International Analysis Journal of Finance and Economics ISSN 1450-2887 Issue 39 (2010) © EuroJournals Publishing, Inc. 2010 http://www. eurojournals.
com/finance. htm Concerns in SME Development in Ghana and South Africa Joshua Abor Section of Financing University of Ghana Business School, Legon Peter Quartey Institute of Statistical, Cultural and Monetary Research College or university of Bekwai, ghana, Legon Subjective This newspaper discusses you will, contributions of SMEs to economic expansion, and the limitations to SME development in developing countries with particular reference to Ghana and South Africa.
SMEs in Ghana have been completely noted to provide about 85% of manufacturing work of Bekwai, ghana. They are also considered to contribute regarding 70% to Ghana’s GDP and are the cause of about 92% of businesses in Ghana. In the Republic of South Africa, approximately 91% from the formal business entities are SMEs. They also contribute among 52 to 57% to GDP and give about 61% to job.
Notwithstanding the recognition of the significant roles SMEs play in these countries, their development is essentially constrained with a number of elements, such as deficiency of access to suitable technology, limited access to intercontinental markets, the existence of laws, restrictions and guidelines that impede the development of the sector, weak institutional ability, lack of supervision skills and training, and the most importantly fund. The newspaper provides several relevant tips to insurance plan makers, advancement agencies, business people, and SME managers to find out the appropriate strategy to improve the SME sector in these countries.
Keywords: SME Development, Ghana, S. africa 1 . 0. Introduction There exists growing acknowledgement of the important role small and medium enterprises (SMEs) play in economic advancement. They are often referred to as efficient and prolific work creators, the seeds of massive businesses and the fuel of national monetary engines. Actually in the produced industrial financial systems, it is the SME sector as opposed to the multinationals this is the largest employer of personnel (Mullineux, 1997). Interest in the role of SMEs n the development procedure continues to be inside the forefront of policy debates in most countries. Governments in any way levels possess undertaken projects to promote the growth of SMEs (Feeney and Riding, 1997). SME expansion can motivate the process of the two inter and intra-regional decentralization, and, they could well be a countervailing power against the financial power of much larger enterprises. Even more generally, the development of SMEs can be considered accelerating the achievement of wider economical and socio-economic objectives, which include poverty reduction (Cook and Nixson, 2000).
According for an OECD survey, SMEs create about 25% of OECD exports and 35% of Asia’s export products (OECD, 1997). International Exploration Journal of Finance and Economics , Issue 39 (2010) 219 SMEs stand for over 90% of private organization and bring about more than 50 percent of job and of GROSS DOMESTIC PRODUCT in most Photography equipment countries (UNIDO, 1999). Small enterprises in Ghana happen to be said to be a characteristic characteristic of the production landscape and get noted to provide about 85% of manufacturing work of Ghana (Steel and Webster, 1991, Aryeetey, 2001).
SMEs are believed to add about 70% to Ghana’s GDP and account for about 92% of businesses in Bekwai, ghana. Similarly, in the Republic of South Africa, roughly 91% in the formal business entities will be Small , Medium and Tiny Enterprises (SMMEs) (Hassbroeck, 1996, Berry et al., 2002). They also contribute between 52 and 59% to GDP and provide about 61% of employment (CSS, 1998, Ntsika, 1999, Gumede, 2000, Berry et approach., 2002).
SMEs therefore have got a crucial position to play in stimulating development, generating career and adding to poverty relief, given their economic pounds in Africa countries. How can SMEs in Ghana match up against their equivalent in S. africa and what policy lessons can be sketched for both countries to boost the contribution of the sector remains primary of this daily news. The rest of the daily news is arranged as follows: Section two opinions the various definitions of SMEs. Section three discusses the characteristics of SMEs in growing countries.
Parts four and five take a look at the advantages of SMEs to economic development and the constraints to SME innovations. The conventional paper concludes in section 6. 2 . 0. What is an SME? The issue of what creates a small or perhaps medium enterprise is a major concern in the literature. Several authors include usually offered different explanations to this category of business. SMEs have without a doubt not recently been spared with the definition trouble that is usually associated with principles which have various components. The meaning of businesses by size varies among researchers.
