Financing experts at a forum on Financing Business Operations in Ghana have agreed that dishonesty in the operations of businesses, particularly small- and medium-scale enterprises (SMEs), largely account for the high interest rate financial institutions slap on them.
The Managing Director of Stanbic Bank Ghana, Mr Alhassan Andani, who first articulated the point, stated, The biggest problem making financial services and products expensive is dishonesty. People consistently misrepresent themselves and the sectors they are in.
Mr Andani was contributing to a theme Financing businesses in Ghana, which was discussed at a forum on Wednesday. The Ghanaian-German Economic Association (GGEA), a grouping of businesses of Ghanaian, German and/or European origin with business interests in West Africa, organised the forum.
The forum brought together financing entities and corporate players, particularly in the SME sub-sector, who may need financing in their operations, and equiped them with vital information to enable them to access financing.
Some of the topics included Financing Business Operations in Ghana; Possibilities for Financing Business Operations in Ghana; Assessing the capital market to fund business operations in Ghana; The Bank and its Financing Options for Business Operators in Ghana; and Funding Start-Up Concerns.
The GGEA organises such fora regularly to enable its members to have a deeper understanding of regulatory and policy issues that affect their business operations.
Mr Andani expressed concern that some of the professionals did not deliver on their role of straightening the books of SMEs, therefore, banks had to subject such applications for loans from that sub-sector to rigorous checks and apply higher risk premiums for resources they release to them.
He explained that banks looked at several issues before lending, the primary one being the cash flows of the business, as well as a lot of due diligence to establish certain technical issues such as whether the equipment a business intended to purchase was obsolete or in vogue as that would impact of availability of parts for maintenance.
Mr Andani also agreed with other speakers that small businesses needed to be mindful of the type of financing for their operations, as different stages of the businesses required a certain type or mix of financing options.
The Deputy Managing Director of the Ghana Stock Exchange, Mr Ekow Afedzie, reiterated that appropriate capital is a problem in Ghana as it is the cause of many businesses that have gone under, explaining that instead of going for medium to long term financing when the business reach the point of expansion, such SMEs still resorted to the bank financing.
He said the stock exchange was one sure place to raise long-term capital to fund expansion, adding that listing on the Ghana bourse was a simple procedure that many SMEs should take advantage of.
Besides the benefit of a stress-free long-term capital, raising capital on the exchange helped SMEs to conform to good corporate governance and adhere to transparency and disclosure policies, Mr Afedzie noted.
The GSE deputy managing director announced that as part of creating a separate alternative market for SMEs and star-ups to raise capital, the GSE in collaboration with some donor partners would set up a revolving fund to enable the target businesses to access in financing their listing expenses, in addition to incentives such a waiver of listing fees.
The West African Head of the German private sector-focused development financier, DEG, Dr Andreas Voβ, explained the various medium to long-term interventions his outfit made in businesses across the world, including a portfolio of 600 million for sub-Saharan Africa in 2010 and over 250 million in Ghana as of last year.
He explained that DEG, a member of the German development banking group, KfW, had medium to long-term financing of anything from 5 million to 30 million for a period of between four and 15 years, adding that the financier was mainly interested in infrastructure, energy, telecommunications, manufacturing and agribusiness which it did through equity participation, debt financing or mezzanine financing arrangements (a hybrid).
The President of the GGEA, Mr Stephen Antwi, called on the government to engage the private sector and inculcate its input into the second phase of the Financial Sector Strategic Plan (FINSSP II).
Mr Antwi stressed that since the plan was directed at the financial sector it would eventually impact on the private sector, the reason they must have their inputs into it at the very beginning in order to own the plan.
Source: Samuel Doe Ablordeppey & Rita Adongo/D-Graphic
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