Chairman of Krif Ghana Limited, Rev. Kennedy Okoson, has emphasized that the cost of credit continues to be a significant hindrance to the growth and expansion of small and medium-scale enterprises (SMEs) in the wholesale/retail and supply chain industry.
To address the credit crunch challenge confronting local businesses, he highlighted the importance of supplier credit – a financial solution that enables businesses to extend their payment terms with suppliers, thereby improving their cash flow position.
He pointed out that multinational shopping malls, wholesalers, and retail companies, which dominate the local market, acquire the capacity to operate through credit guarantees from manufacturers and producers of the products they import, paying back after making sales. However, the same cannot be said for local businesses.
The successful entrepreneur believes that such an arrangement is essential for local players to grow their businesses to a level where they can compete with global giants and ensure sustainability beyond the first generation.
“Access to credit, cost and exchange rate have all played a role in the slow pace of business growth and collapse for some businesses within their first five years. Competitors from other countries get incentives from their governments to export, and get products on credit basis.
“Supplier credit is a financing solution that allows businesses to extend their payment terms with suppliers, ensuring a better cash flow position. By negotiating longer payment periods, these credited facilities empower SMEs to manage their expenses more effectively, invest in growth opportunities and strengthen their supplier relationship.”
Apart from this, he emphasised that work ethics, integrity and attitude of business owners are key to success in business.
“We need to redefine work in our cultural perspective. The way the Chinese, Japanese and Europeans define work influences their attitude and work ethics. The seriousness and principles we attach to work in this country are also challenges, and must be redefined.
“When a producer entrusts products in your care and you fail to meet targets consistently, then you are discrediting the arrangement; and this leads to mistrust and the need for cash and carry models,” he added.
Interest Rate
The average commercial bank lending rate for 2023 was about 36.64 percent – one of the highest in the sub-region. With such a high-interest rate, it is nearly impossible for SMEs to access capital from the banking sector, while suppliers’ credit is also non-existent.
Meanwhile, the current economic climate is placing immense pressure on small- and medium-sized enterprises to manage their cash flow effectively. Many local businesses struggle to secure affordable and flexible credit options from traditional lenders, hindering their growth and development.
It is therefore vital, he said, for financial institutions and policymakers to also prioritise access to supplier credit for SMEs.
Rev. Okoson also advocated closer collaboration between stakeholders to address the credit gap faced by local businesses.