Does the Legal Form of Small and Medium Enterprises Determine their Access to Capital?

Document Type: Original Research

Authors

1 Department Liberal Studies, Cape Coast Polytechnic, Cape Coast, Ghana

2 Ghana Education Service, Monitoring Department, Cape Coast, Ghana

Abstract

Small and Medium Enterprises [SMEs] in Ghana are often denied capital by the financial institutions. Hence, this study utilized data from self-administered questionnaires to 123 SME operators in the Cape Coast Metropolis to ascertain if the financial institutions consider the legal form of business ownership of SME before lending capital. Descriptive statistics, Chi-square and Hierarchical regression were employed to analyse data. We failed to reject the null hypothesis which implied that the financial institutions do not put much emphasis on the legal form before lending capital to SMEs, neither does the legal form determine the amount of capital borrowed. The recommendations were that the National Board for Small Scale Industries (NBSSI) must ensure that all the SMEs are registered and their business operations formalized. Besides, they should also train SME operators on basic business management skills, particularly, keeping accounting records. Government SME financing scheme managers must work professionally by administering the funds to SMEs based on merit and not on other irrelevant considerations such as political affiliation, cronyism or nepotism. Finally, SMEs must revamp their various trade associations to create a formidable union.     

Keywords


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