Accra, Nov. 25, GNA - Professor Stephen Adei, Rector and Director-General of the Ghana Institute of Public Administration (GIMPA), on Monday called for drastic change in the current trend of Small Medium Enterprises (SME's) financing describing it as "monotonous".
He said the commercial and financial sector in Ghana could do a lot more to promote SME's in the country and should therefore be made to open up to cause the desired change.
Prof. Adei was speaking at a Chartered Institute of Bankers lecture on the subject: " Financing the SME"s: The Role of The Ghanaian Banking Sector" in Accra.
He said the SME's like all other businesses entities depended heavily on financing, but sadly they did not get such support to enable them to expand and move the wheels of development forward.
Prof Adei said: "The climate for SME's in Ghana, does not make a good story to tell, neither does it speak well of our banking system, despite marked improvements during the last few years."
He blamed commercial banks for over concentrating on the huge corporate clients to the detriment of the SME's
Prof Adei said: "The Ghanaian economy is a SME economy. But it is regrettable that this sector which has helped the millions of players and the national economy itself has little if not nothing to show for carrying the country this far."
Prof Adei said irrespective of the data on SME's, they were predominantly family owned, had unattractive credit and financial history, only five per cent of small enterprises approached the banks for start-up capital and only 10 per cent of them turned to banks for assistance for operational capital.
He said traditionally, banks expected that loans should be used for purposes for which they were granted and were rigorous on their credit and so considered it a high risk to deal with many SME"s.
However, SME's properly oriented are not as high-risk borrowers as they are perceived to be. "In Ghana, 80 per cent of those who took loans under the Programme of Action to Mitigate the Social Cost of Adjustment (PAMSCAD) in the previous regime repaid it."
Prof Adei said the efforts of EMPRETEC, transferring managerial and training skills to SME's have shown that SME's grow very fast and needed to be considered as sources of bankable projects with very high futuristic potential.
"EMPRETEC has achieved 90 per cent recovery rate of its UNDP grant credit facility, adding that, between 1987 and September 2003, the loan portfolio rose from 1.7 billion cedis to 8.2 billion cedis with beneficiaries increasing from 382 to 1,213.
He proposed a win-win situation where innovative approaches, such as replacing high-value collaterals with assets of businesses with third-party personal guarantees instead of immovable assets of collaterals demanded by traditional banks.
"The traditional collateral system says, 'be rich before I help you to be richer', "Prof Adei stressed.
He said the growth of the financial sector over the years has not been matched by the corresponding role in support of SME's.
Prof Adei explained that out of a total of 69,118 billion cedis credit granted by deposit money banks in 2002, the share that went to the cooperative sector was 0.453 per cent and sole proprietors, 13.18 per cent, totalling only 13.6 per cent.
"In the areas where SME's dominate, only 24.1 per cent went to public institutions, largely in the form of treasury bills and large limited liability companies 55.21 per cent, " he said.
Prof Adei, however, said he was impressed with this years' statistics, which saw am improvement, albeit low, in lending to SME's, which fixed at 1.23 per cent and 15.87 per cent respectively.
