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 

EDAIF expands reach to stimulate business and export trade

Access to credit and low production capacities as well as market information, product development and packaging are among major challenges facing businesses in the country.

The Ministry of Trade and Industry is hoping to address these through interventions of the Export Trade, Agricultural and Industrial Development Fund (EDAIF).

Acting sector Minister, Dr. Mustapha Ahmed, says zonal offices are being established across the country to make services accessible by reducing cost and time for potential clients.

He however tells Luv Biz accessing support under the Fund depends on how bankable, saleable and feasible a proposal is to receive approval.

“EDAIF is ready to support all businesses that are aiming to expand their activities so that they can also increase their capacity to export more,” said Dr. Ahmed.

Ghana export strategy has a policy of increasing revenue generation from the non-traditional export sector from the current $2.4billion to $5billion by 2017.

Dr. Ahmed noted there are special funding arrangements for some industries in poultry, agribusiness and pharmaceuticals to boost production and meet international market standards for export.

The EDAIF has the objective of providing financial resources for the development and promotion of export trade, agriculture related to agro-processing and industrial development.

Ashanti regional minister, Samuel Sarpong, is hopeful the siting of the EDAIF Zonal office in Kumasi would drive the promotion of business, commerce and tourism in the region.

Story by Kofi Adu Domfeh 

New fund in the offing for agricultural financing in Ghana

The Venture Capital Trust Fund (VCTF) has disclosed the setting up of an Agricultural Fund to be operational by end of this year.

Chief Executive Officer, Daniel Duku, tells Luv Biz Report the facility is tailored to finance agriculture related projects, from production to supply-chain and value addition.

Sustainable financing of agriculture investments constitutes a critical factor in enhancing operations of Ghanaian farmers. Smallholder farmers and other actors in the sector are constrained throughout the production, marketing and distribution stages of their operations.

There have been calls for government to incorporate farmers’ access to financial service into national policies.

Targeted financing, especially with the reformed Export Development and Agricultural Investment Fund (EDAIF) is a step to propel the growth of Ghana’s agriculture and food processing industry.

But such interventions have yet to rake in the desired impact.

Dr. Robert Kwabena Asubuah, a Director at the Grains and Legumes Development Board of the Ministry of Food and Agriculture, says there are opportunities for the private sector in agricultural financing.

“Everybody always talks about government investing but right now the private sector has a big role to play to take up some of the agricultural investments that are now available for them to make all the money they want”, he stated.

He cites post harvest investment in agricultural products is a viable venture.

The VCTF has a mandate to provide low-cost long term financing to small and medium scale enterprises, including agriculture.

A Development Assistance Fund supports SMEs to the tune of Gh₵50,000 to improve their businesses.

CEO, Daniel Duku, says about 70 applications have been approved and supported. He however says applications for financing have been skewed towards investors in the Greater Accra Region.

He however expects investors in Ashanti region to take advantage of the VCTF’s office set up in Kumasi to explore opportunities, especially under the proposed agricultural fund.

Ashanti regional Chair of the Association of Ghana Industries, Robert Nketia, is cautiously optimistic of the Fund’s renewed drive to support agriculture.

“Most of the already existing investments went to other sectors, neglecting the agricultural and agro-processing. But they’ve now realized their mistake and now focusing on agriculture which will have an impact in creating employment and making it possible that the rural areas are also opened up”, he opined.

 

But he believes progress can be made only when there is demonstration of commitment to the cause.

Story by Kofi Adu Domfeh