28
2.8.3 Firm’s Performance..............................................................................................................28
2.8.4 Firm’s Innovation.................................................................................................................29
2.8.5 Firm’s Size............................................................................................................................29
2.8.6 Level of Education................................................................................................................29

2.8.7 Collateral security.................................................................................................................30
CHAPTER THREE.................................................................................................................32
PROJECT IMPLEMENTATION.........................................................................................32
Overview...................................................................................................................................32
Methods....................................................................................................................................32
Materials/Data............................................................................................................................35
Analytical Tools.......................................................................................................................40
Ethical Issues Addressed.........................................................................................................41
Summary..................................................................................................................................41
Chapter 4: Results and Discussion................................................................................................41
4.1. Overview.............................................................................................................................41
4.2. Discussion of Results..........................................................................................................46
4.3. Implications for practice.....................................................................................................64
4.4. Summary.............................................................................................................................65
Chapter 5: Conclusion and Recommendations (1500)..................................................................65
5.1. Overview.............................................................................................................................65
5.2. Summary.............................................................................................................................66
5.3. Conclusion..........................................................................................................................66
5.4. Recommendation(s)............................................................................................................67
5.5. Limitation...........................................................................................................................67
REFERENCES..............................................................................................................................69

CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Universally, the impact of Small and Medium Enterprises (SMEs) on the development of general
(national) economies is substantial. In the advanced markets, minor businesses are
acknowledged as the central mechanisms or engines for development as well as growth. Truly,
research undertaken recently in urbanized markets, including the Freedman studies done in the
United Kingdom, established the fact that small (minor) businesses account for the uppermost
total of listed companies and result in substantial involvement in prosperity and the growth of the
economy. In Ghana, statistics gathered from the Registrar General’s Department advocate that,
92 percent of companies registered are micro, small, and medium scale enterprises. SMEs in
Ghana have also been well-known to offer about 85 percent of manufacturing employment,
which contributes to about 70 percent of Ghana’s GDP, and therefore has a catalytic influence on
employment, income as well as economic growth. SMEs can react swiftly to developments in the
marketplace. It does not adhere to an established hierarchy, which may cause the decision-
making process to be slowed. If a business owner sees a chance to fight a competitor, he can act
quickly because he does not need to wait for clearance from others. If and only if an employee in
a SME is quite knowledgeable, he is given the open opportunity to understand how other
departments work. However, large corporations have their own limitations for employee job
descriptions, which creates a significant barrier to an employee's advancement.
Nevertheless, funding of small and medium-sized enterprises (SMEs) has been a matter of
massive attention to both legislators and researchers as a result of the importance of SMEs in the
private sectors worldwide and the insight or fact that these firms are monetarily inhibited.
According to (Ayyagari, 2007) on average, SMEs account for the majority percentage of
manufacturing employment. More significantly, SMEs not only perceive access to finance and
the cost of credit is not only perceived by SMEs to be grand barriers or hindrances or obstacles
than large firms, but these dynamics coerce SMEs (that is, there is an effect or impact on their
performance) far greater than huge businesses. Small businesses have more control over their

output and client interactions than large corporations. For example, the owner may be in a
position to inspect product quality and correct any problems that arise, reducing risk and
preventing crises at an early stage.
Small businesses can contact potential clients directly and openly market them. The
digital revolution has reduced the cost of advertising. Start-ups and SMEs can promote brand
creative trademarks and other marketing collateral with a variety of cost-effective, professional
options.
The subject of what entails a small or medium enterprise remains a key issue in the
collected works. Diverse writers have regularly given dissimilar accounts to this group or class
of business. SMEs have certainly not been left out of the definition problem that is commonly
linked with notions or thoughts or theories associated with a lot of components. Firms described
by their size differ among researchers. Some endeavor to use the capital assets whereas others
use the skill of labor and revenue level. Others describe SMEs in terms of their legal status and
routine of production. In Ghana, Small enterprises are described as enterprises that are worth up
to $100,000 of fixed assets whiles they employ between 6 and 29 employees whereas Medium
enterprises are enterprises that are worth up to $1,000,000 of fixed assets and also employ
between 30 and 99 employees. These enterprises offer substantial prominence to the economy by
engaging the majority of the working populace, increasing GDP, and serving as an engine of the
economy for economic growth.
Notwithstanding their significant standing of SMEs in economic growth, SMEs worldwide, and
Ghana (Ga East municipality) to be precise, are still confronted with several obstacles that
impede entrepreneurial development. Besides poor management skills which is a consequence of
the absence of satisfactory training and education, SMEs financing and access to financial
sustenance (which is the focus of this study), is one of the challenges affecting the growth of
SMEs in Ghana (Ga East municipality). Financial institutions have conventionally fixated on the
large multi-corporate businesses due to the high risks and high transactional budgets involved
when dealing with SMEs. A gap is formed owing to the disregard; this is what the IFC and
others denote as the SME Financial Gap. According to Price Water House Cooper
(PWC)banking survey conducted in 2013, SMEs are often referred to as the Missing Middle in
the context of financial inclusion or access to financial (including banking) services. Financial
inclusion can be described as the state in which every person has the opportunity or chance to

suitable, preferred financial services and products, in other to use or manage their money
commendably. This is attained by financial competence as well as financial literacy on the part
of the consumer and access on the part of financial products, services, and advice suppliers. This
means that SMEs are chiefly ignored when it comes to banking services and other financial
institutions. In other instances, SMEs are neglected when it comes to financial support such as
loans, grants, among others.
– Profile of the Organization (or Business Sector/Industry)
The organization profile primarily revolves around small and medium-sized enterprises which
can be referred to as those organizations where the number of workforces associated with the
company or revenue generation is limited to a certain extent. In addition to that, the asset under
the management of this organization is also limited within a certain threshold. One of the
characteristic attributes of these organizations is that they are primarily non subsidiary business
entities that are independently owned. Following a recent study conducted by Deloitte in 2017, it
is observed that almost all of the small and medium-sized enterprises operating across Ghana are
having a workforce of fewer than 250 employees. On top of that, throughout the African nations,
small and medium-sized enterprises act as the backbone of the national economy; which
represents the significance as well as the gravity of contribution conducted by small and
medium-sized enterprises in terms of regulating the Ghana economy. On January 1st, 2005, a
new legislative principle was brought forward by the Ministry of finance in Ghana in terms of
revitalizing the national economy; with the help of consolidating SMEs that are operational
across Ghana. The main objective of this legislative principle is to undertake certain initiatives
through which funding programs can reinforce the facilitation of business aids in higher intensity

to small and medium enterprises. Additionally, the financial ceilings of aid acquisition are also
increased vehemently in this new legislation.
– Business Issue (or opportunity) Statement
The significance of SMEs in economic improvement is well recognized, SMEs in many
countries, developing countries in particular are not performing well (kessy & Temu, 2010). One
of the factors for poor performance is the lack of adequate finance to finance the operations and
expansion (Rweyemamu and Venter 2004). The funding of small and medium-sized enterprises
(SMEs) has been an issue of boundless concern to both legislators as well as investigators due to
the impact of SMEs in private sectors worldwide and the opinion that financially these firms are
inhibited. According to Ayyagari, et al (2007) on average, SMEs account for the majority
percentage of manufacturing employment. Since approximately 33% of the Ghana national
income is derived from businesses of small and medium-sized enterprises. Additionally, more
than 50% of the employment is only projected by medium and small-sized enterprises in
emerging economies such as Ga East municipality in Ghana. More essentially,
opportunity(access) to funding and the rate of credit is not only identified by SMEs to be
superior impediments as compared to big firms, on the other hand, but these features also coerce
SMEs (that is, disturb their performance) further, about huge firms.
Many SMEs do not have sufficient finance because they are unable to access bank loans (Nasser
et al 2003). Even those who can get access to bank finance, are unable to sufficient funds as they
request. While some SMEs get a small sum of the loan and some do not get at all, numerous
authors such as (Kessy and Temu, 2010; Kuzilwa, 2005; Rweyemamu and Venter, 2004; and
Nasser et al, 2003) argues that the inability to access finance is a challenge which impede the
performance of SMEs and in particular growth of SMEs. For example, Kessy and Temu (2010)
claim that “SMEs have very limited access to financial services from formal financial institutions
in particular credits to meet their working and investment capital needs”. While it is
consequently obvious, that access to finance is one of the elements that hamper the performance
and development of SMEs in the Ga East municipality; determinants of credit access have not
been researched. This study thus pursues to scrutinize the dynamics which determine access to
credit for SMEs in the Ga East municipality.

Project Questions
 What are the factors that influence of SMEs access to credits within Ga East municipality?
 What are the requirements needed by SMEs in Ga East municipality for crediting collateral
security?
 What are the effect of electronic banking in accessibility of credit for SME's in Ga East
municipality?
 What is the experience of manager and age of business in context with SME's in Ga East
municipality?
1.4 Objectives of the Study
1.4.1 Main Project Objective
To investigate the factors that influence SMEs access to credits within Ga East
municipality.
1.4.2 Specific Project Objectives
 To identify the sources of credits available to SMEs in the Ga East municipality.
 To assess the effect of access to mobile phones on accessibility of credit for SME's in Ga
East municipality.
 To assess the influence of firm size on the SME's access to credit in Ga East
municipality.
 To assess the influence of age of business on the SME's access to credit in Ga East
municipality.
1.5 Scope of the Study
The study concentrated predominantly on the determinants of credit accessed by small-scale
enterprises in Ga East municipality and advanced to designate the accessibility levels of the
diverse source of credit and
assess the elements that affect the possibility of small Scale Enterprises requesting funding. This
study was conducted mainly within the boundaries of Ga East municipality.

1.6 Significance of the Study
Access to credit is seen to be vital to the development and sustainability of small-scale
enterprises in Ghana and Ga East municipality to be precise. The result of this research will offer
complete evidence on the determinants of access to credit as well as their impacts on access to
credit by small and medium scale enterprises in the Ga East municipality. This research will also
make available detailed and laborious examination (analysis) of the components that influence
the probability of small-scale enterprises requesting funds.
Supplementary, this study will enlighten government, FIs, SMEs, and all engrossed interested
parties (that is stakeholders) about the elements or components that confine FI's delivery of credit
to SMEs. To end with, this research will add to the literature in this region of study that can
generate by future research.
1.7 Project Outline
This research is structured into five episodes which are arranged in the following manner; First
and foremost is chapter one which entails the background and viewpoint of the problem in the
study area. It encompasses predominantly the problem statement, objectives of the study,
significance of the study, the scope of the study the methodology used in this study. Chapter two,
on the other hand, captures a review of literature on the research topic. Chapter three also deals
with the Methodology. Chapter four depicts data analysis and presentation of findings.
Lastly, chapter five looks at the conclusion and recommendations of the findings based on the
analysis in chapter four of this study.
Summary
To summarize, it can be inferred that both medium and small-scale enterprises operating in Ga
East municipality across Ghana can enhance their business operation; provided they have
substantial access to credit facilities from the financial institutions and also help them to broaden
the scope of the business. Factors relevant to accessing credit are also evident throughout the
study with proper evidence so that organizations can operate fluently. Strategies that are

pertinent with credit accessing regulation in organizations are also discussed in the due course of
the study. Criteria of loan eligibility and how the organization can be able to fulfill the eligibility
criteria are also encompassed in the study. It is an important aspect of the research because, for
non-banking financial institutions, the strategies of determining the eligibility criteria are
completely distinct from banking financial institutions.

