Holistic Analysis of the Financing Gap between Financial Institutions and Small and Medium Enterprises (SMEs) Business-projects

Abstract

It is an indisputable fact that Small and Medium-sized Enterprises (SMEs) are the engine for the growth of every economy; particularly the Ghanaian economy which is SME dominated. Unfortunately, the SME sector in Ghana is constraint by many factors such as lack of external financing; technology and information; management; legal; policies and processes. This research empirically examines how the factors which have created SME financing gap can be arranged in a pyramid and matched with the 3M Pyramid of the methodological frame work. Also, the study aim is to logically develop SMEs project financing model to help bridge SMEs financing gap. This study used questionnaire and interview as the survey instrument. Questionnaires were administered to a selected sample, consisting of 31 randomly selected respondents. They include:  10 heads of credit and SME officers of banks; 12 heads of credit and SME officers of Savings and Loans and Microfinance institutions; 5 equity firms investment analysts; 1 cooperative society credit manager and 3 SME owners operating in Accra – Ghana. The T-values are significant at .01 levels for technology and information, management; finance and economic, legal; policies and processes. T-value of amount on the part of SMEs owners is significant at .05 levels. The result of T-tests shows these have significant effect on SMEs projects financing. The result further showed that knowledge economy factors influence SMEs financing as measured through the 3M pyramid. It also revealed a positive significant correlation between the total scores of the knowledge economic factors and SMEs financing gap (P ˂ 0. 01) and a significant P-value =0.000 (less than 0.05) for predicting the relation between Knowledge economic factors and SMEs financing gap. The study proved that there is the presence of a strong positive relationship between SMEs projects funding and Knowledge economy factors.