Accessibility to non-bank credit and the growth of micro and small enterprises in the Sekondi-Takoradi Metropolis, Ghana

Abstract

Access to credit has been consistently cited as a major constraint to the growth of micro and small-scale enterprises. Research has shown that enterprises that are not able to access credit from banks often rely on non-bank sources. It is based on this that the study set out to examine the accessibility of MSEs to non-bank credit and how non-bank credit affects their growth. In order to achieve the set objectives, 96 MSEs of five non-bank financial institutions were sampled for the study. Questionnaires were used to collect data from both the non-bank financial instutions and the MSEs. Data from the study were mainly analysed using the Chi-Square Test of Independence and log linear resgression analysis. Findings show that MSEs’ accessibility to non-bank credit was affected by inadequate information about credit availability, high interest rates and cumbersome procedure for credit acquisition. Most of the non-bank credit advanced to MSEs were inadequate and were often disbursed at wrong times. Credit received by MSEs mainly went to increasing working capital. This was attributed to the high rate of inflation that forces MSEs to demand credit for re-capitalisation. Firms that accessed larger amount of credit experienced increases in profits. Based on the findings the study recommends to non-bank financial institutions to make the procedures for credit acquisition less cumbersome, provide information about credit availability and to grant adequate and timely loans to MSEs. In order to access credit in time, MSEs are to put in timely application of credit as this will give non-bank credit institution amply time to process the application.