Several attempt to make use of the capital assets while others use skill of labour and turnover level. Others establish SMEs with regards to their legal status and method of development. Storey (1994) tries to sum up the danger of using size to establish the position of a organization by declaring that in certain sectors most firms might be regarded as small , and whilst consist of sectors you will find possibly no firms which are small. The Bolton Panel (1971) initial formulated a great “economic” and “statistical” meaning of a small company.
Under the “economic” definition, a firm is said to be little if it fulfills the following three criteria: • It has a fairly small talk about of their current market, • It is managed by simply owners or perhaps part owners in a customized way, but not through the medium of a official management composition, • It is independent, in the sense of not forming component to a large venture. Under the “statistical” definition, the Committee recommended the following criteria: • The size of the small company sector as well as its contribution to GDP, employment, exports, etc . • The extent where the small organization sector’s monetary contribution has evolved over time, • Applying the statistical definition in a cross country comparison of the small firms’ economical contribution. The Bolton Committee applied diverse definitions with the small organization to different sectors. Whereas firms in manufacturing, development and exploration were identified in terms of range of employees (in which case, 200 or less certified the firm to be a tiny firm), individuals in the selling, services, inexpensive, etc . were defined regarding monetary proceeds (in which case kids is 50, 000-200, 500 British Pounds to be categorized as small firm).
Firms in the road transportation industry happen to be classified little if they have 5 or perhaps fewer cars. There have been criticisms of the Bolton definitions. These kinds of centre primarily on the evident inconsistencies among defining attributes based on volume of employees and people based on managerial approach. The European Percentage (EC) identified SMEs typically in term of the range of employees as follows: • businesses with 0 to 9 employees , micro companies, 220 International Research Journal of Fund and Economics , Concern 39 (2010) • twelve to 99 employees , small companies, • 75 to 499 employees , medium corporations.
Thus, the SME sector is made up of enterprises (except agriculture, hunting, forestry and fishing) which employ below 500 personnel. In effect, the EC definitions are centered solely upon employment rather than multiplicity of criteria. Second, the use of 75 employees since the small business’s upper limit is more ideal, given the increase in production over the last 2 decades (Storey, 1994). Finally, the EC definition did not assume the SME group is homogenous, that is certainly, the definition constitutes a distinction among micro, small , and and medium-sized enterprises.
Nevertheless , the EC definition is too all-embracing to be applied to a number of countries. Analysts would have to make use of definitions intended for small organizations which are more appropriate to their particular “target” group (an operational definition). It must be emphasized that debates on definitions turn into sterile, unless of course size is an issue which impact on performance. As an example, the relationship among size and gratification matters when ever assessing the effect of a credit programme over a target group (Storey, 1994).
Weston and Copeland (1998) hold that definitions of size of enterprises suffer from a lack of universal applicability. In their view, this is because businesses may be created of in varying terms. Size has become defined in various contexts, regarding the number of staff, annual yield, industry of enterprise, ownership of enterprise, and worth of fixed assets. Truck der Wijst (1989) thinks small and medium businesses since privately held firms with 1 – being unfaithful and 12 – 99 people utilized, respectively. The nike jordan et ‘s (1998) determine SMEs as firms with fewer than 75 employees and fewer than €15 million proceeds.
Michaelas ainsi que al (1999) consider tiny independent non-public limited companies with fewer than 200 workers and Lopez and Aybar (2000) regarded as companies with sales beneath €15 million as small. In line with the British Section of Transact and Industry, the best explanation of a small firm remains that utilized by the Bolton Committee in the 1971 Report on Small Firms. This kind of stated a small company is persistent business, handled by the owner or perhaps part-owners and having a small market share (Department of Control and Market, 2001).
The UNIDO as well defines SMEs in terms of quantity of employees by providing different classifications for industrialized and developing countries (see Elaian, 1996). The definition to get industrialized countries is given the following: • Large , companies with five-hundred or more staff, • Channel , organizations with 100-499 workers, • Small , firms with 99 or perhaps less staff. The category given to get developing countries is as uses: • Significant , firms with 95 or more personnel, • Channel , firms with 20-99 workers, • Small , firms with 5-19 staff, • Micro , firms with lower than 5 employees.
