The Private Enterprise Federation (PEF) has joined the list of several other trade unions and development organizations to explore the possibility of setting up own financing scheme to provide long term financing facilities to private enterprises in a bid to wean themselves off the dependence on credit from commercial banks.

The idea of the financing scheme by PEF -though at the exploratory stage- has received backing from the Governing Council of PEF and it’s being carried out on the back of attempts by other private and trade organizations to also set up their own financing scheme to provide long-term sustainable and cheaper funding for the operations of private enterprises in the face of continued tightening of credit conditions by the commercial banks.

PEF, which is the umbrella organization of private enterprises in the country with a membership that includes the banks, are confident of establishing a financing scheme that will offer competitive and cheaper options to private enterprises that are looking for a long-term capital for their businesses.

The CEO of PEF, Nana Osei Bonsu said PEF have moved to actualized the idea of creating a financing scheme for privates enterprises because of the scarce availability of long-term capital and the continued tightening of the credit conditions by commercial banks.

“We think PEF should explore angles where it can create a pension fund that will aggregate the pool of long term funding to be used by SMEs. So that’s an area where we are looking at.

“The council has discussed it at length and we think come next year we will be meeting the regulatory institutions and the other agencies responsible for the pension schemes and make sure that we can attract and participate in creating that pool,” he said.

Nana Osei Bonsu explained to the B&FT on the sidelines when the new French Ambassador to Ghana, François Pujolas, visited the Federation that PEF has now been given the green-light by its Council to set up a pension scheme that will attract long-term funding for use by SMEs. So we are all exploring to see who we can bring on board as partners to be able to create the volume of financing that is necessary in Ghana.

He added: “This is very necessary because Ghana is going nowhere without three things: how, financing and the technical skills. if that is the case then we the umbrella of businesses have to look at ways of leveraging all our council members to create things we can do for ourselves –and that is creating a pool of funding to grow investment in the SME sector.”

Currently, Small and Medium Scale Enterprises (SMEs) in the country face tougher financing of their business as banks continue to tighten access to credits against a background of a challenging business environment fuelled by the ongoing erratic energy supply.

Banks have over the past year kept tightening the credit conditions for SMEs anytime the central bank assesses the credit access situation in the country as perceptions of increasing macro and micro risks as well as the firm-specific outlook, in particular of SMEs, have played an increasing role in the tightening of business credit standards and reduced availability of external financing, albeit policy support.

The Association of Ghana Industries has also found access to credit as the second most important challenge behind availability of power supply facing businesses in the country.

The problem of obtaining banks loans has been aggravated by the erratic power supply, which has impacted negatively on the input costs and production output of smaller firms, putting substantial pressure on profit margins.

In Ghana presently, only the state-run pensions operator, SSNIT, have the capacity and resources to provide the sort of long-term financing needed by private enterprises for their operations.

According to private enterprise organizations, if they can have the influence of aggregating through the new three-tier pension scheme, they should be able to accumulate about GHC1.2 billion a year, which will go a long way to provide the resources needed by the SMEs.

As a result, several unions are seriously considering setting up their own financial institutions to help in financing the activities of their members.

The AGI and the Savanna Accelerated Development Authority (SADA) have also announced their intention to establish a bank solely to facilitate credit to SMEs for accelerated development of the Savannah Ecological Zone.

The Federation of Association of Ghana Exporters (FAGE) is also reported to be working out the possibility of founding its own development financial institution to support member exporters.

Nana Osei-Bonsu added: “Most of our member institutions are exploring various angles: development financing, development banks, guarantee institutions among others. So we are all exploring to see how together we can find ways to create the quantum pool of long-term funding that will be necessary and needed by the SME sector.”