ALTERNATIVE MODEL FOR FINANCING SMEs IN GHANA

Abstract

The role of SMEs in the economic development of a country cannot be over-emphasized. They contribute to employment, GDP, innovations, human resource development and poverty alleviation. However, they are constrained by access to credit. The main objective of this paper was to develop an alternative model for raising funds. It also looked at why lenders are cynical in advancing credit to SMEs. It was found that inappropriate risk management, moral hazard and possible adverse selection limit their access to credit. The SMEs Network Fund developed suggested the formation of a self managed fund by the SMEs to finance their activities, which would require no collateral if SMEs access funds and offer relatively cheaper capital to SMEs.