It is crystal clear from the various definitions that there is not a standard consensus over what constitutes an SME. Definitions change across industries and also around countries. It is important now to take a look at definitions of SMEs succumbed the context of Ghana and S. africa. 2 . 1 . The Ghanaian Situation There are various explanations given for small-scale enterprises in Bekwai, ghana but the most frequently used criterion is definitely the number of personnel of the venture (Kayanula and Quartey, 2000). In making use of this definition, confusion generally arises in regards to the arbitrariness and shut down points employed by the various recognized sources.
In the Industrial Statistics, the Ghana Statistical Support (GSS) considers firms with fewer than 10 employees because small-scale businesses and their alternatives with more than twelve employees as medium and large-sized enterprises. Ironically, the GSS in its national accounts considered businesses with about 9 staff as SMEs (Kayanula and Quartey, 2000). The value of fixed assets in the firm has also been used alternatively criterion for defining SMEs. Nevertheless , the National Board pertaining to Small Scale Companies (NBSSI) in Ghana is applicable both the
International Research Record of Finance and Economics , Concern 39 (2010) 221 “fixed asset and number of employees” criteria. This defines a small-scale venture as a firm with not more than 9 workers, and has plant and machinery (excluding land, structures and vehicles) not exceeding 10 mil Ghanaian cedis. The Ghana Enterprise Development Commission (GEDC), on the other hand, utilizes a 10 , 000, 000 Ghanaian cedis upper limit definition pertaining to plant and machinery. It is crucial to care that the process of valuing fixed assets poses a problem.
Secondly, the constant depreciation with the local foreign currency as against major trading currencies often makes such meanings outdated (Kayanula and Quartey, 2000). In defining minor enterprises in Ghana, Steel and Webster (1991), and Osei ainsi que al (1993) used an employment cut-off stage of 31 employees. Osei et al (1993), however , classified modest enterprises in three classes. These are: (i) micro , employing below 6 people, (ii) very small utilizing 6-9 people, (iii) small , between 10 and 29 personnel.
A more new definition may be the one given by the Regional Project in Enterprise Development Ghana manufacturing survey paper. The survey report labeled firms into: (i) micro enterprise, less than 5 workers, (ii) little enterprise, a few 29 personnel, (iii) channel enterprise, 40 – 99 employees, (iv) large venture, 100 and more employees (see Teal, 2002). 2 . 2 . The To the south African Condition The most widespread framework in South Africa may be the definition of the National Business Act 102 of 1996, which identifies five types of businesses in South Africa.
The meaning uses the amount of employees (the most common function of definition) per venture size category combined with the twelve-monthly turnover categories, the gross assets not including fixed house. The meanings for the different enterprise classes are given the following: • Survivalist enterprise: The income produced is less than the minimum cash flow standard and also the poverty series. This category is regarded as pre-entrepreneurial, and includes hawkers, vendors and subsistence maqui berry farmers. (In practice, survivalist corporations are often classified as part of the micro-enterprise sector). Tiny enterprise: The turnover is less than the VALUE-ADDED TAX registration limit (that is usually, R150 1000 per year). These corporations usually lack formality regarding registration. That they include, for instance , spaza outlets, minibus taxis and household industries. That they employ only 5 people. • Small enterprise: These are enterprises employing fewer than twelve paid workers, except mining, electricity, making and structure sectors, when the figure is 20 staff. These enterprises operate in the formal market and have access to technology. Tiny enterprise: The top limit is definitely 50 workers. Small enterprises are generally more established than small enterprises and exhibit more complicated business methods. • Medium enterprise: The utmost number of workers is 95, or 2 hundred for the mining, electricity, manufacturing and construction sectors. These corporations are often characterized by the decentralisation of power to an additional managing layer. The National Business Act’s meanings of the several categories of organization may be summarised as define in Desk 1 below. 222 Stand 1:
Worldwide Research Diary of Finance and Economics , Issue 39 (2010) Definitions of SMMEs succumbed the Countrywide Small Business Action Number of Workers Fewer than 90 to 200, depending on market Fewer than 40 Annual Turnover (in Southern African rand) Less than R4 million to R50 , 000, 000, depending upon market Less than R2 million to R25 million, depending on industry Less than R200 000 to R500 000, depending on sector Less than R150 000 Gross Assets, Eliminating Fixed House Less than R2 million to R18 million, depending on market Less than R2 million to R4. , 000, 000, depending on sector Less than R150 000 to R500 500, depending on Sector Less than R100 000 Enterprise Size Moderate Small Fewer than 10 to twenty, depending on market Micro Fewer than 5 Supply: Falkena ou al. (2001) Very Small From the above, two essential contrast could be drawn between definitions of SMEs in Ghana and their counterparts in South Africa. 1st, Act 102 of 1996 defines SMEs in South Africa whereas you cannot find any such legal guidelines in Bekwai, ghana.
