Entrepreneurship Development and New Business Start-Ups: Challenges and Prospects for Ghanaian Entrepreneurs’
a) The Role of Government in Facilitating SMEs Development & Growth
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| a) The Role of Government in Facilitating SMEs Development & Growth
For entrepreneurs to set-up and operate their businesses successfully, and be competitive nationally and globally, they need to have access to capital because the availability of capital is a major incentive that could attract more entrepreneurial activities. For example, as the two main government initiatives for supporting entrepreneurs and SMEs in Ghana, the NBSSI and MASLOC should expand their technical assistance and financial support for SMEs. Despite the important role SMEs play in national economies and the global economy in general, their level of growth is often hampered by the limited resources, particularly financing. The study recommends that a new policy approach for promoting SMEs should be implemented by governments in developing countries to promote SMEs as a major institutional policy framework, especially through a rural development policy to enable them maintain economic vitality and thrive to become major supporting industries for the economy. Helping them to have access to financial resources, external markets and gain the necessary managerial, technological skills and information will enable them keep abreast with new innovations and other international business best practices to help SMEs build their capacity. Under the new UN Sustainable Development Goals (SDGs) introduced by the United Nations in 2016 to replace the Millennium Development Goals (MDGs), governments in developing countries should redesign the MDG policies to meet the goals and targets set in the emerging SDGs in order to address any bottlenecks in the MDGs to give a boost to the new development agenda in order to meet the needs of potential entrepreneurs and existing SMEs for poverty alleviation. This chapter argues that the government should deal with the various bottlenecks impeding on entrepreneurs’ access to funding such as corruption and partisanship in the disbursement of funds to potential entrepreneurs/SMEs from government sources. The results of this study also reveal low awareness and usage levels of various financing initiatives among SMEs, especially those in the rural areas due to lack of information and the perception that most funding schemes are either difficult to access or are politicised. The difficulties SMEs face in accessing funds from various sources include lack of securable assets, lack of information or knowledge about funding opportunities, stringent eligibility criteria, bureaucracy and politicization of fund disbursement by government agencies. These factors limit SMEs’ ability to access funds from internal and external sources, therefore the government’s policy actions should focus on better information provision to SMEs, and removal of all the bottlenecks hindering free access to government and donor-sponsored credit facilities. The government should introduce measures to bridge the rural/urban dichotomy in access to funding to effectively
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trigger entrepreneurial activities in the rural areas through aggressive campaign to educate potential entrepreneurs and owners of existing SMEs. The government also should work with the commercial banks to guarantee part of the credit risks to genuinely potential entrepreneurs and SMEs by facilitating equity capital, which provides a base for further borrowing, reduces firms’ sensitivity to economic cycles and provides SMEs with access to syndicates of private and donor venture capital suppliers. SMEs could also be encouraged to access public equity capital through the reduction of listing requirements and subsidising floating cost. Implementing these policy prescriptions could go a long way to improve SMEs access to short/long-term financing and boost economic growth and social transformation in many developing countries. To address the funding challenges facing entrepreneurs and SMEs, the commercial banks should offer tailor-made credit products and develop flexible and appropriate loan schemes specifically for SMEs. Most importantly, the government should play the role of an intermediary in aligning the interests of banks and SMEs by making sustained efforts to improve SMEs’ access to finance, with particular attention to firms with high growth potential. In this regard, the disbursement of loans to SMEs should be based on the viability of individual businesses’ performance. To deal with the challenge of loan repayment, it is important that entrepreneurs build exemplary image with the financial institutions to gain their trust and prove their creditworthiness. This objective is based essentially on building strong bonds of cooperation and trust between the banking system and entrepreneurs. It should be noted that any micro-credit loans and other financial schemes’ success depend on ready and prompt repayment by beneficiaries, and the creation of an effective machinery for loan recovery by the financial institutions. Since business loans are accompanied by some level of default risks by beneficiaries, loan schemes need to be complemented by public education about the legal liability of loan repayment and the consequences of default. New government policies, strategies and incentives such as tax-exemption for new businesses in rural areas and certain geographical areas that lack jobs to encourage the relocation of business start-ups in rural areas should be encouraged to prevent over-concentration of businesses in the urban areas. While in the age of globalisation and the promotion of liberalisation, deregulation and interdependence, it is difficult for any government to protect local industries from external manufacturers, developing country governments should introduce short or medium term measures to make SMEs more competitive in the global marketplace. This could be done by helping SMEs in developing countries to adopt “outward oriented” industrialisation strategies to meet international competition. Production efficiency may be raised by competitive measures, which aim at boosting