CHAPTER TWO
LITERATURE REVIEW
2.1 Overview
This section presents an evaluation of significant literature about this topic. This chapter also
aims to lay a theoretical foundation for the appraisal of the importance of the small and medium
enterprises (SMEs) sector to the Ga East municipality.
Firstly, the definition of SMEs is deliberated on, and the characteristics of the SMEs. It
discusses the historical development of credit in Ghana in general as well as the access to credit
and finance in Ghana by small and medium scale enterprises.
Additionally, it assesses the credit restructurings as well as the supervisory structure in
Ghana and a momentary performance of the credit and FIs in Ghana and some vitally interested
parties of the credit and finance sub-sector in Ghana. It further discusses the role and prominence
of the SME sector in economic development. The limitations faced by SMEs are also discussed.
Lastly, the determinants of access to funding by the SMEs within GA East municipality are also
discussed.
Theoretical Literature
Credit Rationing Hypothesis
The problem of lack of access to credit among SMEs can be described through the theory
of credit rationing propounded by Stiglitz and Weiss (1981). In their explanation, Stiglitz and
Weiss (1981) explained that lack of access to credit is due to imperfections in the financial
market, resulting in credit rationing-a situation where either some applicants’ loan applications
are honored and some rejected even though they possess similar characteristics and are willing to
pay higher interest rate or their applications for credit are rejected because of the limited supply
of credit. Stiglitz and Weiss (1981) show that in equilibrium, the loan market can be
characterized by credit rationing. Due to information asymmetry in the loan market, which
results in adverse selection, sorting out of good borrowers from bad ones and moral hazards
that concern the actions of borrowers, which they also referred to as “incentive effect”.
Adverse selection results from the uneven probabilities of repayment by different
borrowers. Hence, banks use the interest rate as a means to distinguish good and bad risk

borrowers. Stiglitz and Weiss (1981, p. 393) suggest that “the interest rate which an individual is
willing to pay may act as one such device; those willing to pay higher interest rate may on
average be worse risks; they are willing to borrow at higher interest rate because they perceive
their probabilities of repaying the loan to be low”.
They also noted that moral hazard refers to the situation where the behavior of borrowers
may change after the loan contract has been made because borrowers may engage in
adverse actions that may lower the probability of paying back the loan. In their opinion,
borrowers may undertake “projects with lower probability of success but higher payoffs when
successful” (Stiglitz and Weiss, 1981, p. 393).
Using demand and supply analysis, Stiglitz and Weiss (1981) explained the determination
of equilibrium interest rate. The supply of loans is influenced by the bank’s expected returns at
the
‘optimal bank rate’ well-defined as “the interest rate at which the expected return to the bank is
maximized”. When there is excess demand for loans over supply, the interest rate rises.
However, banks would not lend above the optimal rate because it is riskier, and the expected
returns of banks would be lower.
The supply of loans is also influenced by the amount of loan, collateral, or
equity demanded by banks; however, increasing collateral beyond an optimal value may reduce
the returns of banks because of a reduction in average risk aversion of borrowers or result in
the undertaking of riskier projects. This is because there would be a reduction in the equity of
borrowers who could undertake smaller projects with a higher rate of failure. Consequently,
banks would choose to deny loan applications because they are unable to distinguish
between risky applicants from those successful applicants, resulting in credit rationing.
The theory of credit rationing is based on the assumptions that; the credit market is
characterized by many banks and borrowers, both of whom are neutral when it comes to risk and
aim at maximizing their profits.
On the one hand, banks seek to maximize profit by the interest rate charged and the
collateral they request from borrowers. Again, borrowers also choose projects that maximize
profit, while at the same time increasing the probability of repaying the loan. The costs of these
projects are assumed to be fixed and indivisible.

The life cycle theory and SME financing
Businesses exist as living organisms and also go through a life cycle. From start-ups, they go
through several growth phases. The literature regarding the number of SME growth stages has
been diverse. Consequently, there is no consensus on the number of growth stages for SMEs. For
instance, whereas Steinmetz (1969) proposes three stages of SME growth, Lewis (1987) and
D’Amboise and Muldowney (1988) suggest five growth stages. However, the growth stage the
SME finds itself determines the type of financing it requires. According to Berger & Udell’s
(1998) financing life cycle theory, financing preferences of SMEs change as they move along the
trail of growth. SMEs that find themselves at the start-up and nascent stage is usually associated
with a high incidence of information asymmetry (Huyghebaert & Van de Gucht, 2007; Hyytinen
& Pajarinen, 2008). As a result, they often depend on personal and informal sources of credit,
since formal lenders tend to relegate them to the background. This happens because they usually
lack a good track record (Huyghebaert & Van de Gucht, 2007) and do not have enough assets to
meet the collateral requirements of formal lenders.
However, as SMEs advance along the growth path, their desire for informal credit wanes,
and their quest for formal credit increases. This happens because as they grow, they come to a
point where they can meet major requirements of formal lenders such as collateral (Domeher et
al., 2017) and evidence of a good track record (Bhaird & Lucey, 2010). Hence, they tend to seek
credit from formal sources. The above discourse reflects the fact that business age and size
matter in the choice of financing source. Even though the financing life cycle encompasses
equity finance where start-up businesses may subscribe to private equity and more mature and
larger ones may go public, debt finance is highlighted since this is the focus of the project.
2.2 Definition of SMEs
A firm can be classified in terms of two groups of characteristics (Bolton, 1971): quantity
characteristics, such as employment, assets, turnover; and quality characteristics, such as
innovations and organizational structure.
Nonetheless, it can be noted that the latter is much more problematic to measure.
Consequently, the most common benchmarks for disparity amongst small, medium, and large
firms are the number of properties, of which the magnitude of employment and capacity of
yearly revenue is the most recurrently used.

Correspondingly, the world bank (2013) categorizes an enterprise as SME on the basis that any
of the subsequent standards or benchmarks namely, size of assets, annual sales, or several
employees are met, as follows: microenterprises are enterprises that have total assets or year
sales up to $10,000 and also employ up to 10 personnel in addition; small enterprises are
enterprises that have total assets or annual sales to be up to $3 million as well as employing up to
50 personnel, and medium-sized enterprises are described as enterprises that are worth total
assets or annual turnover to be up to $15 million as well as employing up to 300 employees.
As noted by Kushnir (2010), the decision to choose a particular SMEs definition relies on
many components among which include the country’s business culture; the population of that
particular country; industry; among others. She mentions the lack of data on SMEs as a major
challenge because of the circumstance that numerous SMEs function in the informal sector,
expressly in unindustrialized countries. Additionally, the absence of a constant characterization
of SMEs is because countries have dissimilar structural. From the abovementioned, there is no
widespread meaning of SMEs, which relates to all countries.
This is owing to the datum that SMEs are not identical; they diverge from one country to
the other and from industry to industry. On the other hand, SMEs are generally privately-owned
firms that have relatively a small number of personnel and a low volume of sales and fixed assets
(Nkuah et al., 2013).
After the overhead, SMEs have been demarcated along with a comprehensive range of
dimensions and sort or category. About dimension, several parameters which include the number
of employees, total net assets, annual turnover, total net assets, the total number of personnel
(employees), and outlay level are used across the globe to distinguish between SMEs (Kushnir,
2010). For example, the European Union (EU) describes SMEs to be the type of firms that
engage less than 250 individuals, with yearly sales not beyond $67 million and/or total net assets
not surpassing $56 million.
Small enterprises are categorized to be the sort of businesses engaging 10 to 49 people
with yearly sales not exceeding $13 million. However, according to World Bank (2007a), the
most commonly used benchmark is the number of workforces, due to the relative ease of
amassing such material in any country.
Established on employee headcount, Table 2.1 beneath provides a summary of the
proportional descriptions of SMEs across the globe comprising the European Union (EU), the

United States (US), and some of the emerging economies of BRICS. BRICS is an acronym of a
group of leading developing economies consisting of Brazil, Russia, India, China, and South
Africa. With the likely exemption of Russia, the BRICS affiliates are all embryonic economies or
recently technologically advanced countries, differentiated by their large, fast-growing
economies, and substantial effect on regional and international affairs (Schaper, 2010).
Table 2.1: Comparative definitions of SMEs
Definition by Micro enterprise Small enterprise Medium enterprise
Number of employees
Ghana 1-5 6-29 30-99
US Small business
administration
1-19 20-99 100-499
European Union 1-9 10-49 50-249
Brazil 1-9 10-49 50-99
China 1-299 300 300-3000
South Africa 1-5 20-49 50-200
Source; (Schaper, 2010).
As reflected in Table 2.1, a small business in Ghana is an enterprise with 6 to 29
employees while a medium-sized enterprise engages the services of between 30 and 99 persons.
Though the same medium enterprise would be categorized as a small business in the US; a
business is regarded as medium-sized if it employs less than 500 people whiles SMEs are
defined as a business with 19 or lesser personnel in New Zealand (Ministry of Economic
Development, 2011). The EU and Brazil use the same perimeter to classify micro and small
enterprises but dissimilar cut-offs for the medium enterprise limit. Hence, many businesses in
America and Europe viewed as medium enterprises with 250 to 500 employees may be
considered to be big enterprises in South Africa where firms with up to 200 employees are
classified as large. However, given China’s huge inhabitants and the labour-intensive features of
its SME sector, a small business can employ up to 3000 employees depending on the industry
(Kongolo, 2010). Hence it is virtually difficult to associate SMEs globally since they vary
basically over the threshold heights for the difference between small, medium, and large firms.
From the above dialogue, it is evident that there is no widespread meaning of what
establishes an SME. It can be inferred that SME cataloguing standards differ in several nations.

Although SMEs function practically in all industries, they diverge greatly in their nature and
significance from industry to industry and from nation to nation.
Gaining a substantial amount of access to credit from the perspective of business is
quintessential. Because for a business to revitalize its working function and maintain the bottom
line, it is necessary to have constant access to credit. In the recent economy of Ghana, without
having appropriate credit access, it is not available for small and medium enterprises to maintain
their workflow. From an apparent vision, it would seem that access to credit is only a means to
make purchases. However, in reality, it is not only limited to that extent; but also extends to
fulfilling obligations of everyday business operation in small and medium enterprises in Ga East
municipality in Ghana. To put it in statistical perspective, 27% of small and medium enterprises
in Ga East municipality in Ghana are completely functional because of their indomitable access
to credit. In a different perspective, it can be stated that three of the four businesses operating in
Ghana have mentioned that because of inappropriate channels through which credit can be
accessed. They have encountered several impediments in terms of managing the working
function, but on a similar note, these enterprises have also encountered hindrances that impeded
the seamless growth of the micro economy of Ga East municipality in Ghana extensively.
Several important aspects should be taken into consideration in terms of projecting whether a
business should be able to get credit access or not; depending on how the financial management
of the organization takes place. The financial institutions which are in charge of extending the
line of credit determine whether the organization is eligible for the credit or not. A survey carried
out by MasterCard in Ghana in 2018, it is revealed that 46% of businesses operating in Ghana
are experiencing credit impediments because inappropriate financial management strategies are
incorporated in terms of segregating personal expenses with business expenses. If appropriate
financial management strategies are incorporated in terms of managing the company's financial
perspective; then not only the business should be able to determine the ongoing trend associated
with the industry; but at the same time, the small and medium enterprises would also be able to
undertake better financial decisions about their business operation. Hence an inference can be
drawn that as far as business credit is concerned concerning small and medium enterprises
operation, a business which has an exemplary financial management track record can get suitable
access to credit from the financial institution so that the organization’s working function In other
words, small and medium enterprises that are still functioning as of now in Ga East municipality

