Sign in Subscribe
Banks (Finance)

Leverage Risk-Sharing Tools to Unlock SME Credit, BoG Tells Banks

Strategic Insights

— 1 min read

The Bank of Ghana has urged banks to make greater use of risk-sharing mechanisms in expanding credit to small and medium-sized enterprises (SMEs), which remain underserved despite their central role in the economy. Despite their importance, SMEs in Ghana face challenges including lack of affordable finance, difficulties meeting export standards, and fragmented logistics. Governor Johnson Pandit Asiama emphasized the need for risk-sharing to be combined with other innovative financing approaches, citing examples from Rwanda and Bangladesh.

Key Takeaways:

  • SMEs account for about 90 percent of businesses worldwide and provide more than half of global employment, according to World Bank data.
  • In emerging markets, SMEs contribute up to 40 percent of GDP yet face a global financing gap of about US$8 trillion.
  • Ghanaian SMEs face challenges including lack of affordable finance, difficulties meeting export standards, and fragmented logistics.
  • Governor Asiama called on banks to adopt digital tools to reduce transaction costs and improve transparency, citing e-invoicing, digital payments, and electronic trade documentation.
  • The Bank of Ghana has raised bank capitalisation, reinforced credit information systems, and promoted digital finance to strengthen the financial sector.
  • Development finance institutions such as Afreximbank and the African Development Bank are providing blended finance and trade lines that could be scaled up.
  • Banks were encouraged to provide advisory support to help SMEs meet sustainability and export requirements, and bundle financing with advisory services.

Statistics:

  • SMEs account for about 90 percent of businesses worldwide.
  • SMEs provide more than half of global employment.
  • In emerging markets, SMEs contribute up to 40 percent of GDP.
  • Ghanaian SMEs face a global financing gap of about US$8 trillion.
  • Only 10% of SMEs in Ghana are formalized.

Sources:

  • World Bank
  • Powell, T. (2019, January 19). "Growth through SMEs." The New Times.
  • Asiama, J. P. (2023, March 10). "Unlocking the Potential of SMEs in Ghana's Economy." The Business and Financial Times.

Read more