Question

The enormous contribution of Small and Medium Enterprise in Ghana cannot be over emphasized. It is often said that, the Small and Medium Enterprises are the Engine of Growth. Discuss.

Answer 1

The mainstay of developing economies is the informal sector. In Ghana, most employment opportunities are largely hinged on the private sector. The contribution of this sector to Ghana's economic growth through job creation cannot be underestimated. Globally, SMEs are noted for empowering citizens and economic growth of countries in Asia, Europe and North America. Though successive Ghanaian governments after independence in 1957 have made strenuous efforts towards reducing poverty and accelerating economic growth through formulating policies that favor SMEs, there is still a lag in knowledge regarding the presence of SMEs and level of development in rural settings in Northern Ghana. The study sought to find out if the presence of SMEs could be linked to rapid infrastructural development, whether significant number of people is gainfully employed in the sector, and if SMEs have attracted the needed financial institutions through increased in credit facilities. By extension we also explored inherent challenges confronting SMEs and provided recommendations for entrepreneurs and policy makers to improve the sector in Ghana. The study employed a descriptive cross-sectional study design and data was collected between April and August, 2013. Simple random sampling was used to select One hundred and sixty (160) SMEs respondents at 92% confidence interval (C.I) at 0.08 error margin. To achieve the set objective, the study employed both primary (questionnaires and observation) and secondary (documented evidence, internets materials etc) data collection techniques. The study revealed that SMEs do not play significant role in employing youth in the District though most SMEs rely on free family labour to minimize cost. Some infrastructural development like roads constructions could not be associated with the presence of SMEs. 15% of respondents attributed SMEs presence to housing and electricity extension to selected areas. Onion cultivation dominated other crops production in the area and generated appreciable profits. Limited access to credit, Infrastructural development deficits such as decent roads, Onions storage facilities and irrigation dams for all year round cultivation were among key challenges outline as hindering SMEs development in the area. It is recommended that, entrepreneurs should be encouraged to form cooperatives to enable them access bank credits since most financial institutions hold the view that, group lending minimizes the risk of loan default. Also, occasional capacity training sessions should be organized for SMEs on basic records keeping and entrepreneurial management skills. 1. Background of the Study Globally, Small and Medium Scale Enterprises (SMEs) are a tool for empowering the citizens and economic growth. SMEs are associated with rapid economic growth of countries in Asia and North America (Schaper 2002). Among developed countries such as the USA, SMEs still play enormous role in the country's economy (Aranoff et al. 2010). Available evidence points that, SMEs occupy an important and strategic place in economic growth and development in all countries (Abor & Quartey 2010) constituting as high as 90% of enterprises in most countries worldwide. SMEs are the driving force for large number of innovations and contribute to the growth of the national economy through employment creation, investments and exports. Owing to the success of the Asian tigers, interest is running SMEs particularly in developing countries that are in the rat race to meet and reduce the economic and development gap, the Chinese and foreign experts estimate that SMEs are now responsible for about 60% of China's industrial output and employ about 75% of the workforce in China's cities and towns (Schaper 2002). These SMEs creates jobs for workers who have been laid off from state-owned enterprises due to the steady transition from communism to a market based economy. According to (Cook & Nixson 2000), interest in the role of small and medium-scale enterprises (SMEs) in the development process continues to be in the forefront of policy debates in developing countries. In view of the relevance of SME's, in 2006 the government of Taiwan launched a $61 million "branding" initiative, which aimed to propel the economy from being production-based to knowledge-based (Lin 1998; Onuorah 2009; SAN 2006). According to the report in English language version of the online edition of Electronic Engineering Times-Asia print magazine, formerly Asian Sources Electronics Engineer (EE Times Asia) in August 2006, the so-called "Branding Taiwan Plan" is a seven-year program designed to help promising small-to-medium enterprises (SMEs) in developing their own brand, according to the Taiwanese government. This was initiated with the view of SMEs ability to boost the economy particularly in the medium term. Small businesses employ 72,000,000 people (Schaper 2002). More than 90 per cent of the industries in Indonesia, Philippines, Thailand, Hong Kong, Japan, Korea, India and Sri Lanka are small enterprises (Cook & Nixson 2000).