ABSTRACT
The main aim of this research work was to examine entrepreneurship financing among females in Accra focusing on the enabling and challenging factors. The study employed qualitative research approach using exploratory and descriptive methods to achieve the objectives set out for the study. The main instrument employed was semi-structured interviews with twenty (20) respondent size being owners of female run SMEs in different fields ranging from food and beverages, water, clothing and designs, hair and cosmetics product within Accra. The study establishes that female run SMEs derive funding from various sources like family contribution, loans, personal savings and plough back profit with the major one being family contribution.
Again, the study reveals that, the presence of increasing population, demands for goods and services, increased mobile phone and internet usage, presence of financial institutions with several loan schemes serve as enabling factors for the conduct of female run SMEs in Accra whereas factors like high interest rate, request for collateral and though banking procedures, discrimination and gender bias, and family related factors impact negatively on the pace of female business activities in the city and the country at large. Similarly, the study reveals that presence of factors like reduction in interest rate, provision of financial support for female SMEs, education, skills development and training for female SMEs are necessary for obtaining improved pace of female led SMEs in the city and the country as whole.
CHAPTER ONE
BACKGROUND OF THE STUDY
Introduction
This first chapter of this research work will discuss the background to the study, problem statement, research aim and objectives, research questions and significance of the study. The chapter again will detail how the study will be organized.
Background of the Study
A growing body of investigations and research on entrepreneurship and their sources of financing have emphasized the importance of credit and other financial streams to the growth and sustenance of Small and Medium scale Enterprises (hereafter termed as SMEs), (Ahinful, 2012; Abor & Biekpe 2007; Abor & Biekpe, 2006; Osei-Assibey, 2013). Capital for entrepreneurial activities serves as the catalyst for promoting small scale businesses. This is because, as start-up businesses require credit for implementing their business ideas, already existing firms that needs expansion also require capital for investment and growth. Thus far, credit serves as the beacon and life blood of businesses, the world all over, as capital is needed essentially for all the various facets of business operations like, remuneration, acquiring business licenses, setting up the business entity and other operation cost, amongst others. Improved access to credit facilities enables SMEs to “build their productive capacity and also makes them competitive in both the local and the global market” (UNCTAD, 2002, pg. 18). Studies on SMEs indicates that, they are one of the major contributors to national economic development in most countries of which Ghana is no exception (Agbozo et al, 2012; Kayanula and Quartey, 2000).
This according to Gambold (2008), is particularly so as SMEs continuous to serve as the drive for employment creation in most countries, particularly developing countries. In relation to this, UNIDO (1999) affirmed, globally the contribution of SMEs to employment creation is overwhelming as they make up almost 90% of businesses and account for between 50-60% employment rates.
In the case of Ghana, as in the records of the Registrar -General, 90% of businesses registered are SMEs, making up a whopping 92% of businesses in Ghana and about 80% of businesses in the private sector of the country (Registrar General as cited in Agbozo, 2012; Abor & Biekpe, 2007; Abor & Beikpe, 2006). Despite the seeming growth rate of SMEs in Ghana, a search in the literature on SME financing has indicated that, the principal setback to SMEs growth in Ghana, Africa and even most parts of other continents have been financing (Banfo & Asiedu-Appiah, 2012; Cham, 2011; Adotei 2012; Ackah & Vuvor, 2011; Fuseini, 2015; Beck and Cull, 2014; Osei-Assibey, 2014). For instance, in Ghana, in a study of 133 SMEs, “60% identified access to credit as the major bane to their businesses. Similarly, the study also indicates that medium firms have 69.1% chance of success in accessing credit, compared to 45% for small enterprises and 33.7% for microenterprises”, Aryeetey et al. (1994, p. 79). Again, a study conducted by the World Bank on 10,000 firms in 1999 and 2000 in over 80 countries as indicated by Beck and Demirgüç-Kunt (2005), suggest that most small firms are 39% likely to mention financing as a severe obstacle to growth relative to medium-sized firms (36%) and large firms (32%).
