PROJECT FINANCING FOR ENTERPRISES AND INDUSTRIES: EVALUATING THE CHALLENGES ASSOCIATED WITH ACCESSING VENTURE CAPITAL FOR EXPANSION OF SMEs AND SMIs IN GHANA
Journal Title: European Journal of Business and Social Sciences - Year 2014, Vol 3, Issue 8
Abstract
Small and Medium Enterprises (SMEs) and Small and Medium Scale Industries (SMIs) contribute immensely to the economy of Ghana as well providing employment opportunities for many households. Inspite of its contribution, limited access to finance to expand their operations has been a major stumbling block to the growth of SME’s/SMIs as they resort to personal savings, loans from friends, relatives and bank loans which are not adequate to undertake expansion projects.Venture Capital even though is a suitable source of finance for SMEs/SMIs it is rarely accessed by SMEs/SMIs in Ghana. The study therefore sought to investigate the challenges associated with accessing Venture Capital by SMEs/SMIs in Ghana. For this study a purposive sample of thirty(30) SMEs/SMIs was adopted and a further stratified sampling taken from Manufacturing, Animal Farming, ICT, Agro Processing Industries, Health Care Industries, Education and Savings and Loans Sectors. Vestor Oil Company which is an Agro-based Processing Industry was also purposively studied alongside having been successful with attracting and injecting Venture Capital Fund into expanding its operations. Using both quantitative and qualitative approaches as a methodology, the study revealed that the major challenges facing SME’s in Kumasi in their quest to access Venture Capital are the inadequacy of their governance structures, incomplete and unreliable business data on SMEs/SMIs operations. Others were the reluctance of owners of SMEs/SMIs to relinquish part of the ownership of the business as a requirement for accessing the Venture Capital Fund (VCF). These posed serious challenges for SME/SMI growth and expansion within the Ashanti Region. The study recommended that intensive public education was needed to explain the Venture Capital concept to SME’s in Kumasi since majority of them were not even aware of the existence of Venture Capital in Ghana. It is understood that the findings of this paper will provide insight into financing opportunities for SMEs/SMIs via Venture Capital and will enhance their growth prospects for rapid economic development of the country.
Authors and Affiliations
Edward AyebengBotchway| Department of Architecture, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana, Email of corresponding author:edbotchway@gmail.com, KWESI POKU| School of Business, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana Email of corresponding author:edbotchway@gmail.com
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