Stop blaming banks for lack of access to credit - SMEs advised
The Country Manager of GroFin, a financial services company, Mr Samuel Sedagah, has asked small and medium enterprises (SMEs) to stop blaming banks for the lack of access to credit and rather focus on repackaging themselves to attract the needed funding.
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“There are over 30 banks in such a small country as Ghana, so if SMEs are not getting funding, then the problem has to do with the SMEs and not the banks,” he said in an interview with the GRAPHIC BUSINESS after he addressed members of the Ghana National Chamber of Commerce.
He, therefore, urged the SMEs to do their home works well by repositioning themselves to attract the right investments.
“Entrepreneurs and SMEs are always saying access to finance is the problem but the problem is not access to finance. Why is it that some businesses are able to attract funding while others are unable to do that,” he asked.
“The reason is some of these companies are ready to attract funding but others are not and it behoves these entrepreneurs and SMEs to ensure that they package themselves and make themselves investment ready by putting in the right structures,” he said.
He said most SMEs lacked proper book keeping, proper accounting systems, but yet expect to attract investments.
He said its analysis of over 8,000 SMEs across Africa and the Middle East indicated that 57 per cent of SMEs had no business plan, 72 per cent had no formal accounting systems, 43 per cent were not compliant with local regulations, 66 per cent lacked environmental safety standards, and 63 per cent of capital was at risk.
“We should, therefore, move beyond the shout about access to finance being a challenge and begin to look within ourselves and make sure that we formalise our businesses,” he explained.
The Country Manager also pointed out that banks and other lenders priced based on the risks, “apart from the base rate, the remaining is the risk premium and base on your risks, you may attract high interest rate as against your fellow entrepreneur who gets a lower interest rate because he had put in place better measures and structures.”
Support for SMEs
Mr Sedagah said its insights into the SME sector in developing countries indicated that what SMEs needed to flourish was a realistic business plan, a detailed management accounts, a good corporate management accounts, and a succession plan.
He said GroFin, therefore, assessed the businesses of their clients and provided appropriately structured finance packages that took into account their business’s end-to-end needs.
“Our clients can use our finance packages for different needs and at different stages of business maturity such as expanding the business or a new product line, purchasing of property or assets for the business, and as a start-up to commence business operations,” he stated.
To date, he said, the company had invested in 600 SMEs and had supported over 8,000 entrepreneurs with business advice and planning.
“Our funded clients have a success rate of 80 per cent in a challenging market where 70-90 per cent SMEs fail in their first three years of operation, he said.
“We have helped sustain more than 95,150 jobs in our invested businesses and added economic value of over US$ 700 million per annum, through the operations of our clients,” he added.