Abstract:
The main aim of this study was to analyze access to and usage of external finance by micro, small and medium
manufacturing enterprises (MSMMEs) in the Kumasi Metropolis. According to Beck, Demirgüç-Kunt and
Honohan, (2009), access to finance refers to the possibility that individuals or enterprises would make use of
financial services, including credit, deposit, payment, insurance and other risk management services. Access to
finance should be distinguished from the actual use of financial services, because non-use of finance can be
voluntary or involuntary. Voluntary non-users of financial services have access to but do not use financial
services either because they have no need for those services or because they decided not to make use of such
services due to cultural, religious or other reasons. Using a sample size of 361 micro, small and medium
manufacturing enterprises in the Kumasi Metropolis, it was found that whereas 34.35 percent of respondents
used external finance, 42.38 percent of respondents had access to external finance. Thus, access was broader
than usage. Though access was reasonably high, a number of respondents who could not access external finance
could not do so because of various reasons that prevented them from assessing external finance. Notable among
them were high cost of finance, cumbersome application process, long time in securing external finance and
collateral requirements. It is recommended that providers of external finance should create conditions that will
encourage owners/managers of MSMEs to access external finance. These include reducing the cost of finance,
simplifying the application process and relaxing the collateral requirements.