in Ghana is capable of expanding their business horizon, provided they have convenient access
to credit. This is the motivation as to why the research is conducted in this particular concept.
From the argument above, it can be established that there is no harmony in the
characterization of SMEs, as businesses vary in their heights of employment, revenue as well as
capitalization. Hence, descriptions centered on size, once employed to one subdivision might
result in all enterprises categorized as small, while similar dimension description employed to a
dissimilar segment would bring about the enterprises demarcated as huge (NCR 2012). The
nonexistence of a distinct explanation of SME contrasts bank lending practices somewhat
inconsistent (Calice, Chando, and Sekioua, 2012:9).
Conversely, concerning our research, we looked at all the registered SMEs in the Ga East
municipality which has their records with the national accreditation board for small and medium-
sized enterprises in the Ga East municipal assembly.
Also, our research was based on the credit rationing theory. Credit Rationing Theory is a
financing gap theory that was advanced by Stiglitz and Weiss (1981) who in their instigation,
maintained that agency complications (a conflict of interest amongst administration
(management or agents) as well as stockholders (owners) of the entity) and information
irregularities were the foremost cause why SMEs had inhibited access to funding. They reasoned
that only SMEs knew their actual financial framework, the genuine power of the outlay project,
and the effective purpose to pay off the liability, that is, firms had greater private information
(asymmetric information). Therefore, the bank manager made judgments under distorted
information, also operated under a moral threat as well as adverse selection risk.
Notwithstanding the discrepancy in the relative designations of SMEs, the enterprises
have some shared features. Firstly, the position of management, as well as ownership, are
conferred on a single person or family, bringing about subjective decision-making. Furthermore,
SMEs need small capital start-ups in common, irrespective of the country in which they are
founded or the type of industry. But, SMEs encounter complications in drawing exterior funds
for growth; hereafter they depend greatly on investment from friends and relations.
Additionally, there is no dissimilarity amongst business and private funds in this manner
resulting in in-efficiency and non-performance of many SMEs. The subsequent segment
addresses the distinguishing features of SMEs which effects their access to finance.

2.3 Characteristics of SMEs
The word SME is used in the European Union and other international organizations to label
small to medium enterprises-companies that have a restricted, quantified number of personnel.
The United States characteristically uses the SMB, for small to medium businesses. Cataloging
as an SME is established on the number of employees, mostly between 10 and 250 to 500, reliant
on the country in which the business is situated. The Small Business Administration (SBA) of
the US describes a small business as “one which is independently owned and operated for-profit
and is not dominate in its field” (Hughes 2011). All SMEs share identical mutual features
irrespective of the industry and indigenous markets which comprise the following;
2.3.1 Reliance on few employees
Numerous SME firms are fairly small and have only limited employees. This inadequate
staff is expected to carry out all essential tasks comprising accounting, marketing, innovation,
production, and sales for the whole business; the proprietor of the enterprise might as well act as
the administrator who supervises all aspects of the entity. This may be a hindrance where the
personnel is not equipped with the prerequisite set of skills to execute compound tasks well;
though, this sort of business edifice stimulates long-term firmness rather than concentrating on
short-term results. Since the number of employees working in small and medium scale
organizations is extremely limited in nature, managing this employee can be a very convenient
responsibility for the concerned authority; which means delegating responsibilities to individuals
and ensuring that the task is completed within a predetermined time frame is highly probable
concerning logical companies. In addition to that, addressing the queries for resolving grievances
that are registered by the target market in which the small-scale company operates is also
feasible in nature.
2.3.2 Simplicity
The SME is a modest corporate framework that permits the firm to be very elastic as well as
creates the essential variations swiftly deprived of such necessities as addressing board members
or shareholders for endorsement. The elasticity, conversely, does not certainly ensure the
organization is recognizing domestic or nationwide code of practice which a panel or legal team
of a huge entity would analyze preceding to setting such alterations into place. The simplicity
associated with the working function of small and medium scale enterprises is one of the greatest

advantages that can be capitalized on by these industries as well as management authorities in
terms of banking on new opportunities that are completely unexplored by large scale
organizations in Ga East municipality in Ghana. Since the approach of managing a working
function is quite distinct from large-scale companies; the probability of this organization
experiencing hindrances would also be reduced. However, if appropriate financial
management strategies are not incorporated at the initial phase; then the probability of this
organization experiencing an impediment down the line is inevitable. That is why this category
of the organization is in dire requirement of financial support from the government.
2.3.3 Market Area
Small-scale businesses aid a quite reduced or less significant zone as compared to
organizations or large private entities. The smallest-scale businesses aid distinct populations, for
instance, a handiness shop in a rural settlement. The actual description of small-scale precludes
these enterprises from attending to regions far grander than a limited location, because
developing further than that will upsurge the measure of a small business’s maneuvers as well as
drive it into a different category. The market area upon which the small and medium scale
enterprise operates also crucially determines how the financial performance of the small and
medium scale would play out. In other words, if an appropriate market location is selected; then
the feasibility of the small-scale organization to experience profitability within a short span of
operation is highly probable; concerning other locations which are not at all suitable for
appropriate market conditions.
2.3.4 Locations
A small–scale business, by description, could be discovered only in limited areas. These
entities are not probable to owe new sales openings in numerous nations or states, for example. A
countless quantity of small-scale companies works from a retail shop service outlet or solitary
office. Deprived of any company convenience, it is possible to manage a small enterprise straight
from the comfort or convenience of your home.

2.4 Historical development of credit in Ghana
Giving money to individuals, anticipating that the money would be paid back plus interest is
an ancient occupation. It can be noble business, but it is also a very precarious business.
Undeniably, the notion of credit is not new in Ghana (Kwaku. P, 2010).
There always has been the practice of people saving and/or taking minor advances from
individuals and groups within the framework of self-help to commence businesses or farming
endeavours. For instance, existing evidence proposes that the paramount credit union in Africa
was established in Northern Ghana (Upper West-Jirapa) in 1955 by Canadian Catholic
Missionaries (Johnson P.A, 2007).
As time elapses, the credit subdivision has flourished as well as progressed into its modern
form, thanks to numerous financial segment plans as well as packages embarked on since
independence by diverse regimes. Included are enumerated below:
 Delivery of bankrolled (subsidized) funds in the 1950s
 Addressing the financial need of the agricultural and fisheries sector by establishing the
Agricultural Development Bank in 1965.Establishment of the Agricultural Development
Bank in 1965.
 Rules and regulations such as the requirement that commercial banks set aside 20% of
their total portfolio, as well as the establishment of Rural Community Banks (RCBs) in
the 1970s and the early 1980s to encourage or stimulate lending to agriculture and small
scale enterprises.
 Moving from a restraining financial subdivision administration to ease up administration
in 1986
 Allowing the establishment of dissimilar or diverse classifications or sort of non- bank
financial institutions, encompassing credit unions as well as savings and loans companies
through the declaration or decree of the PNDC Law 328 in 1991.
The programs have resulted in the development of three broad classifications of credit as well
as FIs which are enumerated below:
Formal suppliers such as savings and loans companies, rural and community banks, as well as
some development and commercial banks.
Semi-formal suppliers such as credit unions, financial non-governmental organizations (NGOs),
and cooperatives.

Informal suppliers such as “susu” collectors and clubs, rotating and accumulating savings and
credit associations (ROSCAs and ASCAP), traders, moneylenders, and other individuals.
About the regulatory outline, Savings and Loans Companies are controlled under the
Non-Banking Financial Institutions (NBFI) Law 1993 (PNDC Law 328), whereas Rural and
Community Banks are controlled or structured under the Banking Act 2004 (Act 673).
However, the controlling or supervisory structure for credit unions is now being
established, and this would identify their dual nature as cooperatives as well as FIS. The
remaindered of the performers like ASCAP FNGOs, as well as ROSCAS, are yet to have legal
and governing frameworks.
Agricultural Services Investment Project (ASIP), the United Nations Development
Programme (UNDP) Microfinance Project, the Community Based Rural Development
Programme (CBRDP), Rural Enterprise Project (REP), the Social Investment Fund (SIF),
Financial Sector Strategic Plan (FINSSP), the Rural Financial Services Project (RFSP), as well
as the Financial Sector Improvement Project (FINSIP) are all programs currently encompassed in
addressing the sub-sector in Ghana. (Johnson P.A, 2007)
2.5 Credit reforms and regulatory framework in Ghana
With the introduction of SAP (Structural Adjustment Programme), lending and deposit
charges, as well as credit regulators were meaningfully abridged. Obstacles to admission into the
financial division and money were also eradicated. The Reserve Bank Act was reviewed to
eradicate separation as well as to enhance rivalry. Limitations on the employment of excess
reserves and the interest cap on them were jettisoned, releasing such resources for outlay in the
market at the sovereign market tariffs.
The accomplishment of these as well as further changes in the financial subdivision can be
witnessed in the enhancements towards the gathering of reserves. This region is one of the very
uncommon that encountered progress under SAP’s Millennium Economic Recovery Programme
(MERP). The sector was flooded with lots of new competitors. Rivalry as a consequence of fresh
participants also added to the upgrading of the variety of services and products delivered to
consumers. Lending by the financial segment amplified in 1991. Though investigations designate
that rural and underprivileged urban societies did not profit from these restructurings.
Extraordinary interest charges that described credit from banks and other finance houses trickled

over into the informal sector, with money lenders charging even higher interest rates than banks
(Moyo, 2001).
In Ghana, the power assigned by the law to overseas well as police the permitting or
accrediting and set-ups of credit agencies is the Bank of Ghana. The Bank of Ghana (BoG)
would certify that credit agencies act in a way that is expected of them, and desist from the
activities in which they are expected to undertake.
This supervision or controlling of credit establishments is cited in the Credit Reporting Act,
2007(Act 279). According to the credit agencies, if you acquire a loan from a FI and are not able
to service or repay (default) that loan or your absconder with the money, the bank, whether they
can locate you or not, would furnish the credit bureaus with this information. If you can service
the loan too, this information is given to the credit bureaus. This is done to ensure the credit
worthiness of the borrower from the credit bureaus by asking them for information concerning
you when next you endeavor to request for financial assistance from any FI or attempt to acquire
any service on credit. The way this credit reporting is done in a different place, your data is
captured into the databank of credit agencies, even if your application for a loan or credit is
repudiated. Or, even where you are unable to pay your utility bills over a lengthy period, credit
agencies can also capture such information.
The worthy thing however is that; you can request a copy of all the data held about you in
writing to any credit agency at a fee. (Kwaku P, 2010).
In a nutshell, a credit agency (according to the current regulation) has been given the
mandate to possess information that would assist creditors and FIs to evaluate threats as well as
take the correct resolutions on credit as well as loan submissions from the public in general.
2.6 Importance of SMEs to the economic development in Ghana
There is a universal accord that SMEs contribute confidently to the economic as well as
social development of developed and developing countries. Economically, SMEs are known as
engines through which development purposes of developing nations can be attained. As such,
SMEs perform a substantial role in creating employment and revenue for both the rural as well as
the urban population and tend to engage more labor demanding (intensive) technology as
compared to huge firms (Newman, 2010).

