Micro, Small and Medium Enterprises (MSMEs) can offer the economy more in terms of job creation, revenue and economic growth, but only if the government can work to improve access to and cost of credit, as well as sustainably provide support to build resilience, the Association of Ghana Industries (AGI), has said.
These, along with a conducive regulatory environment, the Association in a statement to mark the 2020 International MSMEs Day, noted, could unleash the hugely untapped potential of the sector which represents about 90 percent of all businesses in the country.
“We reckon that there is a lot more MSMEs can offer, barring the numerous challenges that they face. For the past decade, the AGI Business Barometer has highlighted some of the constraints that keep stifling growth of MSMEs in Ghana. Access to credit and cost of credit remain two major decade-old bottlenecks that they face, yet available SME financing schemes have not been able to fill this void.
For this reason, our MSMEs remain under capitalized. Our SMEs continue to yield to pressure from imports and unfriendly business regulations,” the statement signed by AGI’s Vice President, Humphrey Ayim Darke, said.
Despite what the AGI describes as unfriendly conditions that small businesses have to contend with even before the outbreak of the novel Coronavirus led to most of them having to shut down operations, it said the sector continues to contribute significantly to Gross Domestic Product and government revenue.
Although it is difficult to quantify how MSMEs contributes to the economy due the nature of the country’s economy, some estimates suggest 70 percent of all GDP contributions come from such enterprises.
Other challenges impeding MSMEs growth, include restrictive legislation, and a lack of international exposure. Meanwhile, conventional funding sources are difficult to access, as the enterprises are perceived to offer higher risk. As a result, high interest rates, collateral requirements and complicated processes impede the access of SMEs to capital.
The AGI is, therefore, of the view that if the government can offer sustainable support in the form of improved access to and cost of credit to small businesses, as well as a good regulatory space, it could set the tone for MSMEs to contribute more meaningfully to national development.
“We urge government to implement policies that will help our MSMEs build resilience, local production capacity and medium-term growth. To this end, AGI will continue to dialogue with government to ensure a sustainable development of our MSMEs,” Mr Darke added.
On the impact of the pandemic on the sector and government’s relief package, the statement said, “COVID-19 has also taken a significant toll on local industry of which MSMEs were the worst hit. A number of these firms have had to suspend business operations with other downsizing to keep afloat. While we commend government for the GH₵600 million relief package and the 50 percent subsidy on electricity, AGI believes the sustainability and timeliness of government interventions are crucial for the continuity of business. We welcome efforts by government to extend relief support to large-scale enterprises as well.”
About International MSME Day
The United Nations on April 6, 2017 declared every June 27 as International MSME Day, as part of efforts to recognise the role of small businesses in creating decent jobs and improving livelihoods. It is used to advocate favourable policies that promote the growth of the sector, with emphasis on enabling business environment, support for access to finance, information, and markets.
Themed: MSME Day 2020 – COVID-19: The Great Lockdown and its impact on Small Business, the day is also used to raise public awareness of MSMEs contribution to the attainment of the sustainable development and the global economy.