If Small and Medium-sized Enterprises (SMEs) want banks to trust them with people’s monies, they must formalise their operations and put the necessary structures in place, Alhassan Andani, Managing Director of Stanbic Bank Ghana, has said.

Speaking to the media at the Ghana Association of Bankers (GAB) Annual General Meeting (AGM), Alhassan Andani, who is the association’s president, said banks are willing to give financial assistance to small businesses if only they do the right thing.

“Banks as financial institutions are formal institutions which are very structured. But generally, SMEs are not structured. If you take big multinationals, for example, their businesses are very structured. But if you take the SMEs, for instance, they are not structured.

It is just the man and his wife and if they are not around nothing happens. So as a bank, you are now then thinking, if I give this company money and it turns around, what will happen?” he asked.

Even though it is estimated that Small and Medium-Scale Enterprises (SMEs) contribute to over 40 percent of Ghana’s GDP, most small businesses feel banks are not interested in helping them financially to grow and expand their businesses.

A report commissioned by the Friedrich Ebert Stiftung (FES) has shown that banks and other financial institutions in the country contribute a measly 7.9percent to start-up capital in the informal sector, with majority of funds (52.5%) coming from own savings of people in the sector.

In an interview with the B&FT, one entrepreneur who owns a start-up company, said: “What I have realized is that the banks are only ready to give loans to big businesses. For start-ups like mine, they don’t care about us, whether or not the business idea is viable. Once you are not operating on a large-scale, they are not interested.”

The FES report further shows that 13.6 percent of loans were rejected as a result of incomplete documents, with 11.2 percent rejected due to insufficient capital, followed by 8 percent for no reason given by banks.

Loan applications by another 6.8 percent were rejected due to complete but unconvincing documents and 4.4 percent as a result of business activity not deemed as viable.

Mr. Andani therefore advised that SMEs develop very sustainable business plans which would make banks trust that they would be able to pay back loans if given them.

“Before you start a business, ask yourself: How much money do I have? How much will suppliers give me, and how much will I need? But most SMEs do not do that. They start with their own little money and when they are stuck in the middle, they rush and come to the banks to give them loans.

But banks do not like things done in spontaneity. We like things that are planned. Most of the NPLs [Non Performing Loans] are as a result of things done spontaneously,” Mr. Andani added.

He however emphasized that most banks have departments that are set up purposely to advise businesses, especially SMEs to equip them with the needed knowledge in order to bridge this gap.