The role played by medium and small-scale enterprises in terms of rejuvenating the national
economy of Ghana is crucial. For the reason that the characteristic features which are associated
with SMEs revolve around increasing production of a nation, which would require a workforce
to substantiate their respective business operations. This can necessarily be translated into the
fact that the rate of unemployment would reduce the nation as soon as the number of SMEs
increases. Apart from employment generation, the scope of economic contribution in export
facilitation increases the equitable income distribution in Ghana to a certain extent, which can
consolidate the backbone of the national economy in Ghana.
The SMEs that are operating in Ghana can be broadly categorized into traditional SMEs as
well as modern SMEs. However, the number of modern SMEs is increasing day by day as per
the report published by MasterCard. The characteristic difference between the traditional SME
and the modern SME is that the workforce, as well as technological advancement, is
substantially distinct in the modern SME concerning the traditional SME. The regulation of
modern SMEs in Ghana is also bringing certain legislations which can further assist the Macro
economy of Ghana extensively. The scope of investment associated with SMEs also increases
the number of chain operations which can further give employment scope and opportunities for
return on investment which can captivate willing investors to get a line with SMEs.
The current political regime in Ghana has brought forth varieties of legislation to encourage
and support entrepreneurs. The main cause behind extending this assistance from the government
by furnishing legislation lies behind the consequences of SMEs' operation. For emerging
economies, small and medium enterprises can not only change the entire dynamics of the macro
economy but also assist the nation to get ahead of its competitive curve eventually. As far as
technical support is concerned, SMEs can bring forth the necessary change and make
amendments in infrastructure development across the nation; which can seamlessly give
hundreds and thousands of job opportunities for skilled labor in Ghana. Some of the noticeable
legislations would not only extend preferential access of credit to the businesses but at the same
time, preferential policy support is also extended to small and medium-sized enterprises in Ga
East municipality in Ghana.
In the manufacturing sector alone approximately 78% of the current projects that are
ongoing in Ghana are spearheaded by small and medium-sized organizations. To put it in simple
perspective it can be stated that the contribution of small and medium organizations in the

manufacturing sector in Ghana is simply paramount. Not only are they incorporating new
technologies which are recently developed, but at the same time, there are also generating
employment opportunities in the thousands. The manufacturing sector alone contributes 18% of
the gross domestic product in Ghana. Consequently, it can be inferred that small enterprises are
the backbone of the national economy. It is a value-added measure that is incorporated by the
government by subjecting preferential policy treatment towards the medium-sized enterprises in
the small scale organization in Ghana.
Of late, a recent trend is also taking place in Ga East municipality which is oriented
towards export promotion. It would address the current importance of the manufacturing sector.
In 2019, it is pointed out that one of the crucial shortcomings of the manufacturing sector which
is spearheaded by these small-scale organizations in Ghana is imbalances in terms of regulating
payments accounts. Export promotion would permanently mitigate the shortcoming extensively.
Unlike the large scale organization where the accumulation of wealth is primarily emphasized;
small-scale organization solely believes in equal distribution of income and opportunities
through which the operation of small scale business enterprises can be multiplied within a short
period. This is a strategic action undertaken by the small-scale organization in terms of
revitalizing the national economy of a country, especially in the emerging ones like Ghana.
These opportunities can be capitalized on by skilled labor that is already available in Ghana. The
concentration of wealth is not emphasized necessarily in medium-scale enterprises. However,
widespread equal distribution of wealth is prioritized as well as practiced by the medium-scale
organizations in Ga East municipality. The role of entrepreneurs in the context of rebuilding the
national economy is significant. However, large companies cannot substantiate the ambiance
where the growth of entrepreneurs can take place in Ghana. Consequently, small-scale
organizations have given opportunities for entrepreneurs to explore areas where untapped
resources have potential. As a consequence of that, the probability of these entrepreneurs starting
their small-scale industry or even growing up to medium-scale organizations within a few years
would be a beneficial factor for the Ga East municipality’s micro-economy. Moreover, the
growing entrepreneurship culture would give rise to a plethora of startup cultures which can
further alleviate the economic condition associated with Ga East municipality. Small-scale
organization maintenance is a challenging responsibility that entrepreneurs cannot always
resolve. As a result of that, the preferential support policies are forwarded by the government

authorities; so that financial aid can be provided by municipalities' concerned government
agencies which can resolve crises in small-scale organizations. Accumulation of financial
support from government agencies can forward the SMEs extensively which in turn can bolster
the municipality's economics faculties extensively. Individuals who are deprived of accessing
opportunities can also be aided by the growth of small-scale companies. The notion of lean
production and optimal utilization of resources can be effectively practiced by small-scale
organizations which is a challenging responsibility for large-scale companies. Additionally,
medium-scale enterprises can effectively utilize the resources available to fulfill the preferences
of the target market. Therefore, excess products can be oriented for export promotion which
would open up new horizons for business opportunities to be capitalized on by small and
medium scale enterprises.
The significance of SMEs to economic growth has made them focal points in policy
making in both developed and developing economies (Eikebrokk and Olsen, 2007; Maredza and
Ikhide, 2013). There is evidence that SMEs are the backbone of the nation's economy
particularly in developing and emerging countries (Beck et al, 2006). For example, in India and
China, SMEs dominate the industrial and commercial infrastructure (Ebrahim et al, 2011).
SMEs also have advantages over large established firms as they are capable of adapting
much easier to market conditions because of their agile state (Abor and Quartey, 2010).
Typically, they are more flexible as a result of their flat hierarchical structures and are
consequently capable to react quickly to variations in the outer economic surroundings.
Therefore, the turnaround period for the development of a new product tends to be quicker for
SMEs than for larger firms.
Furthermore, SMEs are more labor demanding about bigger firms and consequently are
associated with lower capital costs about job creation (Musara and Fatoki, 2012). Less capital per
worker is used in small businesses and can use capital more effectively and efficiently as
compared to larger firms. Where they are situated in the urban zones, SMEs stimulate
unexploited resources and talents, adding to a more unbiased spreading of income, which plays a
vital role in sectoral balance and regional development and therefore helps fortify political
steadiness in the economy.
2.7 The Constraints Faced by SMEs

Credit is an indispensable need for enterprises, predominantly SMEs which however
minute (small) can mutate into bigger firms when given the chance. Nonetheless, these same
enterprises lack the desirable exterior finance. In addition, Fatoki&Odeyemi, (2010) observed
that about 75% of SMEs in Ghana failed within the first two years of operation due to several
challenges that impede their survival. Fundamental amid these encompass imperfectly
sophisticated workforce, crime, and corruption, inefficient legal systems, restricting labor code
of practice, the nonexistence of administrative and entrepreneurial skills, an unproductive
government bureaucracy, inhibited access to financing, and insufficient provision of
infrastructure.
According to Fatoki (2012), there is evidence that regulatory constraints resulting from
government bureaucracy place a proportionally high burden on SMEs, especially those in
developing economies such as Ghana. As such, SMEs repeatedly find it problematic to obtain
regulatory authority to conduct business undertakings. Regulatory barriers prevent SMEs from
operating in sectors of the economy in which local governments have a vested interest in
protecting state-owned enterprises (Newman, 2010). Also, the restrictions encountered by SMEs
are affected by demand and supply-side elements. Demand-side dynamics relate to the debtor
whereas the supply flank elements relate to the creditor (financial intermediaries). comprising in
the demand-side factors are deficiency of information concerning bank products and services and
the solicitation procedure, being ‘discouraged’ by the perception that low-income earning clients
are denied loans by financial institutions, the nonexistence of collateral, and absence of
repayment capacity due to lack of secure income.
The supply-side factors are deficiency of tailor-made products, the resolution of either to
a loan or not, and in what quantum (Chen and Chivakul, 2008) among others. The existence of
credit constraints or the credit access difficulty is a result of the demand and supply-side factors.
By the principle of demand and supply, a credit constraint arises if the demand for credit exceeds
what financial intermediaries can offer (Ruiz-Tagle, 2005). From an alternative viewpoint,
Banerjee and Duflo (2004) assert that a credit constraint firm is unable to borrow as much as it
would like to at the going market rate.
Empirical Literature

2.8 The Determinants of access to funding by SMEs in Ga East municipality
Credit access in this framework refers to the likelihood that individuals or enterprises can
secure or access credit or loans from financial institutions (commercial banks) as well as Non-
financial institutions. Alhassan and Sakara (2014) find that the number of firm characteristics
such as fixed assets possessed, the size and form of business as well as and the sector of business
in the economy are important success factors in accessing bank finance in Ghana. Osei-Assibey
(2014) finds that a firm’s age, asset structure, and ownership of bank accounts increase the
likelihood of having access to finance among rural non-financial enterprises in Ghana.
2.8.1 Firm’s Age
Numerous studies have reasoned that older firms encounter little limitations in accessing
credit as compared to fresher firms. For instance, Beck and Cull (2014), this is that older firms
tend to have a greater reputation which increases the chances of accessing credit (Osei-Assibey,
2014).
This is as a result of the deficiency of sufficient information on the financial performance of
young as well as new firms makes it challenging for financiers to authorize their demand for
credit (Adomako-Ansah, 2012). Furthermore, the information prerequisite by the creditors at the
spell of offering financial assistance may be restricted for newer firms as a result of a lack of
conventional track record making the engagement charges correlated with loaning to fresher
firms moderately higher (Pandula, 2011). Moreover, younger, as well as fresh businesses or
enterprises, are less likely to meet the security requests of the banks as a result of the fact they
have not amassed ample fixed assets (Pandula, 2011; Adomako-Ansah, 2012).
2.8.2 Industry/Sector of the Firm
Pragmatic studies designate that firms in the services segment are more likely to acquire
credit as likened to their counterparts in the agricultural region as a result of the low level of
threat and reasonably increasing level of sales and turnover connected with the former (Kumah,
2011). Furthermore, Deakins et al. (2010) find that manufacturing SMEs have less access to
credit because there is more information is required of them, especially in circumstances relating
to new technology, new products, in addition to divergence.

