Challenges Affecting SME’s Growth in Ghana
6 Pages Posted: 24 Sep 2014 Last revised: 8 Oct 2014
Date Written: September 22, 2014
The contribution of the development of the private sector to the sustainable growth of an economy cannot be underestimated. In both developed and developing economies small and medium enterprises are considered as an engine for economic growth. These SME’s not only contribute to the growth of national GDP but also contributes to the reduction of unemployment (Mullineux, 1997; Abor & Quartey, 2010).
In developed economies such as the United Kingdom and Germany small and medium enterprises comprises of a major number of registered companies. In a developing economy as Ghana despite there is limited data on the growth and development trends of SME’s, data available from the registrar general department suggests that about 92% of companies registered are small and medium firms.
Furthermore, small and medium enterprise provides 85 percent of manufacturing employment and contributes 70 percent to the national GDP. This supports the fact that small and medium enterprises play a significant impact on economic growth and development, employment and income (OECD, 1997; Villars, 2004). Therefore most nations strived to create a harmonious environment and policies that support the sustainable growth of these small and medium enterprises.
SMEs in Ghana contribute massively on national GDP and employment in the manufacturing sector as stated above. It leads to the creation of employments, manufacturing of locally made goods and services for export, and helps the local government to generate tax revenues for national socio-economic development. This makes this sector a very essential sector to the growth and development of national economy.
Despite the enormous contribution towards the development of economy, SME still face a number of challenges and this has being our motivation for this study that focus on the number of challenges that hinder the development of small and medium enterprise development in Ghana.
The study outlined the definition and contributions of SME’s to the Ghanaian economy and also review current literature to arrive at the pertaining challenges that faces small and medium enterprises in Ghana.
According to the study, despite the fact that there are numerous challenges affecting this sector, the most pertaining ones included, the lack of credit schemes and facilities, low capacity of research and development in technology, globalization and inadequate managerial knowledge and skills.
Furthermore, to curb this situation there should be collaboration among stakeholders such as government, financial institutions to provide credit facilities that are flexible to assess and repay.
Keywords: Credit facilities, Economic development, Ghana, SME’s
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