Abstract:
ABSTRACT
A number of studies have emphasized the growing importance of credit to the growth and
productivity of every business entity especially Small and Medium-Sized Enterprises (SMEs).
Over the years, the contributions of SMEs towards bridging the income gap, reducing
unemployment, and contributing to economic growth has been enormous. Despite the strong
growth prospects for SMEs, accessibility to the right sources of finance continue to be pose as
a major challenge to participants in this space. This study consequently seeks to explore the
sources of finance for SMEs, the impact of these sources of finance on their growth, and the
challenges confronting SME finance in Ghana. This was achieved by obtaining primary data
from 210 SMEs operating in Accra Metropolitan area. The data was solicited by means of a
semi-structure questionnaire which were quantitatively analyzed by means of frequencies and
regression technique. It was found that some common sources of finance for SMEs includes
bank loans, bank overdraft, trade credit, microcredit, and funds from family & friends. The
study also discovered that these sources of funds had a positive impact on growth of SMEs
except microcredit which was uncovered to have a negative impact on growth of SMEs. The
study also established that high interest rate, high transaction cost, unfavourable repayment
terms, and collateral were some barriers to sources of finance for SMEs. It is further
recommended that information on available sources of finance for SMEs be made public whilst
also promoting the establishment of venture capitalists, business angels, and private equities.