2.8.3 Firm’s Performance
The performance of SMEs is one of the standards or criteria for evaluating or assessing the
credit worthiness of the firm. This is occurring because well-to-do firms are more likely to be
able to service their loans. Pandula (2011) uses the average twelve-monthly sales growth for the
previous three years as measured by firm performance since it provides an enhanced indication
of financing requirements compared to that of only a particular year. One of the major reasons
why firms or businesses are unable to have access to credit is as a result of underprivileged
(poor) business performance. Baah-Nuakoh (2003) finds that credit is the utmost severe
limitation amid deteriorating or diminishing as well as stationary (stagnant) firms.
2.8.4 Firm’s Innovation
An empirical study by Ahmed and Hamid (2011) designates that innovation of the firm also
significantly influences the firm’s access to credit. This is because of the lender's perception of
threats and uncertainties linked with, principally product innovation.
Conversely, these studies took into consideration loans from banks only. Furthermore, they
vary in terms of how innovation is evaluated. Ahmed and Hamid (2011) define innovative firms
as those which have introduced a new process only over the last three years.
2.8.5 Firm’s Size
Another criterion for assessing the credit worthiness of a firm by financial institutions is by
its size. (Pandula, 2011; Kumah, 2011). Experimental studies by Pandula (2011) point out that
small entities are more credit inhibited as compared to huge entities about their incapability to
deliver financial data demanded by the FIs for selection and in numerous instances, they lack
reviewed financial reports or accounts (statements). Furthermore, minor firms have less fixed
assets to serve as collateral or security; and additionally, they have an increased risk of failure
rate as likened to huge firms.
2.8.6 Level of Education.
Researchers do not have a common agreement on the effect of the entrepreneur’s level of
education on access to credit (Kimuyu and Omiti 2000). Some have reasoned that education
hampers the realization of entrepreneurial outcomes by decreasing interest, vision, and the
preparedness to take risks. Formal education is said to formulate the issue to emphasize more on

white-collar jobs than the improvement of entrepreneurial skills and self-employment. However,
others have debated that education helps to differentiate entrepreneurs who access credit as well
as those who do not (Lore, 2007). In this instance, education enhances a person’s capability to
access or acquire information and skills which end up helping in formulating projects that can
entice credit from financial institutions. Enterprises with more or supplementary educated
proprietors can be anticipated to have more access or link to institutional credit as compared to
those enterprises with less-educated owners. This comes about since less educated owners are
inclined to have struggled with application processes and are expected to be rejected. Also, well-
educated managers are more probable to conceive managerial skills in finance, marketing
production, and international business that would result in the growth of the firm (Kumar 2005).
2.8.7 Collateral security
In advancing (lending) contracts or arrangements, collateral is a borrower's promise of
precise or explicit property to a lender, to secure repayment of a loan (Joan 1995). The surety or
guarantee functions as a safeguard or for a lender counter to a borrower's default – thus, the
failure of any borrower to service or repay the primary loan amount as well as the interest under
the terms of a loan obligation. If a borrower does default on a loan (due to insolvency or another
event), that borrower forfeits (gives up) the property pledged as collateral - and the lender then
becomes the owner of the collateral.
The research undertaken by Wanjiru (2000), revealed that one of the major determinants of
access to credit by SMEs from the FIs in Ga East municipality is collateral. This is about the fact
that mainstream of the respondents found the necessities of qualifying for credit in terms of
collateral as being unachievable.
2.8.8 Ownership type
Entrepreneurs select proprietorship frameworks in huge measure to guarantee sufficient
funding and as a result of the choice consequences, where funding is granted to entities that have
favorable ownership framework (Pandula, 2011). The ability of enterprises to have access to
finance can be influenced by the ownership structure. For example, the earlier study discovered
that registered firms and alien-owned enterprises encounter minimal financial restrictions (Beck
et al, 2006). Storey (1994), discovered that xxvii legal standing affects bank lending. He

additionally states that corporate status at start-up appears to be associated with a greater
likelihood of bank lending.
2.8.9 Audited accounts
Bass & Schrooten (2005) established that the nonexistence of dependable data brings
about comparably high-interest charges irrespective of the fact that there exists a long-term
relationship between the banks about the borrower. In such circumstances, the availability of
appraised financial reports plays a key part. In acquiring or obtaining credit from FIs, it is
advantageous to possess audited financial statements. Frequently, it has been discovered that, for
banks to be able to provide or offer credit, audited financial statements are required. For instance,
Berry et al (1993) revealed that lenders in the UK show a lot of interest in accounting data to
treat the loan submissions of small enterprises. Nonetheless, the majority of the SMEs in Ghana
have challenges when it comes to obtaining financial assistance from recognized FIs since they
do not have appropriate financial records. The majority of the businesses often keep various sets
of books and do not have audited financial reports constructed on trustworthy accounting
principles. These enterprises, in the long run, acquire loans at very high-interest charges or tariffs
on the hand, since banks consider them as high-risk borrowers as compared to those with a well
audited financial statement prepared under reliable accounting principles or standards.

CHAPTER THREE
PROJECT IMPLEMENTATION
Overview
Chapter three entails the processes or ways, methods or approaches, tools and techniques
used in the study to facilitate in assessing or evaluating the key or most important contributing
factors (determinants) of financial assistance (credit) acquired (accessed) by Small and Medium
Scale Enterprises in Ga East Municipality. The major factors that lead to credit access by small
and medium scale enterprises, Research Design, Study Population, Sample Size, and instruments
used for Data collection as well as Data analysis techniques are all discussed in this chapter.
Methods
The study was conducted in Ga East Municipal. Ga East Municipal District is bordered on
the north by the Akuapim South District in the Eastern Region of Ghana. It is bordered on its
other three sides by other districts in the Greater Accra Region of Ghana. To the west is the Ga
West District, to the south Accra Metropolis District, and in the east the Tema Metropolis
District.
Ga East Municipality has its capital as Abokobi.
Research Design
The collection and analysis of data in a logical or systematic and well-ordered or
organized approach in an attempt to make or get significant information from it is referred to as
research design. (Zikmund, 2003: Jankowice, 2005). It can be said to be the plan or blueprints
and framework or edifice of examination or exploitation considered to attain answers to the
research problem. This study is premeditated to deliver an in-death or detailed process of
surveillance, collecting or amassing, analyzing or scrutinizing, and interpreting data using
quantitative and qualitative research approaches. This research was undertaken to define the
significant factors or dynamics of credit access by small and medium scale enterprises in Ga East
municipality. Quantitative as well as Descriptive research designs or schemes were used for our
study. Due to the voluminous nature of the case study, a Descriptive research method or
technique was adopted to obtain a precise or accurate reaction and results. Similarly, the
application of the quantitative research design or approach was also used to give a statistical,
mathematical, or computational view of the data that was gathered or collected out from the

descriptive research. Quantitative research is referred to as the systematic or organized empirical
investigation or probe of social occurrences or phenomena through computational or
mathematical, or statistical methods. The quantitative research method is to develop and use
mathematical models, concepts, or postulates relating to the occurrences and also employed to
deal with variables that were congregated from the survey research via well-thought-out or
structured questionnaires.
Study Population
The population is an entire collection of all observations of interest (people object or
event) as defined by Burns and Burns (2008). SMEs registered to operate within Ga East
Municipality, constituted the study population. The population of the study encompassed eight
(8) Commercial Banks and four (4) Non-Bank Financial Institutions (NBFIs) in Ga East
Municipality. More explicitly, the study focused on NBFIs as well as commercial banks in Ga
East Municipality. As a result of the existence of an ample number of FIs providing each
institution with an equal opportunity of being represented, Ga East was selected for this study
and also considering the limited amount of time and available resources for this study.
Principally, the number of financial and non- financial institutions comprised the following
Banks (Access Bank, Ghana Commercial Bank, Absa Bank, Ecobank, Agricultural Development
Bank, Stanbic Bank, Consolidated Bank, Fidelity Bank). Non-Financial Bank (Done well
insurance, Loyalty insurance, Star assurance, Traders credit union). Small and Medium
Enterprises (Nyame one hene Enterprise, Queen’s Secret skin care).
Sample Size Determination
Sampling is the process of choosing a unit (for example organization or individuals) from
a definite populace of importance therefore, by observing the unit (sample), the specific populace
from which they were picked or selected can be generalized (Neuman 2011). Sampling
techniques are described as the systematic or organized steps the researcher implements or
employs in selecting objects amongst the sample. It also makes emphasis or stresses on the
number or quantity of objects to be taken into consideration in the sample in other to make
inferences about the entire population. (Kothari, 2015). With regards to the limited number of
banks and SMEs in the Ga East Municipality and since the population of staff was relatively
small, non-probability sampling was used to obtain the data. Non-probability sampling
techniques suggest that the chances of an element being chosen are unknown. Furthermore,

purposive sampling was used for the interview guide. Sample size identification is the process of
indicating the amount or quantity of elements to be encompassed in a numerical sample. The
sample size is a significant characteristic of any pragmatic research within which the objective is
interpreted about a populace from a sample. All Banks and Non-Bank financial institutions in the
Ga East Municipality were demarcated for the Study, based on a population of eight (8) banks
and four (4) Non-Bank Financial Institutions in the Ga East municipality (making a total of
twelve). However, in this case, where all the institutions in the study are used there was no need
to use a sampling technique. In the case of identifying the determinants of Small-Scale
Enterprise financing in Ga, 100 questionnaires were administered based on a simple random
sampling of small-scale entrepreneurs within the Ga East Municipality.
Sampling Procedure
Research techniques are referred to as the systematic measures that can be followed to a mass
fact, as well as scrutinize or examine them to acquire or obtain the information which they
possess (Jankowicz, 2000). Credit Officers, Credit Managers in addition to Relationship
Managers within various financial institutions were presented by the management of the various
financial institutions to assist us in obtaining information. We received suitable replies for the
questions that were thrown to the respondents after the objective of our study or research was
disclosed to them. They were guaranteed of the concealment of the facts being divulged to us by
them and we again guaranteed them that, this would have no impact on their employment status
in the organization as well as the operations of the organization in any form. Furthermore, they
were given the assurance that during the analysis their response was to be treated as a unit, and
also the information provided by them was not to be disclosed to any third party without seeking
their consent first as well as the information they furnished us with was to be used for purposes
of research only. The study also collected primary data from SME owners using questionnaires.
Source of Data
Two major forms of data were collected in this study, that is;
Primary data: can be said to be the data invented or created by the researcher for the first time
via uninterrupted or straight hard work and understanding or skill, explicitly for the tenacity or
reason of tackling his study problem. Raw data or first-hand information or data is another name
conferred to this type of data. The data gathering or accumulation is under undeviating or strict
regulations under the management or administration of the researcher.

Case study, personal interviews, mailed questionnaires, physical testing, and questionnaires filled
and sent by enumerators, observations, surveys, as well as focused group discussions, among
others, are all approaches or means via which data can be collected. Structured interviews,
questionnaires, and surveys were the approaches employed in collecting primary data in this
study.
Secondary data: On the other hand, infers or suggests second-hand data or evidence which is
previously or before now assembled as well as documented by anybody apart from or accept the
user of the information for a resolution, not connecting to the present study problem. It is the
readily sort or type of data amassed or accumulated from countless bases or fonts such as
websites, internal records of the entity, reports, government publications, censuses, books, as
well as journal articles, among others. It provides quite a lot of benefits as it is effortlessly
obtainable or available, and also saves the researcher a lot of cost and time. Secondary data for
this study was collected or acquired from the Ga East Municipal Assembly which included
information on community profile and the number of registered Small-Scale Enterprises as well
as FIs in Ga East Municipality.
Materials/Data
Questionnaires
A questionnaire is a data gathering or accumulating apparatus which consists of a sequence
of questions and other prompts for the determination of assembling facts (information) from
respondents. Questionnaires are an effective way to determine what the general public thinks
related to a particular topic, research or products & services. They help to collect the data from a
lot of individuals and provides a helpful response and observations related to the topic being
discussed. It also helps to ascertain what demographics, situations and preferences to be kept in
mind while using the product, service or research data for which the questionnaire was prepared.
It helps to improve the business and its operations, if related data has been collected with the
help of a questionnaire as it will include the viewpoints of general public summed up as a
collective thought. Preparing and using questionnaires helps businesses to plan their marketing
initiatives, organize promotional campaigns. It also plays a major role when you want to measure
and monitor the effectiveness and quality of the customer service that your business provides.
Interview Guide

