ADB spends GH¢156m in SME financing
By: Masahudu Ankiilu Kunateh
Statistics released by the Agricultural Development Bank (ADB) for the year 2011 has shown a strong commitment of the Bank towards the support of Ghana's small and medium scale enterprise (SME) sector, with the aim of lending its support towards the overall growth of the Ghanaian economy.
According to the statistics, a total of GH¢156.85 million was granted as loans to various categories of SMEs by the close of year 2011. The figure marks a 42% increase in the asset book of ADB's SME Unit, from GH¢110.40 million, which was recorded in 2010. The growth, thus underscores the fact that the industry and market place have responded positively to the activities and operations of ADB's SME Unit.
The growth of Ghana's economy, no doubt, lies in the growth and development of the private sector, and most especially, the strengthening of SME's.
Consequently, ADB's SME asset book points out the importance to which the ADB attaches to the industry. As a result, asset-wise, the ADB's SME portfolio contributes to 37% of total corporate banking assets, and 24% of the total bank's asset.
It is a curious case of accessing loans by SME owners from financial institutions, but most financial institutions like the ADB describe the process as fairly easy, compared with other industry players, provided the applicant meets the basic minimum qualifying criteria.
But, the introduction of product programmes by ADB for SME owners has increased the accessibility of credit to SMEs.
In addition, the ADB has served its SME customers with other innovations and me to help the steady progress and development of SMEs, with innovations such as Local Purchasing Order (LPO) Product Programmes, Interim Payment Certificate/Invoice Discounting/Factoring product programmes, Stock and Collateral Management Arrangements, and a series of self-liquidating short term loans as supplementary working capital for operations.
The bank's quest to support the SMEs is further strengthened in the division of the bank's SME portfolio into two; these include SME Small and SME Medium. The classifications are made to distinguish the various SMEs, and to offer specialised terms of credit to each category.
For liabilities/deposits, the SME Small should have annualised credit turnover between GH¢100,000.00 to GH¢1,000,000, and GH¢1,000,000.00 to GH¢6,000,000.00 for SME Medium. For assets, both small and medium SMEs should be between GH¢30,000 to GH¢2,000,000, being one third of the annualised credit turnover.
Other services offered by the ADB's SME Unit include cash collection, Trade Finance (L/C, Bills), Funds management, structured short Term Loans, Bridging loans / ODs, Term Loans, Contingent liabilities including Performance Guarantees, Advance Mobilisation Guarantees, Bid/Tender Bonds, and Bank Guarantees for suppliers' credit among others.
It is instructive to note that not having access to credit and financing has become the crux of the problems of struggling small and medium scale enterprises (SMEs) in the country. Although, it is evident that some financial institutions, including the Agricultural Development Bank (ADB) continue to support and invest in the sector, the lingering feeling among SMEs owners is that access to credit remains an albatross of the SME business sector's growth.
Despite the several bad loans that banks record yearly on their books as a result of loan defaulters, some banks continue to show their support and invest in SMEs in Ghana.