Bastiat urges financial institutions to promote SMEs

Mr Paul Frimpong, a Fellow of Bastiat Ghana, a free market economic think tank institute, has advised business minded people and the government on the need to promote small and medium-scale enterprises (SMEs).

He said SMEs play a vital role in making it possible for industries and economies to achieve their development objectives, while the development of the sector contributes to poverty alleviation, employment creation and generation of potential entrepreneurs.

Mr Frimpong who is also a member of the Young Professional Economists’ Network, indicated that aside these positive influences of SMEs, it also offers linkage development to large industries and enable marginalised groups such as females, disabled and uneducated persons to get something decent to try their hands on.

To prove his words, he said research from the World Bank (WB) proves that SME contributes about 30 per cent employment opportunities and 15 per cent gross domestic product in the country.

Speaking at Bastiat Second Development conference in Accra on the theme: “Establishing a pragmatic module to build confidence between SMEs and the financial sector of Ghana’s economy,’ Mr Frimpong explained the need for collaboration between SMEs and larger corporations.

He said SMEs could be an important source of local supply and service provision to larger corporations.

He said SMEs could assist larger corporations’ especially financial institutions with extensive local knowledge of resources, supply patterns and purchasing trends.

Mr Frimpong indicated that there are a number of hindrances on the growth of SMEs such as physical infrastructure, including transport, telecommunication, energy and information.

He also said security problems, corruption, property rights, and bankruptcy proceedings under governance as well as human capital which include skills, training for SME starters and technology starters are also contributors of massive hindrances on SMEs progress.

“Although Ghana had the highest economical growth of about 11 per cent in Africa in 2011, however, Africans including Ghanaians who have the most youthful population in the world have failed to influence foreign investors to come and invest in SMEs in the country”, he said.

He said according to the WB report, Ghana ranked 63rd last year in terms of how easy it is to do business in the country, however it is has been ranked 64th this year, showing that less efforts was put in the economy unlike Rwanda, which makes it so easy for investors to set up businesses.

He said although Ghana ranks 85 in 189 countries in terms of providing utilities like electricity for investors to support SMEs, it is not encouraging at all for economic growth.

Mr Frimpong noted that fiscal vulnerabilities across the Ghanaian economy such as public debts, expenditure patterns and high cost of living; fairly resilient growth and external shocks such as slow growth in advance economies prevents SMEs from developing.

He said the legal procedures to set up businesses in the country, and operate it as well as the time and cost required in completing each procedure pushes investors away to develop the economy.

Mr Frimpong urged the government to set up appropriate institutional framework to monitor policy the implementation process to ensure that appropriate regulatory environment, which does not stifle SME growth is put in place.

He also said the government and other stakeholders must give technological support to SME personnel to develop the market.

He expressed the need for financial institutions to enable SMEs to have access to finance in order to develop mutually and the economy as a whole.