Joy Business/World Bank Economic Dialogue Theme: "Stimulating Small Business to Achieve Faster Economic Growth" Date: November 03, 2010; Time: 2.00pm Venue: World Bank Ghana Office, Knowledge Space The first in the series of the Joy Business/World Bank Economic Dialogue on the theme: "Stimulating Small Business to Achieve Faster Economic Growth" which took place on November 03, 2010 at the Knowledge Space of the World Bank office in Accra ended with key speakers highlighting various strategies that stakeholders in the SME sector of the economy can adopt to improve the performance of businesses. The round table event, which was carried live on Joy 99.7 FM assembled leading thinkers and doers in the sector to share pragmatic and ‘radical’ opinions on how to redefine the SME sector. Mr. Kofi Tsikata, Head of Communications at the World Bank Ghana office set the stage with a thumbs up to Joy FM for introducing such an innovative programme. He describes the event as one that seeks to inject some amount of new thinking and discourse on the airwaves. He believed this would enable people with great ideas to make meaningful contributions to growing the Ghanaian economy through healthy discourse. The speakers who participated in the discussion were Dr. Joe Abbey , Kofi Bentil, Madam Kokor Amarteifio, Mrs. Maureen Odoi, Kwamena Esilfie Adjaye, Augustine Addo, Sidney Casely-Hayford, Magnus Nunoo and Eugene Johnson. Emerging Issues

1. There is need for a clear definition of the SME sector
2. Radical tax incentives to the sector can make a big difference; such as a five year tax-free incentive to the sector
3. Encourage appropriate bookkeeping by SMEs and info metrics on the sector
4. Make venture capital work for the sector. Policy incentives should be used to “force” venture capital firms to carry out their core functions to the sector
5. Women entrepreneurs in the sector need special and better support
6. The National Board for Small Scale Industries (NBSSI) should be restructured to be more innovative and proactive

Below are the key issues the discussants raised. Dr. Joe Abbey, Centre for Policy Analysis —Current State of Affairs Dr. Joe Abbey after welcoming guests and speakers to the event posited that the subject matter is very crucial if every sector is going to play a part in creating a strong economy. Dr. Abbey quizzed whether people understood the importance of getting the definition of the sector right. Referring to the Bank of Ghana’s definition of what SMEs are he said various reports on the assessments of the economy always tag the SMEs as riskier businesses making it very difficult for financial institutions to offer good loans to these businesses without the fear of losing the money given out. He explained that “the collateral requirements for SMEs are more onerous than the bigger companies”. Most of these SMEs are also treated at the short end and are charged large interest rates for loans. Dr. Abbey therefore stressed that CEPA continues to promote the principle that it is the collective responsibility of stakeholders in the sector to identify the phenomenon that make the sector risky in order to mitigate such factors. Dr. Abbey further encourages SMEs to ensure that their operations are transparent. This he believes is necessary as most of these businesses do not have strong book keeping principles to give the banks and other financial institutions the needed assurance that the businesses are credible. The Executive Director of CEPA believes that the requirement by banks for women to provide information identity of their spouses when accessing loans can also be problematic for most female entrepreneurs as the men can end up short-changing women for these loans that are accessed. Kofi Bentil, IMANI Ghana —Way Forward: Three Bold Ideas Kofi Bentil introduced his position by stating clearly that the points he will espouse might be uncomfortable for many. Mr. Bentil said his interest in the discussion was because discussants are expected to share how the SME sector can grow. He said “in Ghana, by international standards, every company is a small and medium business.” This he says is as a result of the small nature of most companies in Ghana when they are compared to the huge conglomerates in developed nations. He says Ghana’s history has not been kind to private business and has not allowed them to flourish. “Government after government have tried to help small businesses but these efforts are not very well guided. We have had some intolerance for private business making money as a country.” “You hear people from the government’s side, the ministry and the development partners spending millions of dollars supposedly helping small businesses but you never see it. You don’t know where these money is spent, who it is spent on and what the effect of these monies are,” he bemoaned. He said his position on how to redefine the sector and growing it hinges on three factors:

1. The government needs to provide SMEs with a tax-free 5-year period of operation to allow these indigenous small companies have a firm footing before these taxes are introduced.
2. That, in order for the SME sector to receive the necessary attention, lands and uncompleted buildings need to be titled by the book. This he said, would allow entrepreneurs have the needed backbone to get funding for starting their businesses or for expansion.
3. Mr. Kofi Bentil further asserted that there is no venture capital to help entrepreneurs who have great ideas and want to set up businesses. He therefore says these venture capitals should be ‘forced’ to ‘venture’ and do what they have been set up to do.

