While it is generally acknowledged that 70% of Ghana’s economy is the informal sector (GSS, 2017), it is also the sector in which SMEs are found.
SMEs in Ghana contribute about 70% to GDP and provide about 85% of manufacturing employment. However, in spite of its potential contribution to alleviating poverty, creating jobs, livelihoods, incomes and decent work for many, SMEs are woefully neglected and undeveloped.
Although several governments have made interventions for developing the sector, it has not yet yielded the desired results. One of the common challenges faced by small and medium- sized enterprises (SMEs) in Ghana is access to finance for expansion.
Poor financial literacy leads to poor financial management practices, and this is an area where SMEs need to up their game. In fact, there is a direct relationship between financial literacy and the performance of SMEs.
The month of April is designated National Financial Literacy Campaign Month, which is aimed at creating awareness about the importance of financial literacy and strengthening individuals’ financial capabilities to promote responsible financial behaviour.
Thus, SMEs are advised to go the extra mile and learn more on their own by enrolling for online courses, reading books related to finance to improve their financial literacy – which is very important in running a successful enterprise.
SMEs have variously been described as the backbone of Ghana’s economy, and it is important that they are equipped to take up the arduous task of running a successful, profitable enterprise which in turn translates to economic growth for the larger economy.
Peter Kwadwo Asare Nyarko, Executive Director at the Centre for Financial Literacy Education (CFLE) Africa, underscored the need for enterprises to acquire financial literacy skills to increase their access to finance, particularly SMEs.
With adequate financial literacy, businesses – particularly SMEs – become aware of avenues for funding; acquire the right skillset to produce financial reports properly; and implement accurate financial management policies to enhance their chances of obtaining credit from lenders.