How SMEs in Ghana Can Access Funding

How do you access funding as an SME in Ghana? Like many African countries, Small and Medium Enterprises (SMEs) form the backbone of Ghana’s private sector, representing close to 90% of registered businesses.

Despite their dominance, SMEs contribute only about 5% of total taxes and continue to struggle with accessing capital. The common explanation is that funding is scarce. The deeper truth, however, is that most SMEs are not ready for investment.

I have found out, however, that the problem is not capital availability, but investment unreadiness. Banks, investors, and development partners frequently point out that while capital exists, many SMEs lack the governance, structure, and documentation required to absorb and responsibly manage that capital.

In this article, I examine the core barriers and lay out a practical framework for Ghanaian SMEs to strengthen their operations, present themselves as credible investment candidates, and ultimately access the funding they need to grow.

Investment Unreadiness

Yaw Appiah Lartey of Deloitte Africa summarises the issue clearly: “The problem… goes beyond just their readiness to access the capital… they are not ready for investment.”

SMEs often cite lack of financing as their biggest constraint, but investors see a more fundamental issue. Many enterprises operate informally, maintain weak internal systems, and cannot demonstrate how additional capital will translate into growth.

Even when organisations like Deloitte or the Mastercard Foundation offer free capacity-building programs, attendance is low, indicating that many SMEs have not fully recognised their need for structural strengthening.

In essence, Ghanaian SMEs face a readiness gap, not a capital gap.

What Prevents SMEs From Getting Funding

The barriers that keep SMEs unfundable are interconnected and often rooted in how they are founded and managed.

1. Poor Corporate Governance

Most SMEs begin as family-run ventures or partnerships among friends, and this offers familiarity but seldom provides the mix of skills needed to scale a business.

Investors evaluate the quality of the management team as critically as the business idea itself. I have found out that without expertise, sector experience, or external oversight, the business appears high-risk.

This is why a startup school founded by retired teachers with 80 years of combined experience is instantly more credible to an investor than an older school run by individuals with barely any experience running educational facilities. So governance, which simply put, is who is steering the enterprise, matters.

2. Lack of a Unique Product or Differentiator

Many SMEs operate in highly replicable markets. Businesses without a distinct competitive edge struggle to defend their market share and cannot prove long-term viability.

An example of this in Ghana would be the A1 hot bread; it illustrates how quickly competitors enter the market once one vendor becomes successful. 

A similar fate befell the once-popular Adinkra tie-and-dye business, which lacked protection against mass-produced imports.

Anyone who has lived in the city of Kumasi knows of this. One man’s success literally means death to a niche, especially with there isn’t any meaningful barrier to entry.

But my point is, without product or service differentiation, an SME’s growth strategy becomes difficult to justify to financiers.

3. Cumbersome Regulatory Environment

Ghana’s regulatory framework often applies uniform compliance standards across micro, small, medium, and large enterprises. SMEs must meet the same tax and data protection requirements as multinational companies.

This, unsurprisingly, leads many to default into non-compliance, contributing to their low tax footprint and limiting eligibility for formal financing channels.

4. Poor Record-Keeping

By and large, the most significant barrier is the absence of proper financial records. Many SMEs operate entirely on cash, with critical information – revenues, expenses, margins are all stored in the owner’s memory. To investors, this presents several problems:

1. They cannot verify performance history.
2. The business depends entirely on one individual.
3. There is no way to substantiate projections.
4. The risk profile becomes too opaque to finance.

In Ghana, banks compound the challenge with blanket lending restrictions across entire sectors (e.g., primary agriculture), driven by their limited capacity to assess risk. In addition, most SMEs cannot meet collateral requirements.

Without transparent records, even businesses with high potential appear unfundable.

How to Become Investment-Ready

SMEs can overcome these obstacles by adopting a deliberate, structured approach. Becoming investment-ready is a process – and one that requires professionalisation.

1. Strong Corporate Governance

Business owners must look beyond close relationships and bring in partners, advisors, or employees with relevant expertise. External voices broaden strategic thinking and improve credibility.

For instance, if you are planning to launch a waakye delivery platform (“waakye.com”), you would benefit from collaborating with someone who has years of experience selling waakye.

