How are Ghana's financial support schemes supporting small businesses?

The banking sector has played a key role in mitigating the effects of the Covid-19 pandemic on small and medium-sized enterprises (SMEs). Banking authorities and institutions moved swiftly to ease the economic pressure on SMEs and other entities in the early months of the crisis. In late March 2020 interest rates were cut by two percentage points starting the following month, and a six-month moratorium on principal repayments was granted to companies in the airline and hospitality sectors, which were hit the hardest.


The health crisis had an outsized impact on smaller firms, which traditionally have difficulty accessing capital – a factor that not only left them less financially prepared to manage the economic impact of the health crisis, but also hindered their ability to shift their business online. According to a 2020 survey of 4311 local companies published by the Ghana Statistical Service in collaboration with the UN Development Programme (UNDP) and the World Bank, many businesses were able to incorporate digital solutions early in the pandemic: 37.5% of respondents said they either started or increased their use of mobile money, while 9% did so with e-commerce. “If businesses, especially SMEs, are provided with the needed support to adopt best practices – particularly the use of digital solutions – this could go a long way to increase their productivity and resilience in future challenges,” Frederick Mugisha, UNDP economic adviser for Ghana and the Gambia, said in a statement in August 2020.

The survey also highlighted the challenges faced by smaller companies during the pandemic. It found that 45.1% of large firms reported a decrease in sales, compared to 92.2% for micro-enterprises, 89.7% for small firms and 89.9% for medium-sized companies. While 47% of large firms reported cash-flow problems, this figure stood at 75.2% for micro-, 77.8% for small and 69.6% for medium-sized businesses. Smaller firms were also slower to reopen. During the lockdown imposed in April 2020, 46.6% of large firms were fully open and 20% were closed, but by June of that year 93.3% were fully open and 2.6% were closed. By comparison, 35.4% of micro- and 41.9% of small companies were fully open during lockdown, while 37% and 33.5%, respectively, were closed. By June 18.5% of micro-enterprises and 9.1% of small firms had yet to reopen.

SME Fund

Both commercial and rural and community banks (RCBs) participated in the government’s GHS600m ($102.6m) Coronavirus Alleviation Programme - Business Support Scheme, which was launched in May 2020. The initiative offered soft loans through the National Board for Small-Scale Industries, via the country’s network of commercial and RCBs.

Over 700,000 applications were processed through an online portal, which was open May 20 to June 26 of that year, and an estimated 200,000 businesses were supported by the measure. Through this programme and others, commercial banks were able to provide more than GHS14bn ($2.4bn) in loans to Ghanaian businesses between March 2020 and February 2021, with banks prioritising funding for smaller enterprises.

New Development Bank

The planned establishment of the Development Bank of Ghana (DBG) should further support SMEs in the post-pandemic recovery. The institution will provide wholesale financing to the private sector via commercial banks and other qualifying financial institutions, increasing access to credit for companies across the economy and facilitate the creation of innovative products. The new bank was initially scheduled to launch in 2021, but its rollout had been delayed as of December that year.

In addition to providing finance to key sectors like agri-business, ICT, tourism and manufacturing, the DBG will prioritise micro-, small and medium-sized enterprises (MSMEs) through targeted measures. For example, MSMEs will be eligible for partial credit guarantee facilities and can use a digital platform to access credit, which the authorities hope will make it more efficient and less risky for private lenders to support MSMEs.

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The Report: Ghana 2022

Banking chapter from The Report: Ghana 2022

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