The Utilization of Financial Institutions in Ghana: SME’s Perspectives (A Case Study of SMEs in the Tema Metropolis Assembly)

Abstract

This study aims to examine the perceptions of SMEs when accessing loans from financial institutions. A random sampling technique was used to select the SMEs and banks operating in the Tema Metropolis Assembly to obtain information on the factors influencing the SME when accessing loans, the challenges that militate against the growth of their business and their perceptions when accessing loans from financial institutions. Data from questionnaire were collected from 264 SMEs and 10 banks, between 12th March and 31st July, 2020. The data was presented and analyzed using frequencies, percentages and graphs. Findings show that lack of collateral, unaudited financial statement and high interest rate charges influence SME business when accessing loans from banks. More than half of SME business did not have much knowledge about Cash-Back savings which serves as collateral for securing loans. In addition, the results show that less access to finance, high cost of production and inadequate technology are the major challenges that militate against the growth of SME business. Also, SME had the perceptions that the application process for loans is very cumbersome, banks are very reluctant in granting long term loans, there is lack of sympathy from bank officials and there is no promptness in receiving loans from banks. There should be sustained SME education on the requirements for loan applications, especially securing a collateral and ensuring proper financial obligations in order to improve on the level of approval of loans by financial institutions. Keywords and phrase: Collateral, Financial Institutions, Loans, Perceptions, SMEs, Tema Metropolis Assembly.