Such insight would improve your operational efficiency and give investors confidence that your team understands the market.

2. Unique Value Proposition

To attract funding, a business must show how it stands out. Differentiation may come from hygiene, customer experience, packaging, technology, or service reliability.

In our waakye example, the business could create distinction through eco-friendly packaging (such as leaves), transparent food-handling practices, and proper customer service etiquette.

Investors are drawn to businesses with defensible advantages.

3. Professional Record-Keeping

Accurate financial records are essential for any funding application. SMEs should engage professional accounting services – even small audit firms. Tier 2 and Tier 3 audit firms offer financial statement preparation for as little as GHS 3,000–5,000, making this accessible.

Remember, investors need evidence of performance, not assumptions.

4. Realistic Financial Projections

Financial forecasts must be supported by data and clearly explained. For instance, if a business projects GHS 20,000 in year-end revenue but has only earned GHS 9,000 by September, it must demonstrate why Q4 will outperform previous quarters.

Investors can quickly detect inflated numbers; they want ambitious but attainable plans.

The Funding Landscape

Once an SME is structurally sound, the next step is selecting the most appropriate type of funding.

1. Start with Equity from the “Three Fs”

New businesses should look to Family, Friends, and “Fools” – individuals willing to invest without seeking immediate high returns. Note that debt at the startup phase introduces unnecessary pressure and diverts cash flow from growth.

Equity is patient; debt is demanding.

2. Choose Equity When Possible

Many entrepreneurs fear equity because it dilutes ownership. Yet, long-term growth often requires shared ownership. As the saying goes, it is better to own 10% of a USD 100 million company than 100% of a USD 1 million company.

3. Tap into Alternative Funding Avenues

Angel investors, business plan competitions, and SME forums are vital opportunities. Additionally, international development partners such as the Mastercard Foundation and FCDO provide program funds to financial institutions at significantly lower rates.

These funds support SMEs in sectors like manufacturing and agriculture at interest rates around 7–8%, compared to commercial loans at 30–33%.

SMEs must explicitly ask banks whether such program funds are available.

How to Choose the Right Financing

Securing capital is only the first step. The next step is selecting suitable financing and managing it responsibly.

1. Evaluate Funding Offers Carefully

SMEs should assess:

• Loan Tenor: The duration must align with cash flow cycles. Seasonal businesses should avoid long-term loans that accumulate interest during inactive periods.
• Interest Rate: Comparing rates is essential. Like I said above, program funds offer lower costs.
• Terms and Conditions: Key clauses include stepping rights (which allow lenders to assume control in default), penalty interest for late payment, and processing fees. Term sheets are negotiable, and I would advise SMEs to seek legal or financial advice before signing.

2. Use Funding Strategically

Funds must be used strictly for their approved purpose. Diverting capital, for example, using an approved import loan for trucks to instead import rice, creates unassessed risks and erodes trust.

Also, transparent communication with lenders, especially regarding repayment challenges, is essential. SMEs should also monitor performance proactively and refinance high-interest loans when opportunities arise.

Cultural Mindsets Hindering SME Growth in Ghana

Beyond structural issues, I have noticed that there are cultural habits that influence how SMEs approach capital.

Entrepreneurs often avoid partnerships due to past conflicts or fear of losing control. Yet, partnerships bring complementary skills and networks – forms of “sweat equity” that are as valuable as financial contributions.

The belief that business success is a zero-sum game must give way to a collaborative mindset where multiple parties can win.

Just as importantly, founders must recognise when they are not the right person to scale the business. Often, passing leadership to someone more experienced can unlock new levels of growth.

The Kind of Business Investors Want to Fund

So, accessing capital is not about luck or connections; it is about readiness. Investors look for transparency, professionalism, strong governance, credible financials, and a clear growth path.

As an SME, when you commit to building these foundations, capital, whether equity or debt, becomes far more accessible.

Ghana’s SMEs have enormous potential. But we need more strengthening of our internal structures, cultivate partnerships, and engage disciplined financial management. That’s how SMEs can unlock financing opportunities that fuel long-term and sustainable growth.