Funding Solutions for Informal Sector Businesses in Ghana
  • Jan 21, 2020
  • Blog

In every economy, as in every society and culture, there is the traditional and the non-traditional. Business funding in the Ghanaian context is no exception. Our traditional funding sources and practices are those we have known from time immemorial. These are the banks, to-become banks, and looking-like banks.

But couldn’t there be opportunities with non-traditional funding for businesses in Ghana? What about partnership and cooperation among individuals and businesses? The business of Propartners Exchange is to explore all possible non-traditional ways of providing the funding that our businesses need so badly.

Propartners’ equity partnership service is a combination of various conventional equity finance arrangements including Small Business Investment, Angel Investment, Purchase Order Financing, Private Equity and Venture Capital Investment. The hybrid service is tailored to suit the nature of informal sector businesses and small businesses in the formal sector across and beyond the Ghanaian market.

The problem of no or little funding for SMEs in general and the informal sector in particular has lived with the Ghanaian business community in varying degrees over the years.

Businesses – small or large, rely on equity or debt finance to establish, expand and thrive. Funding is expected from diverse sources including grants from government or other institutions, credit from banks or other finance houses, and equity from individuals or other equity investment companies.

The socio-economic life of the country depends a great deal on thriving businesses. Chief among the numerous benefits offered by businesses is employment and livelihoods. According to recent statistics, SMEs account for about 85% of employment in the Ghanaian manufacturing sector. This figure is typical of the general employment situation of the population. It is worth noting at this stage that 92% of businesses in Ghana are SMEs according to the Registrar General’s Department as reported by BASTIAT Ghana. The sector’s contribution to GDP also stands at a whopping 70%.

The importance of the sector cannot be overstated. It follows therefore that easy access to equity or debt finance for businesses in the sector is so crucial to the Ghanaian economy.

There have been numerous surveys by various organizations and researchers to confirm or assess the situation from time to time. Various reasons have been ascribed to the endemic nature of the problem leading to several calls and attempts to improve access to funding.

But the problem is not the same across the wide spectrum of SMEs in Ghana. As indicated by a study by Aryeetey E.T, the worst affected category of SMEs is the informal sector or micro businesses with 33.7% success rate with access to credit as compared to 45% and 69.1% for small and medium sized enterprises respectively.

Undoubtedly, the informal sector remains the hardest hit by the problem of lack of access to funding even though the sector represents 62% of businesses according to the Ghana Statistical Service. The same body also defines the informal sector as businesses across all sectors which are not registered with the Registrar General’s Department and do not keep formal accounts. According to the October 2, 2018 issue of the BFT, the informal sector’s contribution had hit GHc 73bn, representing 28.6% of GDP.

Undeniably, as the worst victim of lack of funding, the informal sector is also the worst culprit of lack of readiness for funding. Indeed the sector lacks everything that appeals to traditional funding sources. There is no culture of good record keeping. Much of their business is done in obscurity. The businesses are almost inseparably integrated with the personal lives of the owners. And the list goes on – with all the risk elements that drive traditional funding so far away. But where traditional funding is not applicable, the non-traditional becomes the only option.

For so long, we have entertained the need for funding solutions for the SME sector in general and informal sector businesses in particular on the back of change in attitude. Yes, training and education hopefully will help achieve the desired change in attitude, some day. But we urgently need some tailor-made solutions, right now!

Propartners Exchange is committed to tailor-made funding solutions to meet the ever-growing demand of businesses in the informal sector and small businesses in the formal sector which together represent over 75% of Ghanaian businesses.


    • Wisdom Anku Reply

      January 21, 2020 at 5:31 pm

      On point. Truly, the way forward to finance small businesses is equity partnership.

      • Propartners Exchange Reply

        May 3, 2020 at 2:59 pm

        Thanks for the endorsement.

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