EXAMINING THE FACTORS INFLUENCING ACCESS TO CREDITS AMONG MICRO AND SMALL AGRO BASED ENTERPRISES IN TAMALE METROPOLIS

Abstract

Access to credits has been noted as a teething problem among Agro based Micro and Small Enterprises (MSEs). The study examined the perceptions of Micro Enterprise Operators as well as their access to formal and informal credit schemes in the Tamale Metropolis and Sagnarigu District Assemblies of the Northern region of Ghana. A sample of 155 entrepreneurs was selected through multistage sampling technique. The method of analysis involved descriptive statistics and an estimation of a binary logit model. Majority of the entrepreneurs (58.1 %) had no formal education. the percentages of the entrepreneurs who had received training and those who hadn't were 40.5 and 59.5. Lastly, Credit from non-banking institutions was commoner than those from banking institutions. The interest rates charged were generally perceived to be high, especially that of the formal credit schemes. This negatively affected profits. The net effect is that the credit borrowed did not significantly change their businesses. This was especially so with the formal credits. The factors that positively influenced access to formal credit were as follows: age, marital status, formal education, total earnings of the business, distance to formal credit sources and the number of casual employees. In the case of informal credit, the positive determinants of access were age of entrepreneur, total income earnings, age of the enterprise, distance to the source of informal credit schemes and the number of permanent employees. There is the need to step up formal education in the area as well as business training for the current entrepreneurs. The formal financial institutions may have to revise their interest rates downwards if their loans are to be patronized. Government may also want to step up its efforts at granting soft loans to these young entrepreneurs.