'Banks must treat SMEs fairly'

The 2011 National Best Mango Farmer, Kwasi Etu-Bonde, is urging universal banks in the country to change their widely-held perception that the Small and Medium Enterprises (SMEs) sector is a risky area to invest in, and rather adopt an innovative approach in dealing with SMEs to ensure growth of the sector while earning their expected returns.

Mr. Etu-Bonde said there should be a total paradigm-shift in the way the ‘big banks’ consider their engagement with SMEs, and move to provide business development services by way of offering technical and managerial advice, as well as tightening monitoring mechanisms along with the provision of financial support.

He said most of the universal banks, after they have offered credit facilities to SMEs, fail to do the due diligence as per conducting regular facility checks or visiting to monitor and evaluate work on the ground, and rather opt to do so in the comfort of their offices -- or not even do so at all.

He noted out that although unfortunate, some of the SMEs lacking the desired managerial competency to operate in that area of trade might end up collapsing as a result of this managerial and administrative ineptness.

However, he opined that if the banks had conducted facility visits while also assessing and evaluating the level of growth, it would have led them to better understand the work being done in addition to the challenges -- and positioned them to offer the right technical advice to help grow the business.

The national award-winning farmer, who said this in an interview with the Business and Financial Times in Kumasi during the official opening of the EDAIF Zonal office in the Ashanti Region, said the long and rigorous procedures universal banks take SMEs through when accessing credit remains a big disincentive and challenge to many people in the sector.

He noted particularly that most beneficiaries of the Fund operate with rural and community banks, who are always ready to offer them support irrespective of their status.

It is against this backdrop that he recommended to the board and management of the reinvigorated EDAIF Fund -- now amended to include provision of financial resources for the development and promotion of agriculture related to agro-processing and the agro-processing industry -- to consider including rural banks among the listed Designated Financial Institutions (DFIs) to disburse the funds to beneficiaries.

However, speaking to Dr. Mustapha Ahmed, Minister of Trade and Industry, on the subject of including rural banks among the DFIs, he responded that as laudable as the idea is, rural banks in the country would have to meet the requirement that have been set by EDIAF to qualify for inclusion among the Designated Financial Institutions (DFIs) listed to disburse the fund.