Supplier credit will be game-changer for SMEs

Chairman-Krif Ghana Limited, Rev. Kennedy Okoson, has reiterated that credit cost remains a critical impediment to the growth and expansion of small and medium-scale enterprises (SMEs) in the wholesale/retail and supply chain industry.

To overcome the credit crunch challenge facing local businesses, he underscored the need for supplier credit – a financing solution that allows businesses to extend their payment terms with suppliers, ensuring a better cash flow position.

He mentioned that multinational shopping malls, wholesalers and retail companies taking over the local space gain the capacity to do so via credit guarantees from manufacturers and producers of products they bring in, and pay back after sales; but the same cannot be said for locals.

The successful entrepreneur believes that it would take such an arrangement for local players to grow their businesses to a level where they can compete with these global giants, as well as ensuring sustainability beyond the first generation.

“Access to credit, cost and exchange rate have all played a role in the slow pace of business growth and collapse for some businesses within their first five years. Competitors from other countries get incentives from their governments to export, and get products on credit basis.

“Supplier credit is a financing solution that allows businesses to extend their payment terms with suppliers, ensuring a better cash flow position. By negotiating longer payment periods, these credited facilities empower SMEs to manage their expenses more effectively, invest in growth opportunities and strengthen their supplier relationship.”

Apart from this, he emphasised that work ethics, integrity and attitude of business owners are key to success in business.

“We need to redefine work in our cultural perspective. The way the Chinese, Japanese and Europeans define work influences their attitude and work ethics. The seriousness and principles we attach to work in this country are also challenges, and must be redefined.

“When a producer entrusts products in your care and you fail to meet targets consistently, then you are discrediting the arrangement; and this leads to mistrust and the need for cash and carry models,” he added.

Interest Rate

The average commercial bank lending rate for 2023 was about 36.64 percent – one of the highest in the sub-region. With such a high-interest rate, it is nearly impossible for SMEs to access capital from the banking sector, while suppliers’ credit is also non-existent.

Meanwhile, the current economic climate is placing immense pressure on small- and medium-sized enterprises to manage their cash flow effectively. Many local businesses struggle to secure affordable and flexible credit options from traditional lenders, hindering their growth and development.

It is therefore vital, he said, for financial institutions and policymakers to also prioritise access to supplier credit for SMEs.

Rev. Okoson also advocated closer collaboration between stakeholders to address the credit gap faced by local businesses.