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The Challenges Faced by Small and Medium Enterprises (SMEs) in Obtaining Credit in Ghana

Student: Samuel kwadwo-bour Gyinae

Supervisor: Elena Rogova

Faculty: St.Petersburg School of Economics and Management

Educational Programme: Finance (Master)

Final Grade: 7

Year of Graduation: 2020

ANNOTATION Master of Finance and Credit Topic: THE CHALLENGES FACED BY SMES IN ACCESSING CREDIT IN GHANA. Author of the master’s thesis: Samuel Kwadwo-Bour Gyinae Supervisor of the thesis: Prof. Elena M. Rogova Department of Finance This research was aimed at exploring the constraints faced by SMEs in Ghana in obtaining financing. The paper aimed at exploring the challenges, alternative sources of finance and solutions and how effective they are. When we are talking about SMEs, there are a lot of contexts to consider. These includes; financing, contribution to the economy, prospects and challenges. This paper seeks to explore the challenge faced by SMEs in Ghana by considering financial aid and or obtaining credit: it looks at the structure of the SMEs, their business activities, and how the previous two puts them in a situation which makes it hard for them to obtain financial assistance. The literature proved that just number of workers and money made by firms is not enough to classify SMEs but also factors such as the size economy and the specialization sector of the SMEs. From the results, it became evident that SME are mainly private limited liability companies and into retail trading activities but however, they do not make enough turn over to match a successful firm in the Ghanaian context so they seek financial aid from financial institutions which they struggle to secure because they lack creditworthiness which is due to low equity base, poor managerial skill leading to poor portfolios, defaulting on previous loans but the most potent reason being the lack of collaterals. Also, the reason most of SMEs find alternate sources like borrowing and receiving monetary gifts from friends and family, retained profit from previous operations and personal savings other than financial institutions is because of the small payback period and high interests that are being charged on loans. From past results, other researchers believed these above problems can be solves by establishing more banks to serve the masses but from my results I do not agree because the issue is not with the number of banks available as to the conditions presiding such as the loan payment period, interests charged on loans and other complexities in the application like bureaucracies.

Full text (added May 15, 2020)

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