The Association of Ghana Industries (AGI) is in the process of establishing an industrial development bank to cater for the financial needs of the mostly small and medium enterprises (SMEs) which constitute about 70 percent of its membership, the President of AGI Mr. James Asare-Adjei has said.

Access to credit has consistently been listed as the number-one challenge hindering the growth of businesses in the country, particularly those in the SME bracket according to AGI business barometer reports.

Many credit institutions and banks have tagged SMEs as high risk ventures to invest in, and as a result have introduced rigorous processes and procedures to follow when giving out credit to such businesses – that is, in places where funds are available.

This has become a major disincentive to several businesses that are mostly unable to meet these stringent requirements. Even the few who qualify to access the credit facilities are asked to come up with ‘ridiculous guarantees’ while also being made to pay back at unbearable interest rates.

Mr. Asare-Adjei, addressing members of the AGI at the 17th Regional Annual General Meeting of the AGI Ashanti and Brong Ahafo chapter in Kumasi, said the Association is fully aware of the challenges confronting businesses and particularly SMEs in the country.

He noted that critical among these challenges has been the issue of unavailability and high cost of credit, which has become a deterrent to many businesses.

It is in view of this, he disclosed, that the AGI has taken an initiative to apply to the Bank of Ghana for a licence to establish and operate an industrial development bank as part of efforts to address some of these challenges.

He said while the Association awaits response from the central bank and goes through the necessary processes, it has gone a step further to set up an industrial support fund to offer some medium to long-term financing at concessionary rates to businesses.

He said the Association is seeking to draw funds from other liked-minded organisations and other government-established funding institutions -- like the EDAIF, Venture Capital Fund among others -- to support operations of the Fund.

Meanwhile, he asked that government should show support to industries by committing some money to the Fund. He emphasised that the only way to develop the local economy is by ensuring SMEs are well-resourced with the needed capital at all times to expand their operations.

Despite these developments, he appealed for financial institutions to support the growth of SMEs and other businesses in the country. He said considering the critical role of SMEs in the economy, it is important that they are offered the necessary financial support to grow these small businesses into African giants.

He therefore asked that financial institutions should be flexible in their requirements to allow SMEs access credit without any impediments, and also develop products to meet their needs.

In a related development, he told B&FT that the solution to the power crisis does not rest in continuous upward review of tariffs but having effective and efficient operations of utility companies, and ensuring that they offer value for money.

He said it was not in the interest of industry to continuously see tariff hikes, since this affects their competitiveness, and gave the strongest indication that the AGI opposes the proposed tariff increases.

He called for restructuring of the tariff system and effective collection of revenue by the Electricity Company of Ghana (ECG) to end the perennial losses.

The 17th AGM of AGI Ashanti and B/A, which was held under the theme ‘Enhancing SME opportunities in today’s financial market place’, also coincided with elections for leadership of the Association in the two regions and opening of AGI’s new office.

The chairmanship position was keenly contested between Afua Gyamfua Owusu-Akyaw, Chief Executive of Gyamfua Ababio Investment Limited and the Royal Larmeta Hotel, and the Managing Director of Agricare Limited, Mr. William Awuku Ahiadormey.

The Chief Executive of Gyamfua Ababio Investment Limited and the Royal Larmeta Hotel, Afua Gyamfua Owusu-Akyaw, has been elected as the new chairperson while the deputy position went to Daniel Agyei, Chief Executive of Danny Praise Computers.