The SME Conundrum

By Sydney Casely-Hayford, www.bizghana.com



We are paralysed in such a way that our thinking capacity is hemmed in by old age practices and cultural norms that threaten to collapse our entire financial system. Our way of doing things makes corruption a norm rather than a cancerous option to be avoided, replaced by sound financial management and good book keeping at the least.



What has now come to be known as the “UT Way - a loan in 48 hours” is fast challenging the traditional banks, as recent upstart in the financial sector, UT Bank takes over from the orthodox way of business as usual.



Last week, 8th October, Retired Captain Budu Koomson of UT Bank provided great insight into possible solutions for the SME conundrum of access to finance.

Successive Governments tout the private sector as the engine of growth for Ghana and in consequence the SME sector becomes the focus for all planning but unfortunately, more rhetoric than action.

Presenting his concepts for “curing” the SME problem, Budu Koomson described three pillars and several anchors to pin these pillars down for possible resolution to our SME conundrum.



Government, Banks as Suppliers and SME’s. A crisp list of his views needs very little elaboration.



What Government must do

Create macro economic stability

Promote sound fiscal policies

Present a sound National Strategic Plan

Provide good regulation and Institutions

Ensure a functional legal system

Provide a good and effective tax system

Manage public hostility toward Government



In themselves these anchors are by no means novel to Ghanaian businesses and to our Governments. The fact that we keep bringing them up as requirements to ensure financial stability and progress in governance means we do not have a mechanism to remove the bottlenecks in our structures. For the umpteenth time of any government in our history, this paralysis does not seem to have a cure.



Where Banks are going wrong

They have adopted a basically alien system of banking

The banking environment is chaotic

Banks are not making any effort to listen to the SMEs

Banks employ Ivy League graduates who talk down to SMEs

Banks have a latent mistrust of the SME or informal sector



Listen to any SME tell you about their experiences with a bank or other financial institutions when they have tried to raise working capital will confirm this litany. The present banking structure and processes do not favor serving the SME market.



What the SMEs are facing and doing out of turn

They have a lack of trust in Government and the system

They are last to understand when there is a change in Government policy

There is still a criminalization of origins of finance going back to revolution days

There is very little documentation of transactions and thus a lack of transparency

SMEs lack planning and scientific and financial analysis

SMEs have a clear lack of financial discipline

Cultural practices and social and extended family pressures are priority ahead of business requirements

There is a lack of use of research and development and a resistance to change from old ways

SMEs lack a certain level of education required to move ahead in business

The Human willingness factor



These are classy bottlenecks identified by practioners. To hear Budu Koomson speak gives you hope that there are possible solutions to these and other SME issues. The simple fact that after 13 years UT Bank has bothered to fashion their own way of resolving the market is a mark of an educated, sophisticated and culturally savvy persons with a formula that might fix the SME finance access problem.