Corporate Governance Practice among Small and Medium Scale Enterprises (SMEs) in Ghana; Impact on Access to Credit

University essay from Blekinge Tekniska Högskola/Institutionen för industriell ekonomi

Abstract:

Background, Purpose and Problem Discussion This study, Corporate Governance Practice among SMEs in Ghana; impact on access to credit, was undertaken to bring to the fore the level of corporate governance practice among Ghanaian SMEs and what impact it has had on them accessing credit. In spite of all the argument about the advantages of corporate governance and the potential economic development that it could bring to a developing country like Ghana, its practice among the SMEs is very low though that sector forms the majority of the country’s firm tissue. In tackling this topic, both the quantitative and qualitative approach was adopted. Questionnaires were circulated to 120 SMEs in the Accra, Tema and Kumasi .metropolis through the convenience sampling. 100 responses were received and based on the responses received through these questionnaires, the following major findings came to the fore. While most SME stakeholders had heard about Corporate Governance, actual knowledge and adherence to modern day corporate governance guideline is very low. Most SMEs still maintain the CEO/Board chairman duality. . Majority of the SMEs studied did not have board committees, while some did not even know what board committees were. On the average SMEs in this study had a 4 member board; but only a small percentage had regular meetings i.e. quarterly. Most met semi-annually and annually. Very few of the SMEs in this study had directors who were external to them. Secondly, the study also revealed that commercial banks remains the most reliable source of funds for the SMEs, these banks do not make adherence to modern day corporate governance principles a reason for granting credit. The SMEs credit history, pledged security and cash flow were considered more important. Conclusion Corporate Governance practice among SMEs in Ghana is very low. This phenomenon have not had any significant impact on the SMEs access to credit. .Thus even the promise of improved access to finance, business and economic growth have not proven strong enough to make SMEs pursue strict adherence to corporate governance principles. It is recommended that government, the banks, NGOs and all other stakeholders in the SME sector pay more attention to activities that increases corporate governance awareness among SMEs in Ghana.

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