The interview consists of the collection of data by asking the respondents specific questions
constructed by the interviewer, similarly, data could be gathered or amassed by listening to the
individual and recording their reactions.
Focused group
A focused group is a planned interaction to inspire dialogue around a precise theme or subject.
Small scale entrepreneurs who engage in trading activities such as the buying and selling of
goods and services and manufacturing activities were sampled using the simple random sampling
method. A self-administered semi-structured questionnaire was used for the collection of primary
data. Respondents who find it difficult to interpret the questions in the questionnaire mostly due
to their educational level were subject to oral interviews using researcher administered
questionnaire. The data was collected by the research team.
In accordance to the nature of the current investigation, use of the below stated
questionnaire has been made for data collection:
Questionnaire
Q1) Do you having the understanding about the factors that influence SMEs access to
credits within Ga East municipality?
a) Yes
b) No
c) Average set of information
Q2) What are the main sources of credits available to SMEs in the Ga East municipality?
a) Commercial banks
b) Indigenous bankers
c) Trade credit
d) Instalment credit
e) Advances and own retain earning
Q3) Are you agreed with the fact that the on access to credit from both formal and
informal financial institutions are made by SME to meet its financial needs?
a) Strongly agreed
b) Agreed
c) Disagreed

d) Strongly disagreed
e) Neither agreed nor disagreed
Q4) What are the key access to credit from formal financial institution?
a) Commercial banks
b) Regional rural banks
c) Cooperative credit societies
d) Development and commercial banks
Q5) What can be the main benefits of accessing credit by a SME from formal financial
institution?
a) They are government registered
b) Charge lower interest rate
c) Authentic in nature
d) Terms and conditions are clearly stated in written form
Q6) Is some issues and challenges are also associated with assessing credit from formal
financial institution by the SME?
a) Yes
b) No
c) Lack of information
Q7) What could be the key issues associated with taking credit from formal financial
institution?
a) Time consuming
b) Bureaucratic in nature
c) More paper work
d) All of the above
Q8) Which are the main set of informal financial institution from which a SME can
access credit within Ghana?
a) Collectors and clubs
b) Rotating and accumulating savings
c) Credit associations (ROSCAs and ASCAP
d) Traders and moneylenders

Q9) What are key regulatory agency that are being working in Ghana for protection of
rights of SME while accessing credit?
a) Controlled under the Non-Banking Financial Institutions (NBFI) Law 1993
b) Banking Act 2004 (Act 673
c) Reserve Bank Act
d) SAP’s Millennium Economic Recovery Programme (MERP).
e) Credit Reporting Act, 2007(Act 279
Q10) What are the key project and programmes operated in Ghana for betterment in
access of credit for SME along with addressing the sub-sector in Ghana?
a) Agricultural Services Investment Project (ASIP
b) United Nations Development Programme (UNDP)
c) Community Based Rural Development Programme (CBRDP
d) Rural Enterprise Project (REP
e) Social Investment Fund (SIF
Q11) As per your view point, what are the Determinants of access to funding by SMEs in
Ga East municipality?
a) Firm’s Age and Firm’s Performance
b) Industry/Sector of the Firm
c) Firm’s Innovation and Firm’s Size
d) Collateral security
e) Ownership type and Audited accounts
Q12) What possible influence of firm size is being seen on the SME's access to credit in
Ga East municipality?
a) Small entities are more credit inhibited
b) Huge entities lack incapability to deliver financial data
c) Minor firms have less fixed assets
d) SME have limited collateral and security
Q13) As per your view point, what possible effect of access to mobile phones is being seen
on accessibility of credit for SME's in Ga East municipality?
a) Positive effect

b) Negative effect
c) No effect
Q14) Are you agreed with the fact that age of business have significant impact on the
SME's access to credit in Ga East municipality?
a) Strongly agreed
b) Agreed
c) Disagreed
d) Strongly disagreed
e) Neither agreed nor disagreed
Q15) As per your view point, what possible impact of age is being seen on the SME's
access to credit in Ga East municipality?
a) Older firms encounter little limitations in accessing credit
b) Older firms tend to have a greater reputation
c) Young firm have ineffective financial performance
d) Young firm face a lack of conventional track record
e) Young firm are less likely to meet the security requests
Q16) What are the key constraints that are being faced by the SME in accessing credit in
Ghana?
a) Imperfectly sophisticated workforce
b) Nonexistence of administrative and entrepreneurial skills,
c) Inefficient legal systems
d) Unproductive government bureaucracy
e) Inhibited access to financing
Q17) Are you agreed with the fact that SME tend to plays a vital and effective role in the
improved economic development of Ghana?
a) Strongly agreed
b) Agreed
c) Disagreed
d) Strongly disagreed
e) Neither agreed nor disagreed

Q18) What are the key importance of SME in economic development of Ghana?
a) Supporting higher employment opportunity
b) Ensuring creation of equality in society
c) Higher GDP and growth rate
Q19) What possible step can be taken by the government authority of Ghana in
supporting better access to credit and effective development of SME?
a) Launching more programmes for support of SME
b) Ensuring easy credit for SME
c) Facilitating awareness and education
d) Launching training session
e) Investing more in development of financial institution
Analytical Tools
Data analysis or investigation is the process or manner of thoroughly or methodically or
systematically employing or using statistical and/or logical techniques or procedures to designate
and demonstrate, summarize as well as review, and assess data. According to (Sharmo and
Resnik 2003), numerous diagnostic techniques or processes offer a way of making inductive
interpretation from data in addition to differentiating the indicator (phenomena of concern) from
the noise (statistical fluctuation) existent in the data. This study explicitly pursues to define or
explain the convenience heights of diverse means of funding or financial assistance to small-
scale enterprises in the Ga East Municipality. There are numerous tools and techniques suitable
for scrutinizing ordinal data. In this study, we used the software SPSS for Windows to do
analysis and descriptive statistics, frequency tables, percentages, and cross-tabulations were also
used to present the results. Also, the study designated the elements that affect the likelihood or
odds of small-scale enterprises demanding or requesting credit.
3.10 Study Limitations
Limitations or restrictions in the methodology relate or link to the non-availability or
nonexistence of a database or databank with precise records of SMEs both nationwide and at the
local level. To overcome or bypass this barrier or obstacle, dependence was placed upon

membership registers acquired or secured from organizations affiliated to SMEs and Municipal
Assembly database. The study was also faced with financial and time resource constraints and
was therefore limited to Abokobi, the district capital in the Ga East Municipality and Dome.
Ethical Issues Addressed
The researcher’s virtuous obligation to the contributors or part-takers as well as funders of the
project is of great essence (McGivern, 2006). Where there is a struggle, the accomplices’ rights,
as individuals, should be the utmost priority. According to Van der Wal (2006), researchers must
do whatever it takes within their supremacy to shelter or safeguard the social, psychological as
well as physical well-being, as well as to honour the self-respecting addition to the seclusion or
discretion of the study population. The approval to undertake the study, conversant consensus,
and concealment (the right to discretion and shielding proof of identity), are three categories of
moral principles for surveys that an investigator ought to consider. The resulting guidelines focus
on how ethical issues were handled in the study.
Summary
From the above chapter this can be concluded that there are various management tools
which are used within the research and these are helpful in analysing and gaining knowledge in
respect of project topic. This is the process which helps in implementation research plans and in
the same manner overall research can be executed. Under this, there are various limitations
which are being faced by the researcher such as financial and operational resources and many
others.
Chapter 4: Results and Discussion
4.1. Overview
The current section of the report is tending to be based on the review and analysis of the
collected data to have better presentation and discussion of the facts. The use of the frequency
table has been made to have systematic and better presentation of the collected raw data from the
selected 100 participants that has been presented and given as below:

Q1) Do you having the understanding about the factors that
influence SMEs access to credits within Ga East municipality?
Frequency
a) Yes 98
b) No 1
c) Average set of information 1
Q2) What are the main sources of credits available to SMEs in the
Ga East municipality?
Frequency
a) Commercial banks 20
b) Indigenous bankers 25
c) Trade credit 15
d) Instalment credit 28
e) Advances and own retain earning 12
Q3) Are you agreed with the fact that the access to credit from both
formal and informal financial institutions are made by SME to meet
its financial needs?
Frequency
a) Strongly agreed 28
b) Agreed 30
c) Disagreed 15
d) Strongly disagreed 10
e) Neither agreed nor disagreed 17
Q4) What are the key access to credit from formal financial
institution?
Frequency
a) Commercial banks 30
b) Regional rural banks 20
c) Cooperative credit societies 26
d) Development and commercial banks 24
Q5) What can be the main benefits of accessing credit by a SME
from formal financial institution?
Frequency
a) They are government registered 28
b) Charge lower interest rate 32
c) Authentic in nature 21

d) Terms and conditions are clearly stated in written form 19
Q6) Is some issues and challenges are also associated with assessing
credit from formal financial institution by the SME?
Frequency
a) Yes 80
b) No 15
c) Lack of information 5
Q7) What could be the key issues associated with taking credit from
formal financial institution?
Frequency
a) Time consuming 26
b) Bureaucratic in nature 24
c) More paper work 20
d) All of the above 30
Q8) Which are the main set of informal financial institution from
which a SME can access credit within Ghana?
Frequency
a) Collectors and clubs 18
b) Rotating and accumulating savings 22
c) Credit associations (ROSCAs and ASCAP) 32
d) Traders and moneylenders 28
Q9) What are key regulatory agency that are being working in
Ghana for protection of rights of SME while accessing credit?
Frequency
a) Controlled under the Non-Banking Financial Institutions (NBFI) Law
1993
20
b) Banking Act 2004 (Act 673 25
c) Reserve Bank Act 22
d) SAP’s Millennium Economic Recovery Programme (MERP). 18
e) Credit Reporting Act, 2007(Act 279 15
Q10) What are the key project and programmes operated in Ghana
for betterment in access of credit for SME along with addressing the
sub-sector in Ghana?
Frequency
a) Agricultural Services Investment Project (ASIP 20

b) United Nations Development Programme (UNDP) 25
c) Community Based Rural Development Programme (CBRDP 12
d) Rural Enterprise Project (REP 25
e) Social Investment Fund (SIF 18
Q11) As per your view point, what are the Determinants of access to
funding by SMEs in Ga East municipality?
Frequency
a) Firm’s Age and Firm’s Performance 20
b) Industry/Sector of the Firm 18
c) Firm’s Innovation and Firm’s Size 22
d) Collateral security 20
e) Ownership type and Audited accounts 20
Q12) What possible influence of firm size is being seen on the SME's
access to credit in Ga East municipality?
Frequency
a) Small entities are more credit inhibited 30
b) Huge entities lack incapability to deliver financial data 25
c) Minor firms have less fixed assets 15
d) SME have limited collateral and security 30
Q13) As per your view point, what possible effect of access to mobile
phones is being seen on accessibility of credit for SME's in Ga East
municipality?
Frequency
a) Positive effect 64
b) Negative effect 14
c) No effect 22
Q14) Are you agreed with the fact that age of business have
significant impact on the SME's access to credit in Ga East
municipality?
Frequency
a) Strongly agreed 42
b) Agreed 25
c) Disagreed 10
d) Strongly disagreed 13

e) Neither agreed nor disagreed 10
Q15) As per your view point, what possible impact of age is being
seen on the SME's access to credit in Ga East municipality?
Frequency
a) Older firms encounter little limitations in accessing credit 20
b) Older firms tend to have a greater reputation 18
c) Young firm have ineffective financial performance 22
d) Young firm face a lack of conventional track record 20
e) Young firm are less likely to meet the security requests 20
Q16) What are the key constraints that are being faced by the SME
in accessing credit in Ghana?
Frequency
a) Imperfectly sophisticated workforce 12
b) Nonexistence of administrative and entrepreneurial skills, 25
c) Inefficient legal systems 30
d) Unproductive government bureaucracy 20
e) Inhibited access to financing 13
Q17) Are you agreed with the fact that SME tend to plays a vital and
effective role in the improved economic development of Ghana?
Frequency
a) Strongly agreed 40
b) Agreed 35
c) Disagreed 5
d) Strongly disagreed 12
e) Neither agreed nor disagreed 8
Q18) What are the key importance of SME in economic development
of Ghana?
Frequency
a) Supporting higher employment opportunity 38
b) Ensuring creation of equality in society 32
c) Higher GDP and growth rate 30
Q19) What possible step can be taken by the government authority
of Ghana in supporting better access to credit and effective
Frequency