the competitiveness of SMEs and creating opportunities for business growth. The government can also enhance local business competition by applying the “carrot and stick” approach to its loan and grant schemes, in terms of rewarding success and honesty, and punishing failure and dishonesty. Promoting competition through state support could improve the entire SME sector and help many businesses grow faster through efficient and effective management. In circumstances where genuine and well-performing businesses may have justifiable reasons for losses, governments should treat such failure as part of the business learning and risk- taking process. State support could also help build entrepreneurs and SMEs’ capacity by instituting effective monitoring and evaluation systems in the private sector and offering them advice where necessary. These actions should be based on public-private partnerships to promote a sustainable system of business support services and secure SMEs’ long-term sustainability. For example, in Ghana, the mandate of the NBSSI and MASLOC should be
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expanded to work in collaboration with the Ghana Export Promotion Council (GEPC) and the Ghana Investment Promotion Centre (GIPC) to create the enabling environment for SMEs to find foreign partners. The domestic market environment for SMEs can also be facilitated by the government’s ministries, departments and agencies (MDAs) to create local markets for SMEs’ goods and services, by contracting out the supply of goods and services to them. With regard to entrepreneurs’ management challenges, government financing institutions should expand their training programmes to cover a wider geographical area across countries to teach business owners basic skills in business management such as planning, production, marketing, pricing and sales strategies, savings and investment strategies, competitive strategies, as well as accounting, bookkeeping and effective customer service/customer relationship management and quality/inventory control. Entrepreneurs engaged in medium-scale businesses also need to be proactive in seeking business advice and management training to learn basic financial management, terms of obtaining credit and strategic planning on how to manage credit received, including legal advice on government regulation, contract agreements and negotiation skills in terms of dealing with partnerships. Emphasis should be placed on gaining the necessary business knowledge, skills, abilities and other characteristics that can boost the prospects of entrepreneurs to benefit customers and the economy. There is also a need to educate entrepreneurs on the management of SMEs in terms of how to balance growth, risk and profitability. To achieve this, domestic entrepreneurs in various developing countries need to be trained to learn and implement management by objectives (MBO) strategies in their business operations. Through this, they can increase their organisations’ performance and help them align their goals with timelines and evaluate their performance. By building their capacity, entrepreneurs can develop the necessary character traits, discipline and skills to sustain and/or expand their businesses to move closer towards achieving realistic business goals. Developing the human capital capacity of entrepreneurs and promoting entrepreneurial endeavours will help them transform themselves into competitive and sustainable entities in order to become the driving force of the economy, and aid the government’s poverty reduction initiative. Since information is of strategic value in achieving business effectiveness and efficiency for organisational competitiveness, the government should take all necessary steps to facilitate entrepreneurs’ access to information that will enable them to improve their business performance. Information on existing services and schemes should be coherent and made easily accessible to SMEs by instituting a programme to help SMEs with identifying potential international suppliers and distributors. Locating efficient local suppliers can also help reduce time for delivery, transportation costs and after sales services. Information on financial support, and fiscal incentives, including those for investment in training and innovation, needs to be introduced and widely disseminated to all beneficiaries, especially SMEs in the rural areas. In every developing country, procedures for starting, transferring and closing a business need to be simplified. This implies reducing the time, cost and formalities needed for registering a company and lowering capital requirements. There is also a need to simplify the tender process to make it easier for SMEs to compete for contracts. Rules governing business activity must be transparent and applied uniformly without any biases regardless of an entrepreneur’s party affiliation. The data on the operations of SMEs should be updated, bureaucratic bottlenecks in the registration of business also need to be removed and favourable microeconomic conditions to boost entrepreneurship and SMEs activities promoted. For example, in Ghana the
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passage in December 2003 of the Public Procurement Law (Act 663) by the government which granted concessions to local businesses in the procurement process was a step in the right direction since it gives preferential treatment to local businesses so far as they have the capacity and meet the contract requirements. Since the public procurement system constitutes the largest domestic market, this new procurement law could channel resources to domestic enterprises and thus become a mechanism for SMEs’ growth. It should however be pointed out that these benefits will be realised only if SMEs improve upon the quality of their products and meet market demand deadlines by customers. It is also imperative that the government reduces the cost of energy, lower taxes, import/export duties, and other costs that impede the sustainability and success of domestic SMEs and attract new investors to relocate their businesses from neighbouring countries in the sub-region. tải về 368.36 Kb. Chia sẻ với bạn bè của bạn:
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