'Banks don’t understand SMEs'

The Managing Director of Union Savings and Loans, Philip Oti-Mensah, has criticised banks for lacking critical understanding in the business of small and medium enterprises (SMEs), which has resulted in their reluctance to lend to business in the sector.

“In Ghana everybody claims they know SMEs; what they do and what not. Banks come up and say they are an ‘SME-focused bank’, but before you realise they are enjoying corporate banking. Banks need to invest to understand the SME sector very well, know their real needs before they claim they are supporting the sector,” he said.

In an interview with the B&FT, Mr. Oti-Mensah urged banks to be committed in supporting the SMEs over the long-term.

Figures from the Registrar General’s Department shows that 92 percent of companies registered are micro, small and medium enterprises, and provide about 85 percent of manufacturing employment. Currently, it is estimated that SMEs contribute about 70 percent to Ghana’s GDP.

Nonetheless, SMEs in Ghana are faced with a myriad of challenges -- such as the absence of adequate and timely banking finance, limited capital and knowledge, and the non-availability of highly skilled labour at affordable cost.

Managing Director of GCB Bank Ghana Limited, Simon Dornoo, recently conceded that small and medium-sized enterprises remain marginalised when it comes to banks’ provision of funding to support business-growth activities of players in the sector, and has called for banks’ increased attention to this key economic area.

Mr. Dornoo noted that despite the country’s financial sector remaining very vibrant with the various technological investments which have helped to increase consumer access to banking services, funding for the SME sector -- which is a key driver of economic growth -- remains on the low side.

“Despite these positives, small and medium-sized enterprises and low-income-earning groups remain marginalised in accessing funding to grow their businesses. Banks should be encouraged to take up the task to support businesses in the low-income-earning bracket.”

Mr. Oti-Mensah believes that another channel through which banks can show their commitment is through developing products and services for the SMEs, allocating a portfolio to them, and more importantly training staff to be able to understand the SMEs.

“I believe for now most banks are nowhere near understanding SMEs.”

But Stanbic Bank’s Chief Executive, Alhassan Andani, has a different view about SME funding. He noted that his bank has a well-fitted-out department with well-qualified people to deal with SMEs.

“We have products and services for SMEs and we have never run out of SME clients -- from depositors to loan clients -- and I will challenge any SME that banks with Stanbic to come and say they were marginalised.”

He pointed out that in terms of numbers, the bank’s biggest clients are small businesses; but in terms of quantum big companies obviously enjoy the bigger pie.

CAL Bank’s Head of Investor Relation, Dzifa Amegashie, added that SME-funding in the country is difficult because of the way banks are structured in terms of reporting requirements and accounting.

“A large number of SMEs do not meet the requirements of banks. It is because of the regulations that we operate under. We haven’t gone out of our way to say we do not support SMEs, but what we as a bank has to do is undertake business support and education for these SMEs.”