development of SME?
a) Launching more programmes for support of SME 18
b) Ensuring easy credit for SME 20
c) Facilitating awareness and education 22
d) Launching training session 19
e) Investing more in development of financial institution 21
4.2. Discussion of Results
To have better discussion and presentation of the results use of the pie charts, frequency
table along with SPSS model has been made that has been presented in this section of project.
SPSS is short for Statistical Package for the Social Sciences, and it's used by various kinds of
researchers for complex statistical data analysis.
Theme 1: factors that influence SMEs access to credits within Ga East municipality
Q1) Do you having the understanding about the factors that
influence SMEs access to credits within Ga East municipality?
Frequency
A) ys 98
b) No 1
c) Average set of information 1
Category 1 Category 2 Category 3 Category 4
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
Series 1
Series 2
Series 3
From the above graph, it is clear that there are different factors which influence small
medium enterprises for accessing the credit of east municipality. Out of 100 respondent’s, there
are 98 people who agreed that there are different elements associated with SMS which are

helpful for managing credits of municipality. On the other hand, there are one respondent’s
respectively who do not have idea about the factors influencing SMEs and having average set of
information.
From the above graph, it is concluded that there are different sources of credits which are
available in small medium enterprises which are associated with E municipality. These include
commercial banks, indigenous bankers, trade credit, instalment credit and advances and owned
retain earning. Out of 100 respondents, there are 20 people who think commercial banks are the
source of credit, there are 25 people who think indigenous bankers provide credit and 15
respondents add a green with trade credit. There are 28 and 12 respondents respectively who
think instalment credit and advances and own retain earning are the basic source of credit.
Theme 2: main sources of credits available to SMEs in the Ga East municipality
Q2) What are the main sources of credits available to SMEs in the
Ga East municipality?
Frequency
a) Commercial banks 20
b) Indigenous bankers 25
c) Trade credit 15
d) Instalment credit 28
e) Advances and own retain earning 12
a)
Commercial
banks
b)
Indigenous
bankers
c) Trade
credit d) Instalment
credit e) Advances
and own
retain
earning
0
5
10
15
20
25
30
Series1

From the above graph, it is clear that 28 respondents out of hundreds are agreeing that
there is successful credit from both formal as well as informal financial institutions which are
developed in SMEs for meeting the financial requirements. Only 10 respondents think that there
is no available credit for the formal and informal financial institutions which are developed by
SME’s.
There is different key access for credit associated from formal financial institution. The above
graph clearly states that commercial banks are the main access for formal financial institution.
There are regional rural banks which have 20 respondents in context of managing formal
financial institution. There are 26 and 24 respondents respectively who are agreeing upon
cooperative credit societies and commercial banks.
Theme 3: access to credit from both formal and informal financial institutions are made by
SME to meet its financial needs
Q3) Are you agreed with the fact that the access to credit from both
formal and informal financial institutions are made by SME to meet
its financial needs?
Frequency
a) Strongly agreed 28
b) Agreed 30
c) Disagreed 15
d) Strongly disagreed 10
e) Neither agreed nor disagreed 17

a) Strongly
agreed b) Agreed c) Disagreed d) Strongly
disagreed e) Neither
agreed nor
disagreed
0
5
10
15
20
25
30
35
Series1
There are different benefits associated with the assessing of credit by a formal financial
institution two SMEs. From the above graph, it is clear that these are providing various credit
from formal financial institutions to stop there are 80 respondents out of hundreds who have
agreed that different challenges and issues have to be face while maintaining financial institution
by SMEs.
Theme 4: key access to credit from formal financial institution
Q4) What are the key access to credit from formal financial
institution?
Frequency
a) Commercial banks 30
b) Regional rural banks 20
c) Cooperative credit societies 26
d) Development and commercial banks 24

a) Commercial
banks b) Regional rural
banks c) Cooperative
credit societies d) Development
and commercial
banks
0
5
10
15
20
25
30
35
Series1
From the above graph, it is clear that out of 100 respondents, there are 80 people who
think challenges and issues have to be faced by the assessing of credit from formal financial
institution. There are 15 respondents who think no challenge has to be faced while the
assessment of formal financial institution. Five respondents think that they do not have proper
knowledge regarding the former financial institution.
Theme 5: main benefits of accessing credit by a SME from formal financial institution
Q5) What can be the main benefits of accessing credit by a SME
from formal financial institution?
Frequency
a) They are government registered 28
b) Charge lower interest rate 32
c) Authentic in nature 21
d) Terms and conditions are clearly stated in written form 19

a) They are
government
registered
b) Charge lower
interest rate c) Authentic in
nature d) Terms and
conditions are
clearly stated in
written form
0
5
10
15
20
25
30
35
Series1
The above graph shows different issues which are associated with taking credit from
formal financial institutions. These include time consuming, bureaucratic in nature and more
paperwork. In context of present study, 26 respondents have stated that time consuming is the
biggest issue. More paperwork is the another issue faced by the taking credit or formal financial
institution and 20 respondents think that bureaucratic in nature is the biggest issue faced in
managing the credit from financial institution.
Theme 6: issues and challenges are also associated with assessing credit from formal
financial institution by the SME
Q6) Is some issues and challenges are also associated with assessing
credit from formal financial institution by the SME?
Frequency
a) Yes 80
b) No 15
c) Lack of information 5

a) Yes b) No c) Lack of information
0
10
20
30
40
50
60
70
80
90
Series1
From the above graph, it is clear that different set of informal financial institution for
which SMEs can access credit within Ghana are present. These include collectors and clubs,
rotating and accumulating savings, credit associations and money lenders and traders. Out of 100
respondents, there are 32 respondents who think credit associations are the main set of informal
financial institution. There are 28 people who think traders and money lenders are the informal
financial institution. There are 18 and 22 respondents respectively who think collectors in clubs
and accumulating savings are the main set of informal financial institution.
Theme 7: key issues associated with taking credit from formal financial institution
Q7) What could be the key issues associated with taking credit from
formal financial institution?
Frequency
a) Time consuming 26
b) Bureaucratic in nature 24
c) More paper work 20
d) All of the above 30

a) Time
consuming b) Bureaucratic
in nature c) More paper
work d) All of the
above
0
5
10
15
20
25
30
35
Frequency
Frequency
This graph clearly shows that there are different key regulatory agencies which are
effectively worked with in Ghana for protecting rights of SMEs and managing the credit. The
different acts involved are controlled under the non-banking and financial institution law 1993,
banking act 2004, Reserve Bank act, SME Millennium economic recovery programme and credit
reporting act. Major number of respondents that is 25 have stated that banking act 2004 is the
key Regulatory agency while managing protection of rights of SMEs.
Theme 8: main set of informal financial institution from which a SME can access credit
within Ghana
Q8) Which are the main set of informal financial institution from
which a SME can access credit within Ghana?
Frequency
a) Collectors and clubs 18
b) Rotating and accumulating savings 22
c) Credit associations (ROSCAs and ASCAP) 32
d) Traders and moneylenders 28

a) Collectors and clubs
b) Rotating and accumulating savings
c) Credit associations (ROSCAs and ASCAP)
d) Traders and moneylenders
0
5
10
15
20
25
30
35
Series1
There are different key project as well as programmes which are operated in Ghana for
the betterment in excess of credit regarding SMEs. These include agricultural services
investment project, United Nations development programme, community based rural
development programme, rural enterprise projects and social investment fund. According to the
viewpoints of respondents, United Nations development programme is the best in order to
analyse the factors associated with betterment of credit in Ghana.
Theme 9: key regulatory agency that are being working in Ghana for protection of rights of
SME while accessing credit
Q9) What are key regulatory agency that are being working in
Ghana for protection of rights of SME while accessing credit?
Frequency
a) Controlled under the Non-Banking Financial Institutions (NBFI) Law
1993
20
b) Banking Act 2004 (Act 673 25
c) Reserve Bank Act 22
d) SAP’s Millennium Economic Recovery Programme (MERP). 18
e) Credit Reporting Act, 2007(Act 279 15

0
5
10
15
20
25
30
Series1
From this graph, it is clear that there are different determinants of access to funding by
SME’S in Ghana E municipality. According to 20 respondents, age of foreman performance of
firm is the factor for having efficient funds. There are 20 respondents who think sector of the
form determines the funding excess. Another 22 respondents think that innovation and size of
firm provides funding capabilities. There are 20 respondents each who think collateral security
and ownership type as well as audited accounts provides the excess of funding to SMEs.
Theme 10: key project and programmes operated in Ghana for betterment in access of
credit for SME along with addressing the sub-sector in Ghana
Q10) What are the key project and programmes operated in Ghana
for betterment in access of credit for SME along with addressing the
sub-sector in Ghana?
Frequency
a) Agricultural Services Investment Project (ASIP 20
b) United Nations Development Programme (UNDP) 25
c) Community Based Rural Development Programme (CBRDP 12
d) Rural Enterprise Project (REP 25
e) Social Investment Fund (SIF 18

0
5
10
15
20
25
30
Series1
From the above graph, it is clear that there are various influences of form size which is
seen on SMEs success for credit in ga E municipality. Out of 100 respondents, there are 30
people who think small entities are having more credit and they influence the size of SMEs.
There are 25 people who think having huge entities lakin capability while delivering the financial
data. There are 15 people who think minor firms are having less fixed assets and 30 respondents
think that SMS are having limited collateral and security.
Theme 11: Determinants of access to funding by SMEs in Ga East municipality
Q11) As per your view point, what are the Determinants of access to
funding by SMEs in Ga East municipality?
Frequency
a) Firm’s Age and Firm’s Performance 20
b) Industry/Sector of the Firm 18
c) Firm’s Innovation and Firm’s Size 22
d) Collateral security 20
e) Ownership type and Audited accounts 20

a) Firm’s Age
and Firm’s
Performance
b)
Industry/
Sector of the
Firm
c) Firm’s
Innovation
and Firm’s
Size
d) Collateral
security e)
Ownership
type and
Audited
accounts
0
5
10
15
20
25
Series1
There is various possible effect of access to mobile phones which is seen on acceptability
of credit for SMEs in Ghana. Out of 100 respondents, 64 people think that it will make a positive
change in Ghana credit. On the other hand, there are 14 respondents who think it will have
negative impact upon managing the access to mobile phones through accessibility of credit.
Theme 12: possible influence of firm size is being seen on the SME's access to credit in Ga
East municipality
Q12) What possible influence of firm size is being seen on the SME's
access to credit in Ga East municipality?
Frequency
a) Small entities are more credit inhibited 30
b) Huge entities lack incapability to deliver financial data 25
c) Minor firms have less fixed assets 15
d) SME have limited collateral and security 30

