Rural Bank Financing and Performance of Small and Medium-sized Enterprises Jirapa Municipality

Abstract

Ghana’s Small and Medium-sized Enterprises (SMEs) are faced with challenges in accessing credit from Rural Banks which tends to have effects on their performances too. Consequently, this study used the quantitative approach in examining Rural Bank financing and the performance of Small and Medium sized Enterprises in the Jirapa Municipality. The stratified sampling technique was used to select 92 SME owners while 23 Sonzele Rural Bank staffs were equally selected, with all 115 respondents responding to questionnaires. The study revealed that the lack of access to Rural Bank financing is prevalent on the part of SMEs in the Jirapa municipal. It was discovered through the study that the few SMEs who access the loans/credits use them effectively as working/operating capital; to purchase fixed assets, for research and for development purposes. This tends to have positive effects such as encouraging the expansion of businesses, increasing capital, enabling the setting up of other businesses and an improvement in the overall standards of performance of SMEs. The study showed that the lack of guarantees or collateral, absence of positive track records, high risk attached to projects, absence of convincing business plans and inadequate source of repayment served as the major challenges on the part of SMEs in their attempt to access finance from the Rural Bank. Finally, it was recommended that Rural Banks should put in measures meant to increase and make credit facilities easier and more accessible to SMEs. It was also recommended that government and private individuals should establish more Rural Banks in the area to cater for the growing SMEs. The study recommended that SMEs should improve on their track records, go in for projects of no/minimal risk and also develop attractive business plans.