James Asare Adjei
The president of the Association of Ghana Industries (AGI), James Asare Adjei has advocated medium to long term credit for Small and Medium Scale Enterprises (SMEs).
This, according to him, will enable SMEs to operate efficiently and take advantage of opportunities to expand to the sub-regional markets.
Mr Asare Adjei, who was speaking on TV3 Business Focus recently, said AGI research has shown that between 80 to 85 percent of all credit in the country are short-term, explaining that the credit don’t go beyond 12 months.
“It is difficult for businesses to take this short-term capital to retool and expand. There is therefore the need for medium to long term credit for SMES so that they can operate efficiently and expand,” he said.
The president of the association advised businesses not to always use debt financing to grow their businesses.
“We should not think that loans from banks are the only source to grow our businesses. There are other forms such as equity financing- raising capital from the alternative market which gives a more flexible approach in entering the stock market.
“We can also look at private placement which offers a long term capital with flexible terms for businesses to grow. These are opportunities that are there but unfortunately SMEs have not been able to avail themselves to such opportunities,” he said.
Mr Asare Adjei urged SMEs to take advantage of some opportunities to grow their businesses.
Touching on some of the challenges that SMEs face, he said, “If you look at the current interest rate which is in excess of 35 percent; it is very difficult for businesses to operate profitably.”
He stressed the need to have a cap on interest rate, stating “to what extent can commercial banks go when it comes to setting up interest rates. Granted we have a policy rate of 26 percent, are we saying that banks can then charge up to 35 to 40 percent interest rate- no there should be a cap.”
He urged government to take a second look at the microeconomic indicators that really affect the operations of businesses in Ghana.
BY Cephas Larbi