In examination of the likely causal factors to the difficulty of SMEs in accessing finances, Alhassan and Sakara (2014), Stephanou & Rodriguez (2008), Abor & Biekpe (2007), indicated that, SMEs are met with various unfavourable demands and conditionalities like high interest, maturity, collateral and lending procedures, business plans, personal guarantors demanded by the
bank, cumbersome loan application process and unfavourable repayment period. This situation makes financing a difficult task to achieve which eventually forces most SMEs to depend largely on family, friends and ‘susu’ lenders to finance their operations (Nkuah et al., 2013; Beck and Demirgüç-Kunt, 2005); The continuous lack of access to credit by SMEs have impacted negatively on their effectiveness and efficiency in the Ghanaian entrepreneurial drive. A gender composition analysis of entrepreneurship and entrepreneurs, in the Ghanaian community, and as indicated by the Ghana Statistical Service, estimated that, of the 8 million labor force as at the year 2002, the informal sector employed the largest of the people which is around 60 and 65 percent, with its attendant dominancy of SMEs. According to the Ghana Statistical Service, about 85 percent of the Ghanaian female labour force is employed in the private sector mostly dominated by SMEs; (Ghana Statistical Service, 2002). Again, in 2015, women accounted for 54.9% of the 90% of workers in the informal sector dominated by SMEs indicating a highly dominated female based informal sector with SMEs been its major characteristics (Ghana Statistical Service, 2015) with women in SMEs not been exception to the various issues, favorable or unfavorable surrounding the management affairs of SMEs. This thus brings to question, how Ghanaian women led SMEs are being financed as regards the enabling and challenging factors.
Problem Statement
Several studies on SMEs in Ghana, Sub-Sahara Africa and other parts of the world has indicated that, SMEs largely are constrained by the lack of access to credit (Ahinful, 2012; Abor & Biekpe 2007; Abor & Biekpe, 2006; Banfo & Asiedu-Appiah, 2012; Cham, 2011; Adotei 2012; Ackah & Vuvor, 2011; Fuseini, 2015; Mensah, 2004; Gallardo, 2001). In one such study by Abor and Beikpe (2006), it was concluded that, SME’s lack of access to credit results from their low
participation in the capital markets partly due to the perception of higher risk, informational barriers and higher costs of intermediation for smaller firms”. The absence of finance for SMEs makes it difficult for them to acquire new technologies, acquire assets, compete effectively, pay competitive remuneration and expand their businesses thus resulting in most of them collapsing shortly after being set up (Adewale, 2015; Prempeh, 2015; UNCTAD, 2002).
According to the Ghana statistical service, majority of SMEs in Ghana are operated by women and thus women take up a big chunk of the SMEs ratio rate (GSS, 2015). This is evident in the statistics in 2015 in which 85% of the Ghanaian women are in the private sector dominated by SMEs wholly. Despite the high rate of women involvement in SMEs, studies on their SMEs drive indicates they are confronted with varying degrees of issues. For instance, Dovi (2006) explained that, most women in Ghana are engaged in small and medium scale enterprises but experience in the sector shows majority of them being handicapped by various factors like finances. Accordingly, Dzisi (2008) posited that, most Ghanaian women experience high levels of obstacles that prevent them from becoming financially and socially independent by working or opening their own businesses for their benefit and wellbeing. For those who do manage to establish independent businesses in Ghana, 80% remain at the micro level because of the inability to expand due to the lack of “properly coordinated support, cheap and long-term credit and insufficient access to new technologies” (Dzisi, 2008; Dovi, 2006). Female entrepreneurs are great contributors to the economic development of individual families and the government as well. Female entrepreneurship is thus a great source of employment, economic emancipation and promotes national economic development effort. It is thus imperative that women SMEs in Ghana should be taken more seriously. However, issues of financing and resource requisition to the female entrepreneur has become quite daunting (Samani, 2008; Dovi, 2006). The motivation
of this study is thus to examine the challenges confronting women in SME’s when sourcing financing for their SME businesses. The study will concentrate on SMEs in Accra and also investigate the enablers available for financing their businesses.
Research Aim
The overall aim of this research work is to examine the financing of entrepreneurship (SMEs) among female businesses or SMEs in Accra.
Research Objectives
The specific objectives guiding this research work are;
- To examine the source of financing SMEs among female businesses in Accra
- To identify the enablers or enabling financing factors of entrepreneurial activities among female in Accra.
- To examine the challenges facing female SME start-ups in Accra
- To identify measures in addressing the challenges of female SMEs start-ups in Accra
Research Questions
- What are the sources of financing available to SMEs managed by female entrepreneurs in Accra?
- What are the enabling factors in financing SMEs among female businesses?
- What are the challenges faced by female in SMEs enterprises?
- What measures are necessary in addressing the challenges faced by female SMEs in Accra?
