SMEs Advised To Insure Loans

The government has been called upon to create an enabling environment for insurance companies to enable them provide facilities to cover business loans for Small and Medium Enterprises (SME).

“We need to look at insurance as a risk transfer mechanism for SME loans- in terms of deaths, disability or in case of bankruptcy or risk of default,” Mr Kingsley Kwesi Kwabahson, Head of Technical, Life Insurance at the Ghana Insurance Association, said.

He said government could do this through policies that would among others, give tax rebate over a period of time to insurance companies, which would then be required to insure loans offered to SMEs for their business expansion and growth.

Speaking at a stakeholders' forum in Accra on Tuesday, Mr Kwabahson said provision of loans, especially for business start-ups and business expansion, was a high risk venture which most financial institutions were unwilling to undertake. He, therefore, advised SMEs to look at insuring their loans as a relief for loan providers.

The stakeholders' forum was organised by the Ministry of Private Sector Development in collaboration with the Ministries of Trade and Industry and Finance as a prelude to the 2016 SME Financing Fair which is scheduled to be held on March 16 and 17. The pre-event engagement with stakeholders was to seek their support and commitments towards the organisation of the fair and exhibition.

The maiden edition of the SME Financing Fair is to help address access to financial challenges facing Small and Medium Enterprises (SMEs) in the country. The fair and exhibition would also feature various fora with the aim of bringing representatives of the stakeholders to discuss crucial issues on SME financing spaces.

Mr Julius Debrah, Chief of Staff, said SME's play very significant roles in established economies and government was determined to create the atmosphere that would make businesses grow. He said the efforts of government to support SMEs and ensure their growth was not political and so government officials should refrain from politicising the issues and know that such efforts are only to help create and sustain businesses in Ghana.

Mr Rashid Pelpuo, Minister of State in charge of Private Sector Development and PPP, said SMEs constitute over 90 per cent of businesses registered in Ghana and a major pillar in the economy.   He said SMEs comprise over 160,000 registered liability companies and over 350,000 registered sole enterprises, generating over 40 percent of GDP.

Mr Pelpuo said the main aim of the forum was to get initial comments and views from stakeholders to inform the organisation of the main SME financing fair and exhibition in March which would pave way for effective SME financing and growth in the country.

He said the prevailing high interest rates, limited access to funding with undercurrent of information asymmetry are debilitating forces against the SME sector.

“Therefore, the SME Financing Fair was launched in a bid to find lasting solutions to the challenges and to bring exposure to innovative financing mechanisms prevailing in the country,” Mr Pelpou said. Mr. Murtala Mohammed, Deputy Minister of Trade and Industry, said with the energy situation currently solved, what is left is providing financing to SMEs, and that was also being tackled  with efforts such as the forum and the financing fair to ensure that businesses get the needed resources to help them expand and grow.

Stakeholders who expressed their views at the forum all welcomed the fair saying the cost of doing business was quite high. They called for medium to long term credit facilities for businesses to replace the few short term credit facility with a short payback time.

It is expected that the fair would provide an avenue to make known to SME entrepreneurs, the various government and private sector initiatives; the funding and financing solutions that could be taken advantage of; as well as bring to light, major issues to be dealt with in the quality of financial intermediation to increase credit to SMEs. GNA