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Title: Finance and small and medium-sized enterprise development in Ghana
Author: Quartey, Peter
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 2003
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This thesis provides a critical evaluation of the inter-relationship between finance and other key factors and SME development. However, the study places much emphasis on issues relating finance and SME development since studies have shown that financial constraint is the major factor affecting SME entrepreneurs in Ghana. Issues of finance and small and medium-sized enterprises (SMEs) in developing countries have dominated the research agenda at various policy levels. However, very little empirical analysis, that is, hypothesis testing, has been carried out to ascertain the relationship between finance and enterprise performance. Although a few studies have attempted to examine this relationship, there remain large gaps in our knowledge concerning the relationship between finance and SME development. This thesis aims to fill these gaps in our knowledge. The objective of the study is to provide a better understanding of the relationship between finance and other key factors such as exports, education, inter-fiem linkages and small and medium enterprise development in Ghana. It will conduct hypothesis testing on key relationships on the financial structure of small and medium enterprises in Ghana and also ascertain how firms differ in their demand for internal and external sources of finance. The study will also investigate the determinants of growth and SME entrepreneur's access to finance. The analysis is based on firm level data gathered in 1999 from 208 small and medium enterprises located within a 50 Kilometre geographical radius of five principal cities in Ghana. The Study employed a combination of analytical techniques, namely, tile 'Basic Detailed Characteristics' approach and regression analysis (Two Stage Least Squares and Logistic Regression Analysis). This allowed for an exhaustive analysis of the SME sector and its potential for income, employment, and economic growth. The empirical issues revealed by the analysis were: First, results from the regression equation on the determininants of firm growth confirmed the principal hypothesis of the thesis, that is, access to finance exerts a significantly positive effect on growth. This indicates the need to improve the availability of credit to SMEs to enable*the sector realise its potential. Another major finding is, increases in firm size exert a negative and statistically significant effect on growth (when defined as growth in sales). However, when growth is defined as value added, increases in firm size have a positive and statistically significant effect on growth. This has very useful implications for policy, that is, support programmes should be equally targeted towards small and medium enterprises. Another major finding is, exporting firms perform better than non-exporting firms. This re-emphasizes the need for policies to support upgrading of SME products to meet acceptable standards and compete internationally. Higher levels of education of SME entrepreneurs also exert a statistically significant effect on growth. There is therefore the need to educate entrepreneurs especially on production techniques and managerial abilities. The second regression equation investigated the determinants of access to finance and found that frill size exerts a significantly positive effect on access to finance. This implies small firms are often marginalized in the allocation of credit, hence there is the need to target more credit to the small-scale sector. Secondly, older firms tend to have better access to finance than newly established firms. An export equation was also estimated and very interesting findings were revealed. First, foreign owned firms are more likely to export than locally owned enterprises. Educated entrepreneurs are more likely to export than tile less educated ones. Also, males are more likely export than their female counterparts. Finally, medium-sized firms are more likely to export than small-scale enterprises.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available