Secondly, the cut off points for the different SME size categories in South Africa are much higher than that of Ghana. This may be a result of the fact that S. africa has a higher income levels than Bekwai, ghana. 3. 0. Characteristics of SMEs in Developing Countries Fisher and Reuber (2000) enumerate a number of characteristics of SMEs in developing countries under the extensive headings: work characteristics, sectors of activity, gender of owner and efficiency. Considering the fact that most SMEs are one-person businesses, the largest employment category is working proprietors.
This group makes up more than half the SME workforce in most expanding countries, their families, who tend to be past due but mixed up in enterprise, make-up roughly one other quarter. The rest of the portion of the workforce is definitely split among hired employees and students or apprentices. SMEs are definitely more labour intense than much larger firms and for that reason have decrease capital expenses associated with job creation (Anheier and Seibel, 1987, Liedholm and Mead, 1987, Schmitz, 1995). In terms of activity, they are typically engaged in selling, trading, or manufacturing (Fisher and Reuber, 2000).
While it is a common understanding that the majority of SMEs will get into the 1st category, the proportion of SME activity that happens in the retail sector varies considerably among countries, and between non-urban and metropolitan regions inside countries. Selling is mostly present in urban regions, while developing can be found in either rural or urban companies. However , the extent of involvement of the country in manufacturing will depend on many factors, which include, availability of raw materials, taste and consumption habits of domestic consumers, plus the level of advancement the foreign trade markets.
In Ghana, SMEs can be categorized into metropolitan and rural enterprises. The previous can be subdivided into “organized” and “unorganized” enterprises. The organized ones mostly have paid employees having a registered workplace, whereas the unorganized category is mainly consisting of artisans who have work in available spaces, momentary wooden set ups, or at home, and utilize few or in some cases no salaried personnel (Kayanula and Quartey, 2000). They count mostly about family members or apprentices. Country enterprises happen to be largely made up of family groups, specific artisans, females engaged in foodstuff production from local crops.
The major activities within this sector include: – soap and detergents, fabric, clothing and tailoring, linen and leather-based, village blacksmiths, tin-smithing, ceramics, timber and mining, stones and concrete, beverages, food processing, bakeries, wood pieces of furniture, electronic set up, agro control, chemical-based companies mechanics (Osei et approach., 1993, Kayanula and Quartey, 2000). Most of SMEs are female-owned businesses, which generally are internet marketing compared to these owned by males, they may be operated at home and are typically not regarded as in recognized statistics.
This clearly impacts their chances of gaining access to financing schemes, since such International Research Journal of Finance and Economics , Issue 39 (2010) 223 programmes are designed without satisfactory consideration in the needs of companies owned by simply females. These types of female business owners often get the impression they are not capable of using these credit schemes, as the administrative expenses associated with the schemes often outweigh the benefits. Preceding empirical studies in Bekwai, ghana have shown that female-owned SMEs often have difficulty accessing finance.
Females are generally involved in sole-proprietorship businesses which can be mainly microenterprises and as such may well lack the necessary collateral to qualify for loans (Aryeetey ou al, 1994, Abor and Biekpe, 2006). Measures of enterprise productivity (e. g. labour production or total factor productivity) vary tremendously both inside and around industries. Firm size can be associated with a few other factors which might be correlated with performance, such as managerial skill and technology, and the effects of the policy environment.
