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Tuesday, October 28, 2014

Ghanaian entrepreneurs slow to access equity financing

Demand for start-up funding as well as capital for business expansion remains high in Ghana.

Local manufacturers, especially, complain of high cost of credit at the commercial banks to grow operations.

But there are other funding opportunities for entrepreneurs and businesses, which inherently place limited burden on business operators. Sources of equity financing in Ghana include the Venture Capital Trust Fund and the Export Trade, Agricultural and Industrial Development Fund (EDAIF).

Luv Biz enquiries however suggest most entrepreneurs are reluctant to access such funds for fear of sharing ownership with fund managers.

“It has become a challenge for some of them [entrepreneurs]; we’ve had to go through a process of going to fund a company, where we’ve given the company the offer for them to turn it down, several times, because you are going to share ownership,” noted Percival Ofori Ampomah, Head of Investments at the Venture Capital Trust Fund.

Equity financing often involves buying ownership and sharing in decision making at the Board level of a company for a period of time.

The Trust Fund is a government of Ghana backed private equity initiative providing long-term funds and technical support to enable SMEs grow and expand operations.

Since 2006, the Trust Fund has partnered with various private sector institutions and invested in 46 SMEs across various sectors of the Ghanaian economy.

A lot more local businesses are however least informed of such existing opportunities.

Dr. Kwaku Adu Aninkora, Chairman of the Ashanti Regional Advisory Committee of the Ghana Employers Association, acknowledged it is difficult for local businesses to raise capital without going in for equity financing.

He is encouraging members to open up their books to such funding opportunities.

“They are coming with about 70-80percent [of funding] and yours is to tope up with the 20percent… we have come to a stage where we need to partner each other and then move forward because no individual in Ghana can raise the needed capital for his or her business and the interest rates of the local banks are killing,” said Dr. Aninkora.

Meanwhile, the Ghana Employers Association has initiated moves to provide guarantee for members to access EDAIF.

Story by Kofi Adu Domfeh 

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