Clinic business

Access Bank/Graphic Business SME Clinic – Why SMEs need more support

Micro, small and medium-sized enterprises (MSMEs) are to economies what children and young people are to nations.

Just as children and young people are the next leaders of every nation and the world at large, MSMEs are the next big corporations and multinationals, requiring all possible support to enable them to flourish quickly and unhindered.

But as you might expect, many of them quite often and quickly fall off the growth ladder. Others must overcome a myriad of challenges to be able to stand up, grow and contribute meaningfully to national development.

Some of those who survive are also stunted and remain small businesses forever, while a few go through the phases to become big.

Failure rate

Various researches estimate that the failure rate of SMEs in Ghana is over 60% in the first five years.

This means that out of 10 start-ups, six are likely to collapse within the first five years of operation.

As alarming as it sounds, it has persisted for decades in a country where public sector jobs are fading, the population is growing rapidly and the poverty rate is rising.

The size and potential of SMEs makes it even more ironic.

As the foundation of any economy, SMEs in Ghana account for over 80% of all businesses, contribute over 70% of the value of national output as measured by Gross Domestic Product (GDP) and employ over half of the population economically. active population.

Indeed, also the largest employers, providing jobs for millions of working-age people.

With all these magnificent advantages and huge potentials, the big question then is why countries, including Ghana, allow SMEs to fail?

The causes of these huge failures and how these factors are dealt with are also interesting.

The reasons for failure rates are many, but much economic and social research agrees that most SMEs fail due to lack of access and high cost of credit, lack of skills, weak or non-existent access to the market and the mediocrity of feasibility studies prior to creation.

Issues related to lack of discipline and disorderly operations are also present, although access to credit and its cost were among the top five challenges.

Credit constraint

Money is the engine of any economy. For businesses, this could double their water.

Yet the World Bank says Ghanaian businesses have fewer financial resources than the economy deserves, creating a revenue shortfall that is costing the country valuable businesses, jobs and growth.

In a paper titled: “Improving Access to Finance for Ghanaian SMEs: Is There a Role for a New Development Finance Institution? published in June 2019, the World Bank said that general credit to the private sector had been consistently below expectations. structural characteristics of Ghana.

He said that the situation had deteriorated in recent years due to several factors, including reduced risk appetite of banks resulting from the economic slowdown and the sharp deterioration in asset quality, the closure of banks distressed and high levels of public sector borrowing investing in government securities. highly profitable.

SMEs most affected

The bank observed that SMEs faced greater credit constraints because banks tended to lend to a limited number of businesses, giving priority to large borrowers.

“Many small businesses are not profitable enough to be able to repay their loans at current market rates and terms.

“They also have difficulty securing their working capital given the late payment practices of private and public sector buyers,” the Bretton Woods institution said in the document announcing the creation of Development Bank Ghana ( DBG), in which she played a key role. .

The World Bank concluded that the financing gap for MSMEs in Ghana was estimated at 13% of GDP, or about $6.1 billion in 2017.

Intervention Graphic Business/Access Bank

To address these challenges, various initiatives have been put in place to help SMEs get off to a good start.

The latest is the unique partnership between Graphic Business, the country’s premier read on business and economic issues, and Access Bank Ghana Limited, a bespoke banking service provider, which took off in 2020.

Known as the SME Clinic, the project aims to support SMEs through the various stages with expertise and financial support to enable them to survive and grow into large companies.

It combines capacity building through seminars, frequent reviews of their operations and counseling with financing packages, which makes it unique among the various initiatives supposed to target small businesses.

Beyond using its nationwide banking centers to support small businesses, the Graphic Business/Access Bank partnership offers regional seminars, where SMEs converge through leadership, hands-on interactions on how to cope with daily challenges limiting their progress.

Three such seminars have been organized in the Greater Accra, Ashanti and Western regions, and more are planned in the other regional capitals and key SME hotspots.

Free warranty

As part of the initiative, Access Bank has introduced a collateral-free loan that allows it to lend to qualified SMEs without asking for collateral.

For those familiar with the credit access constraints faced by businesses and SMEs in particular, the withdrawal of collateral is such a relief and the interest in the facility speaks volumes.

In the first two years, the bank said it disbursed over GH¢50 million to 6,500 companies.

While both continue to invest in this laudable idea, it is incumbent on SMEs and businesses in general to properly use knowledge to their own advantage and that of the economy.

Access Bank is also to finalize its partnership with commercial lenders to expand the portfolio of funds available to SMEs under the unsecured loan.

As for teaching through the Métier Graphique and its sister platforms, it is a constant in the bouquet of publications.

Entrepreneurs need to start reflecting them in their day-to-day decision-making processes and general operations.