Most research in growing countries reveal that the tiniest firms are definitely the least useful, and there is a few evidence that both large and small firms are relatively bad compared to medium-scale enterprises (Little et al., 1987). It is often argued that SMEs are usually more innovative than larger businesses. Many little firms bring innovations towards the market place, however the contribution of innovations to productivity frequently takes time, and larger firms may well have more assets to adopt and implement these people (Acs ou al., 1999). 4. zero. Contributions of SMEs to Economic Creation
There is a basic consensus the performance of SMEs is important for equally economic and social development of developing countries. From the economical perspective, SMEs provide a quantity of benefits (Advani, 1997). SMEs have been noted to be one of the main areas of matter to many plan makers in an attempt to accelerate the speed of growth in low-income countries. These kinds of enterprises have already been recognized as the engines through which the growth goals of developing countries can be achieved. They are really potential types of employment and income in lots of developing countries.
SMEs apparently have advantages over their large-scale rivals in that most suitable option adapt more readily to market conditions, given all their broadly experienced technologies. They could withstand unfavorable economic circumstances because of their flexible nature (Kayanula and Quartey, 2000). SMEs are more time intensive than larger businesses and therefore include lower capital costs associated with job creation (Anheier and Seibel, 1987, Liedholm and Mead, 1987, Schmitz, 1995). They will perform valuable roles in ensuring income stability, growth and career.
Since SMEs are time intensive, they can be more likely to achieve smaller downtown centres and rural areas, where they can contribute to a more even circulation of monetary activity in a region and may help to gradual the stream of immigration to significant cities. Due to their regional dispersion and their work intensity, it can be argued, modest production products can encourage a more equitable distribution of income than large companies. They also increase the efficiency of domestic market segments and make productive use of scarce resources, thus facilitating long-term financial growth (Kayanula and Quartey, 2000).
SMEs contribute to a country’s national product simply by either manufacturing goods valuable, or through the provision of services to both consumers and/or various other enterprises. This kind of encompasses the provision of goods and, into a lesser magnitude, services to foreign clientele, thereby contributing to overall export performance. In Ghana and South Africa, SMEs represent an enormous portion of businesses. They stand for about 92% of Ghanaian businesses and contribute regarding 70% to Ghana’s GROSS DOMESTIC PRODUCT and over 80% to employment.
SMEs also account for regarding 91% in the formal organization entities in South Africa, contributing between 52% and 58% of GDP and rendering about 61% of work (CSS, 1998, Ntsika, 99, Gumede, 2k, Berry et al., 2002). From a fiscal perspective, nevertheless , enterprises are certainly not just suppliers, but also consumers, this plays a crucial role if they are able to location themselves in a market with purchasing electricity: their with regard to industrial or perhaps consumer merchandise will induce the activity with their suppliers, just as their own activity is induced by the requirements of their clientele.
Demand in the form of investment performs a dual role, both equally from a demand-side (with regard to the suppliers of industrial goods) and on the supplyside (through the opportunity of new creation arising from improved equipment). In addition , demand 224 International Exploration Journal of Finance and Economics , Issue 39 (2010) is important to the income-generation potential of SMEs and their ability to stimulate the demand pertaining to both consumer and capital goods (Berry et al., 2002). five. 0. General Constraints to SME Expansion
Despite the potential role of SMEs to accelerated progress and work creation in developing countries, a number of bottlenecks affect their very own ability to understand their total potential. SME development is definitely hampered by a number of factors, including fund, lack of bureaucratic skills, tools and technology, regulatory issues, and use of international markets (Anheier and Seibel, 1987, Steel and Webster, 1991, Aryeetey et al, 1994, Gockel and Akoena, 2002). The lack of bureaucratic know-how spots significant restrictions on SME development.
Although SMEs tend to attract encouraged managers, they can hardly take on larger firms. The scarcity of administration talent, prevalent in most countries in the region, has a magnified impact on SMEs. Deficiency of support solutions or all their relatively higher unit expense can hamper SMEs’ attempts to improve all their management, mainly because consulting businesses are often not really equipped with suitable cost-effective management solutions to get SMEs. Besides, despite the many institutions rendering training and advisory solutions, there is nonetheless a abilities gap inside the SME sector as a whole (Kayanula and Quartey, 2000).
This is because entrepreneurs perhaps have been hit by the recent economic climate and are unable the high cost of training and advisory solutions while others tend not to see the need to upgrade all their skills due to complacency. When it comes to technology, SMEs often have problems in attaining access to ideal technologies and information on offered techniques (Aryeetey et al., 1994). Generally, SMEs utilize foreign technology with a hard to find percentage of shared control or renting. They usually get foreign licenses, because regional patents happen to be difficult to attain.
