BoG, DBG & UGBS take empirical approach to propel MSMEs growth

By Joshua Worlasi AMLANU

The Bank of Ghana (BoG), in collaboration with the Development Bank Ghana (DBG) and the University of Ghana Business School (UGBS), is exploring possible Fintech innovations to drive the growth of micro, small and medium enterprises (MSMEs) in a strategic alliance.

The MSME sector remains key to the economy, contributing approximately 70 percent of GDP and employing over 80 percent of the workforce.

Recognising the pivotal role of credit in economic development, Dr. Maxwell Opoku-Afari, First Deputy Governor of the Bank of Ghana, said the initiative seeks to address the financing challenges faced by MSMEs and bridge the existing funding gap.

As part of the partnership, the three organisations have formally commissioned a study, titled ‘Innovative Financing for MSMEs in Ghana’, which is expected to be ready next April. This, they explained, marks a significant step toward understanding the intricacies of MSME financing.

The First Deputy Governor, commenting on the study’s objectives, stated: “The expectation is that this study will promote understanding and provide anecdotal evidence on the financing challenges that MSMEs face in Ghana”.

Banks have historically exhibited reluctance in lending to MSMEs due to perceived high risks, further intensified by global and domestic shocks, including the recent COVID-19 pandemic, geopolitical tensions and macroeconomic challenges. The resulting risk aversion prompted the introduction of policy and regulatory reforms aimed at encouraging lending to critical sectors, including MSMEs.

For instance, BoG’s latest Collateral Registry report for the fourth quarter of 2023 reveals a significant decrease in the total value of secured loans granted and registered by banks and specialised deposit-taking institutions. Compared to the same period in 2022, there has been a notable 54.9 percent decline, with the total value standing at GH¢5.9billion, down from GH¢13.2billion in Q4 2022.

Despite several efforts, the funding gap for MSMEs persists. Dr. Opoku-Afari underscores the study’s potential impact, expressing confidence that it will generate a reliable document informing policies to encourage innovation in MSME financing.

“At the end of the day, this study will provide us with a reliable document which will inform policy that will encourage innovation in financing for this critical mass of our economy, the micro, medium and small enterprises (MSMEs); and by that create employment and spur economic growth,” he said.

Results from the study are expected to provide valuable insights for regulators to leverage Fintech to channel resources from surplus spending units to deficit-spending units in the economy, particularly benefitting MSMEs.

The collaboration between BoG and DBG, marked by the signing of the Memorandum of Understanding (MoU), signifies a historic commitment to addressing financial sector challenges.

The First Deputy Governor assured the project team of unwavering support and commitment to the collaboration with DBG and UGBS, with hopes that the success of this partnership will inspire further collaborations aimed at addressing broader challenges in the financial sector and the economy.

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