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The Importance of Commercial Banks to Small Scale Enterprises in Ghana

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Autor:   •  January 6, 2017  •  Thesis  •  8,912 Words (36 Pages)  •  225 Views

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ISSIFU NURUDEEN HARUNA                  03/1578

CRYSTAL K. LUKE                                    03/1370



Over the past few years, “Sustainable Development” has become the latest developmental catchphrase.  Both governments as well as non-governmental organizations (NGOs) embrace it as the new paradigm of development. Sustainable Development (SD) has been defined in the literature as “development that meets the needs of the present without compromising the ability of the future generations to meet their own needs” (World Commission on Environment and Development (WCED, 1987).

In achieving sustainable growth and prosperity in a country, investment has been touted as one major mechanism through which this can be undertaken by the government, individuals in the country, as well as corporate bodies and foreign nationals. The fundamental premise derives from the longstanding recognition of private sector investment especially the small scale enterprises as the most potent ‘engine of growth’.

The small scale enterprises are of great importance in the world, especially developing countries.    In Ghana small enterprises play a positive and important role in developing of the country in terms of providing employment opportunities for all social groups in order to increase income and achieve self-sufficiency.   They are also important in the provision of goods and services needed by society, and turn some countries to develop small projects through the preparation of an integrated strategy to fight poverty and unemployment.  

Indeed increasing productivity in small enterprises constitutes a vital area of entrepreneurship and the exploitation of local raw resources and the redistribution of income. And small scale enterprises play a vital role in this area.  

The Middle Eastern Finance and Economics captures vividly the importance of small scale enterprises.  It says that, given the characteristic of small projects (from the properties) of being characterized by intensive work and compensated for the capital they make, makes the sector one of the main options to alleviate poverty and unemployment, especially in developing countries, hence the small enterprises have the capacity to absorb labor and create additional jobs and the formation of a broad base of productive employment (Middle Eastern Finance and Economics - Issue 10 (2011) 167).

Commercial banks are the intermediaries that move money from the capital markets to businesses and institutions. Banks get their money through business checking or deposit accounts, service fees and by issuing certificates, among others. Commercial banks offer services such as trade finance, project finance, payroll, foreign exchange transactions and trading, lock boxes for collecting payments and general corporate finance.

Without commercial banks therefore, the international finance, the operations of the small scale enterprises and import-export industry would be difficult. Commercial banks make possible the reliable transfer of funds and translation of business practices between different countries and different customers all over. The global nature of commercial banking also makes possible the distribution of valuable economic and business information among customers and the capital markets of all countries.

The aim of carrying out this project work is to identify the role of commercial banks in financing the activities of small scale enterprises in Ghana.

2.0. The Problem Statement

As already mentioned in the introduction, to realize the growth and prosperity need in a country like Ghana, the private sector becomes highly indispensable.  It is therefore not surprising that successive governments have not only encouraged the sector but has continuously made funds available for the sector’s improvement.  A clear case in point is the setting up of the National board for small scale industries in 1985 by an Act of Parliament. The aim of this board is to promote and develop small and medium enterprises, (report from the National Board for Small Scale Industries, 8th August, 2008).

However, with the increasing inability of governments to mobilize resources to undertake investment projects, the private sector investment in small scale businesses is seen as a crucial channel by which countries could grow. They are expected to bring in equipment, technology, scarce human capital, financial resources and so on. They create employment, value added and help in the growth process (Tutu, 1999). But the question one will ask is how is the private sector, especially the small scale enterprises able to organize equipment, capital and other financial resources to promote and sustain development in Ghana?

It is at this point that the role of the commercial banks is indispensable to the small scale enterprises not only in Ghana, but all over the developing world.

It is for this reason that the research team embarks on the project of uncovering the essential services that the commercial banks provide to small scale enterprises in this country to enable them position themselves well to play their part in the development of the country.

3.0. Research Questions

The problem of the study seeks to answer the following questions:

  • What is the role of the commercial banks in financing small-scale projects in the country?
  • In which way(s) is the private sector providing solutions to the unemployment and poverty situations in Ghana?
  • What are difficulties involved in securing the services of these commercial banks?
  • In which way(s) is the government facilitating the resolutions of the problems facing small scale industries in accessing the services of the commercial banks?

4. 0.Objectives of the Study

This study aims to identify two set of objectives. The general and the specific ones

4.1. General Objective

To examine the roles of commercial banks in financing small scale enterprises in Ghana.

4.1.2. Specific Objectives

  • To identify the specific services commercial banks are providing to small scale enterprises in Ghana.
  • To examine the problems small scale enterprises face in accessing the services of these commercial banks.
  • To identify the ways the central governments have put in place to enable the small scale enterprises over their difficulties
  • To identify the role of the private sector in reducing unemployment and poverty in Ghana.


The study is necessary because the following reasons;

The study was necessary because it aimed at highlighting the importance of commercial banks to small scale enterprises in Ghana.  In addition, the study serves as an important resource for students who wish to conduct further studies on the subject area.  Another benefit to be derived from the study is the fact it highlighted the various ways commercial banks can assist in improving the performance of small scale enterprises.


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