Question

The contribution of Small and Medium Enterprise in Ghana is being acknowledge. It is often said that, the Small and Medium Enterprises are the Engine of Growth. There are , however, certain factors that militate against the Growth and Development of the Small and Medium Enterprises in Ghana. Discuss

Answer 1

1. LACK OF FINANCING RESOURCES- There is no proper financing system which can provide them the funds at reasonable or lower rates.if people choose to borrow amount from some private lender then the financing cost is increased and a large portion of profit goes in the repayment of loan and interest.
2. UNFAVORABLE TAXATION SYSTEM- there is no special tax benefit for the new businesses and the tax burden over businesses increases and net disposable income decreases in the economy.this discourage the new business comers to enter in the market.
3. THREAT OF FOREIGN COMPETITION-domestic small and medium scale industries can't enjoy the economy of scale and economy of scope while producing,which the foreign giant industries enjoys while executing the process at huge level production.therefore their(foreign industry's) per unit cost decline and they can sell the product at a cheaper rate in GHANA's domestic market.which create another hurdle in the development of domestic industries.
4. INEFFECTIVE GOVERNMENT POLICIES- red-tapism (heavy documentation and paper work),strict policies ,lengthy legal process to initiate a business creates an adverse impact for the new business concerns.
5. INEFFECTIVE MANNER OF PRODUCTION-small and medium industries generally used traditional and manual method of production and the use of technology is scarce and limited in nature which is the reason that it can't produce the quality goods at cost effective price.