The Role of Banks in Financing Small and Medium Scale Enterprises in Ghana- A Case Study of Universal Banks in Sekondi-Takoradi

Abstract

Bank finance has been found as an important source of funds for most firms. This study examines the role banks play in addressing the finance gap facing SMEs in Ghana. Through a questionnaire survey, data was gathered from sampled Banks and SMEs in Sekondi-Takoradi. The data revealed that banks see SMEs as a profitable segment. Also bank finance enhances the profitability of beneficiary SMEs. This has encouraged a trend of increased bank involvement with the SME sector. However, SME specific factors, high interest rates, collateral requirements, lack of quality information, delays in judicial proceedings and difficulties in disposing collateral restrict further bank involvement with SMEs and the latter’s freedom to access bank finance. The authors conclude that all relevant stakeholders must contribute to fostering the trend by helping to mitigate the constraints through the implementation of deliberate policies that enhances trust between banks as lenders and SMEs.

Key words: Role of Banks, Financing, Small and Medium Enterprises, Sekondi- Takoradi, Ghana