Regulatory constraints also present serious issues to SME development and although wideranging structural reconstructs have resulted in some advancements, prospects for enterprise creation remain being addressed with the firm-level. The high start-up costs intended for firms, which include licensing and registration requirements, can enforce excessive and unnecessary problems on SMEs. The very high cost settling legal claims, and excessive holds off in court proceedings negatively affect SME operations. Regarding Ghana, the cumbersome procedure for registering and commencing business are essential issues typically cited.
The World Bank Working Report (2006) indicated it takes 127 days to handle licensing issues and there are of sixteen procedures involved with licensing a business in Ghana. It takes longer (176 days) in South Africa and there were 18 techniques involved in dealing with licensing problems. Meanwhile, the absence of antitrust legislation favors larger firms, while the not enough protection pertaining to property rights limits SMEs’ access to foreign technologies (Kayanula and Quartey, 2000).
Previously insulated by international competition, many SMEs are now facing greater external competition plus the need to expand market share. However , their limited international marketing experience, low quality control and product standardisation, and small access to foreign partners, still impede SMEs’ expansion in to international marketplaces (Aryeetey ou al., 1994). They also lack the necessary information regarding foreign markets. One significant problem that SMEs generally face can be access to capital (Lader, 1996).
Lack of adequate financial resources areas significant constraints on SME development. Make and Nixson (2000) note that, notwithstanding the recognition of the function of SMEs in the development process in many developing countries, SMEs expansion is always constrained by the limited availability of money to meet various operational and investment requires. A World Bank study found that about 90% of small companies surveyed mentioned that credit rating was a significant constraint to new purchase (Parker ain al., 1995).
Levy (1993) also found there is limited entry to financial resources accessible to smaller businesses compared to bigger organisations and the consequences for growth and development. The role of finance continues to be viewed as a major element to get the development of SMEs (Cook and Nixson, 2000). A large part of the SME sector will not have access to enough and ideal forms of credit rating and value, or indeed to financial services more generally (Parker et al., 1995). In rivalling for the corporate market, formal financial institutions include structured goods to provide the requires of large corporates.
International Study Journal of Finance and Economics , Issue 39 (2010) 225 A general analysis of survey and research outcomes of SMEs in S. africa, for instance, uncovers common reactions from SME owners evaluated. When asked what they understand as restrictions in their businesses and especially in establishing or perhaps expanding their particular businesses, that they answered entry to the market to funds is a major constraint. This really is reflected in perception queries answered by simply SME owners in many surveys (see BEES, 1995, Graham and Quattara, 1996, Rwingema and Karungu, 1999).
This case is not different in the case of Ghana (see Sowa ain al., 1992, Aryeetey, 1998, Bigsten et al., 2k, Abor and Biekpe 06\, 2007, Quartey, 2002). Dialectic, it might seem to be surprising that finance needs to be so important. Requirements such as discovering a product and a market, acquiring any important property privileges or permits, and keeping proper information are all in certain sense more fundamental to running a little enterprise than is fund (Green ain al., 2002). Some studies have subsequently shown that a large number of small enterprises are unsuccessful because of non-financial reasons.
Additional constraints SMEs face incorporate: lack of use of appropriate technology, the existence of laws and regulations, regulations and rules that impede the introduction of the sector, weak institutional capacity and lack of management skills and training (see Sowa et al., 1992, Aryeetey ainsi que al., year 1994, Parker et al., 95, Kayanula and Quartey, 2000). However , potential providers of finance, if formal or perhaps informal, are unlikely to commit money to a organization which they view as not being on a sound footing, irrespective of the exact mother nature of the unsoundness.
Lack of cash may be the instant reason for an enterprise failing to start in order to progress, even if the more fundamental reason lies elsewhere. Financing is said to be the “glue” that holds collectively all the different aspects linked to small business start up and advancement (Green ou al., 2002). 6. zero. Conclusion This paper offers reviewed several definitions of SMEs and in addition discussed the characteristics, contributions of SMEs to economic creation, and the restrictions to SME development. In reviewing the definitions of SMEs, it had been concluded that there is not any single, common, uniformly suitable definition of SMEs.