a) Small entities
are more credit
inhibited
b) Huge entities
lack incapability
to deliver
financial data
c) Minor firms
have less fixed
assets
d) SME have
limited collateral
and security
0
5
10
15
20
25
30
35
Series1
From the above graph, it is clear that the age of business is having significant impact
upon SMS. It has access for credit in ga E municipality. It consists of managing the facts of
performing business operations and maintaining credit ability. Out of 100 respondents former 42
people have agreed that age of businesses having direct impact upon access to credit of SMEs.
Theme 13: possible effect of access to mobile phones is being seen on accessibility of credit
for SME's in Ga East municipality
Q13) As per your view point, what possible effect of access to mobile
phones is being seen on accessibility of credit for SME's in Ga East
municipality?
Frequency
a) Positive effect 64
b) Negative effect 14
c) No effect 22

a) Positive effect b) Negative effect c) No effect
0
10
20
30
40
50
60
70
Series1
This graph clearly states that there are different possible impact of age on SMEs success
for credit nga E municipality. These include older firms encountering little limitations in
accessing credit. Out of 100 respondents, there are 22 people who think young forms have
ineffective financial performance. This is the major impact of age on being SME’s to have less
credit in municipalities.
Theme 14: age of business has significant impact on the SME's access to credit in Ga East
municipality
Q14) Are you agreed with the fact that age of business have
significant impact on the SME's access to credit in Ga East
municipality?
Frequency
a) Strongly agreed 42
b) Agreed 25
c) Disagreed 10
d) Strongly disagreed 13
e) Neither agreed nor disagreed 10

a) Strongly
agreed b) Agreed c) Disagreed d) Strongly
disagreed e) Neither
agreed nor
disagreed
0
5
10
15
20
25
30
35
40
45
Series1
From the above graph, it is stated that there are different constraints which are faced by
SMS for accessing credit in Ghana. Out of 100 respondents, there are 30 people who think
ineffective legal systems are the main constraint which is being faced by SMEs while
maintaining the credit. There are 25 people who think non-existence of administrative as well as
entrepreneurial skill is the factor 4 SMS being credit in Ghana. There are 13 people who think
inhibited access to financing is the major constraint that SME’s in Ghana have to face.
Theme 15: possible impact of age is being seen on the SME's access to credit in Ga East
municipality
Q15) As per your view point, what possible impact of age is being
seen on the SME's access to credit in Ga East municipality?
Frequency
a) Older firms encounter little limitations in accessing credit 20
b) Older firms tend to have a greater reputation 18
c) Young firm have ineffective financial performance 22
d) Young firm face a lack of conventional track record 20
e) Young firm are less likely to meet the security requests 20

0
5
10
15
20
25
Series1
Theme 16: key constraints that are being faced by the SME in accessing credit in Ghana
Q16) What are the key constraints that are being faced by the SME
in accessing credit in Ghana?
Frequency
a) Imperfectly sophisticated workforce 12
b) Nonexistence of administrative and entrepreneurial skills, 25
c) Inefficient legal systems 30
d) Unproductive government bureaucracy 20
e) Inhibited access to financing 13

0
5
10
15
20
25
30
35
Series1
Theme 17: SME tend to plays a vital and effective role in the improved economic
development of Ghana
Q17) Are you agreed with the fact that SME tend to plays a vital and
effective role in the improved economic development of Ghana?
Frequency
a) Strongly agreed 40
b) Agreed 35
c) Disagreed 5
d) Strongly disagreed 12
e) Neither agreed nor disagreed 8

a) Strongly
agreed b) Agreed c) Disagreed d) Strongly
disagreed e) Neither
agreed nor
disagreed
0
5
10
15
20
25
30
35
40
45
Series1
SME play a vital and effective role for improvising economic development of Ghana. It
is clear from the respondent’s viewpoint that out of 100 people, there are 40 who have strongly
agreed upon this statement. It is clear that SMEs helps to enhance financial performance of the
country. This is directly associated with the economic development and growth in GDP.
Theme 18: key importance of SME in economic development of Ghana
Q18) What are the key importance of SME in economic development
of Ghana?
Frequency
a) Supporting higher employment opportunity 38
b) Ensuring creation of equality in society 32
c) Higher GDP and growth rate 30

a) Supporting higher
employment
opportunity
b) Ensuring creation
of equality in society c) Higher GDP and
growth rate
0
5
10
15
20
25
30
35
40
Series1
It is concluded from the above graph that it is very important for SME to develop
economic development of Ghana. From the present graph, it is clear that the key importance for
SME in economic development includes following three factors – supporting higher employment
opportunity, ensuring creation of equality in society and Higher GDP and growth rate.
Theme 19: step can be taken by the government authority of Ghana in supporting better
access to credit and effective development of SME
Q19) What possible step can be taken by the government authority
of Ghana in supporting better access to credit and effective
development of SME?
Frequency
a) Launching more programmes for support of SME 18
b) Ensuring easy credit for SME 20
c) Facilitating awareness and education 22
d) Launching training session 19
e) Investing more in development of financial institution 21

0
5
10
15
20
25
Series1
There are different steps which are taken by government authority of Ghana for supporting
better access to credit and having effective development of SMEs. These include launching
programmes for supporting SMEs, ensuring easy credit for SMEs, facilitating education and
awareness and investing in development of financial institutions. Out of 100 respondents, there
are 22 people who think facilitating education and awareness is the biggest step that can be taken
by government authority of Ghana for supporting better access to credit and effective
development of SMEs. There are 19 respondents who think launching training sessions is the
most effective step that can be taken by government of Ghana for supporting access to credit and
development of SMEs.
4.3. Implications for practice
It is clear from above research that Small and medium enterprises depend upon economies
which are substantial. There are different advanced markets, which are involved in
acknowledging these central mechanisms for development and growth. Government has taken
several initiatives for funding small and medium sized enterprises. These have become key
process for the Management and development of effective ways in which young entrepreneurs
can be provided motivation and encouragement. It is concluded in this research that lack of
access for credit among SMEs is a major issue which is faced in Ghana. It provides the
development and access for credits in order to have imperfections of financial market. It includes
loan market which is categorised on the basis of credit rational Inc. Because of information as

symmetry at loan market, there are different adverse selection in context of sorting out borrowers
and moral hazards which are associated with incentive effect. By using various supply and
demand analysis, it is determined that expectation of bank in context of return provides optimal
Bank rate which is associated with the demand for loans oversupply.
4.4. Summary
There are different theories of credit which are involved in rational links the exemption
depending upon characteristics of borrowers and banks. Both are at risk when there is need to
maximise profits and sales. There is need for choosing the project which provides profit
maximisation. There are different small business enterprises present in country and these are
associated with a life cycle. The first phase includes number of SMS growth stage in different
diverse. These includes consensus of number of growth stages that are involved in managing the
performance of company.
Chapter 5: Conclusion and Recommendations (1500)
5.1. Overview
The advance path along with informal credit includes management of Co lateral tracking
and recording. It can be associated with the problematic measure for smas to manage their
functioning in places where revenue is less. On the basis of World Bank, it is clear that
enterprises are working as a semi on the basis of benchmark and standards. These are associated
with annual sales, size of a set, not meeting employees demand and many more. There are
different estimates which are having comprehensive range of categories and dimensions. These
include parameters consisting of turnover, net sales, annual turnover which are involved in
distinguishing the roll off SMS.
The rationale behind this research is to survey or scrutinize the factors or determinants of
credit accessed or acquired by small scale enterprises in Ga West Municipality. Respondents
were selected at a random basis and a greater number of the participants fell within 26 – 35
years’ age range. Out of the total sample size of 92 respondents, it was eminent that 69 of the
respondents were males whereas the remaining 23 were females. A vast majority of the

registered small-scale enterprises engage in retailing as compared to manufacturing and services
sector.
The study revealed that, respondents with little or no formal education dominated the
ownership of the small-scale enterprises within the Ga West Municipality. Also, from the field
survey, it was uncovered that, most of the respondents were satisfied with their access to or
acquisition of credit and a greater portion of the satisfied respondents secured or obtained their
credit from formal financial institutions. Only a few of the respondents were discovered through
this study who complained of difficulties or hindrance in accessing credit.
5.2. Summary
It is clear from the above discussion that SME’s are playing an essential role for the betterment
of economy. These helping overall development of the country. Youngsters are more involved in
starting their own businesses or start-ups. These are effectively funded by government in order to
enhance and motivate them for betterment. It is clear from the viewpoint of respondents that
SMEs have to be properly Operated and sufficient funds provided to them in order to operate in
business world. Ghana is a developing country and it is essential for government to take initiative
that will help new business developers to create opportunities and become entrepreneurs.
5.3. Conclusion
From the above discussion, it is concluded that Ghana is having lots of opportunities in
markets for SME’s. It is very important for Ghana to have SME’s. These are helpful in managing
contributing towards economic development of the country. There are different parameters
associated with the management of elements associated with increased economy. Any company
can have lot of opportunities by introducing new product or service in market. Young
entrepreneurs off Ghana are implementing new start-ups which have helped in reaching potential
goals and objectives associated with enhancing growth and development.
According to the findings, the resulting assumptions can be drawn. Firstly, it has been
gathered or understood that, retailing, service as well as manufacturing undertakings are the key
or foremost monetary activities amid the listed or registered small-scale enterprises in the Ga
West Municipality, nonetheless other petty economic undertakings likewise exist on the other
hand.

It is evident or apparent that, access to finance has a lot of confident economic influence
or effect on the sustainability of small-scale businesses. For example, it functions as opening
capital and resource for business enlargement or growth to numerous entrepreneurs in Ga West
municipality.
Majority of the listed small scale are content or pleased with the access to credit delivered
to them by the financial institutions. Nonetheless, a few hitches or complications have been
noted or identified to be related with the methods and techniques involved in accessing credit,
such as collateral requirement, bureaucratic processes and so on.
Relying on the discoveries it was disclosed that heights (level) of education, location of the
business, collateral, type of ownership, firm’s age, as well as the firm’s size were all regarded as
the key factors or determinants of access to credit by small scale enterprises in Wa Municipality.
5.4. Recommendation(s)
From the above analysis, there are several recommendations developed for SME. Some
of these are mentioned below:
 The establishment of credit includes matter of loans that entrepreneurs of small scale
enterprise have to use in participation of economic undertaking. There are several private
and government sectors which provide funds to small medium enterprises. It is important
to make effective ideas for start-ups so that profits and sales can be easily enhanced.
 It is important for financial and credit organisations for undergoing various workshops
come up public mediums, conferences, media outreach and sessions in order to update
the procedures, necessities and methods acquired for managing the credit.
 There is need to have credit establishment which includes managing of ample
investigations which will help in improvising direction of augmenting the products. It
will help in enhancing loan in terms of customer fitness. There will be realistic interest
ratio and satisfactory loan which will provide usefulness for assisting small scale
entrepreneurs in meeting loan reimbursement.
 There are different organisations like national vote for small scale industries and micro
finance and small scale centres which have to be enhanced in order to help small scale
enterprises.

5.5. Limitation
The limitations involved in this research are time and money. The research would have
provided more effective outcomes if there was more time and money indulged into it. The
number of respondents could have been more. It will help in knowing about viewpoints of more
number of respondents. In this way effective results would have been developed. Limitations or
restrictions in the methodology relate or link to the non-availability or nonexistence of a database
or databank with precise records of SMEs both nationwide and at the local level. To overcome or
bypass this barrier or obstacle, dependence was placed upon membership registers acquired or
secured from organizations affiliated to SMEs and Municipal Assembly database. The study was
also faced with financial and time resource constraints and was therefore limited to Ga West, the
district capital in the Ga West Municipality.

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