Proceedings of The 5th International Conference on Business, Management and Finance
Alternative Financing for Sme’s: A Case of the Service Sector In Ghana
Afia Serwaa Attrams, Professor Makgopa Tshehla
Small and Medium-Sized Enterprises (SMEs) form the majority of businesses in developing economies, and they require diverse forms of financing to thrive. However, financial institutions that are their major sponsors are challenged in lending to SMEs. The study used a mixed-methods design to gather information from both financial institutions and SMEs to determine the alternative means by which lending to SMEs in the service sector, in particular, is made feasible. Qualitative data was gathered from seven financial institutions, whilst the quantitative data were obtained from 663 SMEs in the service sector. The results revealed that angel investment and venture capital are SME’s most preferred forms of external sources of alternative financing. Financial institutions’ alternative means to direct lending to SMEs is to tie financing to receivables, use of soft grants, lending schemes and start-up clubs’ formation to ring-fence their lending. The policy implication is to enhance the alternative approaches to SME financing for the mutual benefit of all key stakeholders if the growth of the SME sector is to be achieved and not only desired.
keywords: SMEs, financial institutions, alternative financing, service(s), capital .