Sidney Casely-Hayford — Financial consultant Mr. Casely-Hayford, taking his turn, pointed out that statistics show that 90% of the private sector is small business. He therefore believes that small businesses need to be broken down into micro, small and medium segments to be clearly defined to suit the specific markets they are to serve. He adds that another 90% of small businesses are probably micro businesses insisting that the lack of definition for small scale businesses does not auger well for the growth of the sector. “In growing the sector we need to know what makes a small business. Who are we thinking of? Who we are trying to attract? There is also no definition for a medium sized business” he added. The financial consultant says even though the World Bank has a definition for the sector it does not suit Ghana because it is too broad. He also concedes that even though the Ministry of Trade and Industry has a definition of the sector under its Micro, Small, Medium Enterprises (MSME) division, he believes that definition is borrowed from the Association of Ghana Industries without a clear understanding of the sector. Mr. Casely-Hayford further adds that the micro enterprises are very well catered for with all the various lending institutions that are available and should be left alone but the small and medium scale enterprises suffer the brunt of the economy and the lending institutions and needs the right attention from stakeholders. “I am expecting in a week or two that the GSS will announce the rebasing of the national accounts to 1993 which will see a considerable leap of the GDP of this country. It is significant because when that happens, all the indicators being used will change. We should be able to define the sector clearly and the people involved to be able to identify what interventions to put in place.” Maureen Odoi , AABN— How are female-headed SMEs doing? Maureen Odoi defines the SME sector as tough for female entrepreneurs. She stated that most women are found in the Micro and Small enterprises while a few are doing well in medium sectors. Most of these female entrepreneurs face an arduous task at creating jobs for women who come out of school. She said the system needed the right structures to help women who want to start their business. Maureen explained that the frustrations in the sector make it difficult for female businesses to grow. “People start small, and so you stay small and you don’t have money to employ the right staff”, she said. Maureen holds the view that there is a challenge for women in the sector who have to blend home management with work. She advocated better support to female-headed businesses especially in the areas of accessing and managing credit. She also advised that training and encouraging more young college level females in entrepreneurship could help to boost female enterprises in the long run. Magnus Nunoo, Mobile Water— Industry: Reality on the Ground Magnus Nunoo who shared his experiences as an entrepreneur in the sector said government and all agencies who want to boost the sector have a great deal of work to do. He says “there is virtually no support. All the infrastructure required is not available. Ideas without help or support will take one nowhere.” The man who currently employs over 400 workers paints a gloomy picture stating that the biggest issue is with the banks adding that even though his company is not a start-up company, access to finance is really difficult. “The time you really need them, they are nowhere to be found but when they see you blossoming, that is when they come with all kinds of offers”, he added. He therefore advised the banks that some level of risk goes with some level of reward. “Many businesses are growing very well in Nigeria even though it is regarded as a high risk business environment. There is a need for our banks to take some level of risk. If you go with zero risk and then you want the guy to grow before you start helping him, they all end up dying off.” Eugene Johnson, MSME project of the MOTI — Access to Finance Mr. Eugene Nunoo of the Micro, Small and Medium Enterprises (MSME) project unit of the Ministry of Trade and Industry said there are various plans being instituted to ensure that the SMEs are catered for. He said programmes are being developed to create funding for those companies who really need them to help shape the SME sector in the country. These he said, are known as ACCES TO FINANCE programmes. The programme captures three broad areas which are the:

• Partial Credit Guarantee (PCG)— This allows banks who lend to SMEs to be cushioned with 50% of the loans given out when businesses default in paying back the loans.
• Line of credit facility- This is a long term credit facility given to banks to lend money to SMEs for a duration between 2 to 5 years intended to give the businesses enough space and time to grow without the hustle of paying back the loans quickly.
• Performance based Technical Assistance

— This is also purely based on technical assistance. Here, a business services entity is consulted to train bank officials on SME services on a cost sharing bases. Another aspect of the technical assistance for SMEs is the use of a consultant who will conduct feasibility studies for the businesses on how viable their business plans are and the appropriate steps to take. This he says is also based on a cost sharing process to ensure commitment on the part of the businesses. Mr. Nunoo said the government has no control on how the money is disbursed and that the IFC which is the governing body of the programme will ensure that these banks are worthy of the credit before giving any money out to prevent wastage. He revealed that Ecobank is one of the banks receiving support at the moment and other banks are being assessed before being given any support. Kwamena Esilfie Adjei, Business Consultant — How to stimulate economic growth Mr. Kwamena Esilfie Adjei on his part stated that concrete steps must be taken to ensure that MSMEs contribute their quota to the economy. He said the NBSS programme should be adequately resourced and structured to play similar roles that the Small Business Administration (SBA) is playing in the US and other parts of Europe. Mr. Esilfie Adjei noted that the sector needs to be promoted in all the functional business area which includes Marketing and Accounting, adding that is necessary to learn from the more developed countries that have enterprise and business development agencies in boosting entrepreneurial aspirations. Augustine Addo, Institute of Chartered Accountants-- Bookkeeping and formalization: are SMEs Mr. Augustine Addo brought the accounting perspective into the dialogue. He advised small businesses to streamline their book keeping process in order to be credit worthy. He said the SMEs do not meet the information based component of the lending requirement of most banks that are looking at performance, financial health, internal control systems and stewardship reporting of businesses. According to Mr. Addo, the ICA has put forward the following to help grow the sector:

• Accountants have been advised to take up lo cum accounting services with businesses that cannot afford to pay them as Chartered Accountants.
• The ICA is helping to facilitate a closer relationship between small businesses and accountants in small practice to give the businesses financial advice that will help in shaping the sector and making it credit worthy.

Kokor Amartefio — Exploring untapped sectors: a look at the Creative Industries Kokor Amartefio voiced out the frustrations of individuals in the creative industry explaining that most of the business in the creative industry in Ghana are in the MSME sector. She says even though most world bodies have some commitment to specific creative industries Ghana does not have a clear statement on such a commitment and this is not good enough. She says there is a need for some in-depth analytics on the creative industry to provide industry players with evidence with which they can seek funding for projects. Conclusion In all there was a general feeling after the discussion that Ghana needs to do more and better to stimulate faster growth of the SME sector. Participants called for action, especially by government but also more innovation by banks, venture capitalists, and financial management firms towards stimulating the sector to drive faster national growth. The next edition of the dialogue takes place in December 2010.