Several actions or signals have been utilized to define the SME sector. The most widely used is the number of employees with the enterprise. Yet , in applying this classification, confusion frequently arises in respect of the arbitrariness and cut-off points utilized by various recognized sources. The definitions of SMEs inside the context of Ghana and South Africa were examined, considering that this newspaper focuses on the two of these countries. SMEs often fall under two groups, that is, city and rural enterprises. The previous can be sub-divided into “organized” and “unorganized” enterprises.
The organized teams have authorized offices and paid workers, whilst the unorganized ones are mainly composed of artisans. Country enterprises will be largely made up of family groups and individual merchants. The activities inside the SME sector range from art and ceramics to manufacturing of spare parts and electronic assembly. SMEs in Ghana and South Africa have a lot of commonalities in terms of their particular characteristics and also the vital role they be in the two economies. However , they will differ with regards to size and regulation.
For example, the stop point pertaining to the various categories of SMEs in Ghana are lower than that they pertain in South Africa. Second, whereas a national laws defines a great SME in South Africa, simply no such Take action exist in Ghana. The analysis also noticed that SMEs constitute an important element of the development process, and their contributions regarding production, employment and cash flow in expanding countries can be widely recognized. Hence, interest in the role of SMEs in the development procedure continues to be at the top of the plan of insurance plan makers inside the two countries.
Notwithstanding the recognition, the development of SMEs is always limited by a volume of factors such as, lack of access to appropriate technology, limited usage of international markets, the existence of laws and regulations, regulations and rules that impede the development of the sector, weak institutional capacity and lack of supervision skills and training. However , access to finance remains the greatest concern in most of SMEs. This study suggests that, to improve access to credit rating to SMEs, entrepreneurs should be encouraged to form cooperatives seeing that financial institutions believe that peer pressure often reduces the risk dua puluh enam International Exploration Journal of Finance and Economics , Issue 39 (2010) of default, Second, the government through tax incentives can encourage certain training institutions and NGOs to provide training to entrepreneurs upon simple record keeping and managerial know-how. Also, a national laws in Ghana to determine what comprises an SME and their legal as well as duty obligations will assist you to integrate numerous informal companies into the formal framework. This should be associated with procedure for minimize the legal types of procedures involved in conducting business in both countries.
Additionally it is suggested that technology transfer through simple, inexpensive and adaptable technology should be marketed to enhance the productivity of SMEs. Recommendations [1] [2] Abor, M. and In. Biekpe, 2006. “Small Business Financing Pursuits in Ghana”, Problems and Perspectives a manager, 4(3), pp. 69-77. Abor, J. and N. Biekpe, 2006. “SMEs’ Access to Debts Finance: An evaluation of Male-Owned and Female-Owned Businesses in Ghana”, Intercontinental Journal of Entrepreneurship and Innovation, 7(2), pp. 105-112. Abor, T. and And. Biekpe, 3 years ago. Small Business Reliance on Lender Financing in Ghana”, Emerging Market Financing , Control, 43(4), pp. 93 – 102. Acs, Z., L. Morck, and B. Fresh, 1999. “Productivity Growth and Size Distribution”, in Acs, Z., Carlsson, B. and Karlsson, C. (eds. ), Entrepreneurship, Small , Medium-Sized Corporations and the Macroeconomy, Cambridge School Press. Advani, A. 1997. “Industrial Clusters: A Support Program for Small and Medium-Sized Enterprises”, Private Sector Development, Universe Bank Periodic Paper Number 32, Community Bank, Washigton, DC. Anheier, H. E. and L. D. Seibel, 1987. Small Scale Industries and Economic Advancement in Ghana”, Business Actions and Approaches in Simple Sector Financial systems, Verlag Breitenbech, Saarbruckh, Philippines. Aryeetey, Electronic. 1998. “Informal Finance intended for Private Sector Development in Africa”, Economic Research Papers No . 41, The African Development Bank, Abidjan. Aryeetey, E. 2001. “Priority Exploration Issues Relating to Regulation and Competition in Ghana”, Hub on Rules and Competition Working Newspaper Series, School of Manchester, Manchester. Aryeetey, E., A. Baah-Nuakoh, To. Duggleby, L. Hettige, and W. Farreneheit.
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