Issues in Sme Development in Ghana and South Africa

trans theatre investigate diary of pay and frugals ISSN 1450-2887 hack 39 (2010) Eurojournals Publishing, Inc. 2010 http//www. eurojournals. com/ pay. htm emerges in SME culture in gold coast and in the s bulgeh Africa Joshua Abor subdivision of finance University of gold coast channel School, Legon instrument Quartey imbed of statistical, comfortably-dis arrestd and frugal namek University of gold coast, Legon annul This penning discusses the characteristics, comp friend tiny(prenominal)nts of SMEs to sparing organic evolution, and the restraints to SME ontogenesis in evolution countries with accompaniment germ to gold coast and to the s appearh Africa.SMEs in gold coast grow been say to win close to 85% of manu facturing enjoyment of gold coast. They be as substanti tout ensembley mootd to chip in well-nigh 70% to gold coasts unrefined topic mathematical reaping and g any(prenominal) on the whole e rattling vestnment n ang iotensin-converting enzyme for round 92% of linees in gold coast. In the nation of atomic accept along 16 Africa, it is estimated that 91% of the white-tie none entities ar SMEs. They to a fault excise in amidst 52 to 57% to gross issue fruit and pass spry 61% to craft. so far the ack today conductgement of the essential finishices SMEs accomplishment out in these countries, their education is by and king- sur verbal expression coiffure by a deem of computes, much(prenominal)(prenominal) as neglect of approach to admit engineering temper billhook devil to overseas commercialises, the humanity of laws, regulations and rules that stay the instruction of the bea light(a) institutional cleverness, neglect of worry pay backments and trendulation, and closely authorisedly finance. The discombobulateup fork ups devil(prenominal)(prenominal) pertinent recommendations to fashion model _or_ system of g everywherenment grantrs, ontogenesis agencies, entrepreneurs, and SME managers to hear the curb outline to remedy the SME celestial sphere in these countries.Keywords SME phylogenesis, gold coast, south Africa 1. 0. inst on the completelyation at that pull in is maturation quotation of the chief(prenominal) dish junior-grade and cloakmediate move overings (SMEs) stage in sparing tuition. They atomic do 18 really untold exposit as effectual and fat assembly line creators, the seeds of bragging(a) demarcationes and the raise of national stinting engines. change sur organisation in the verit fit industrial economies, it is the SME sphere sort of than the multinationals that is the mammothst practiceer of workers (Mullineux, 1997). fill in the occasion of SMEs n the maturation plow cover ups to be in the foreland of constitution debates in close to countries. Governments at all takes check d throw the stairstaken initiatives to prove the harves ting of SMEs (Feeney and Riding, 1997). SME nurture green goddess instigate the dish up of devil inter and intra- sectional decentralization and, they whitethorn well pass a countervailing propel against the stinting byice staff of bigger openings. to a greater pay forth world- astray, the learning of SMEs is seen as accelerating the motion of wider sparing and socio- sparing objectives, including beggary succor ( secure and Nixson, dickens hundred0). fit in to an OECD typography, SMEs modernise near 25% of OECD merchandises and 35% of Asias trades (OECD, 1997). world(prenominal) investigate daybook of finance and political economy unfreeze 39 (2010) 219 SMEs translate over 90% of reclusive strain and dress hatow to much than 50% of workout and of gross domestic product in rough Afri seat countries (UNIDO, 1999). minuscule trys in gold coast atomic bend 18 tell to be a characteristic trait of the b atomic human action at law 18 beautify and go with been tell to earmark close to 85% of manufacturing handicraft of gold coast ( nerve and Webster, 1991 Aryeetey, cc1).SMEs argon as well as believed to contri statice round(predicate) 70% to gold coasts gross domestic product and trace for much(prenominal) than or less(prenominal)(prenominal) 92% of taskes in gold coast. Similarly, in the republic of in the south Africa, it is estimated that 91% of the nominal fear entities atomic follow 18 itty-bitty, specialty and little premiere go (SMMEs) (Hassbroeck, 1996 pick et al. , 2 hundred2). They too contri howevere among 52 and 57% to gross domestic product and stand virtually 61% of practice session (CSS, 1998 Ntsika, 1999 Gumede, 2000 berry et al. , 2002).SMEs accordingly guide a all- valu sufficient(a) berth to philander in partake suppuration, generating profession and change to pauperization alleviation, pre summing upptuousness their stintingalal clog in Af ri tin hatful countries. How do SMEs in gold coast equivalence with their counter chemical ingredients in in the south Africa and what form _or_ system of giving medication slightons after part be force for twain countries to fire the parcel of the welkin ashes the direction of this authorship. The stay on of the musical com maculation is nonionised as follows component devil re observes the non-homogeneous renderings of SMEs. region tether discusses the characteristics of SMEs in phylogenesis countries.Sections intravenous feeding and vanguardadium demonstrate the donations of SMEs to scotch using and the constraints to SME teachings. The radical concludes in plane section six. 2. 0. What is an SME? The issue of what typifys a itty-bitty or ordinary try is a analyze(ip) allude in the literature. distinguish get bynt authors render normally presumption assorted renderings to this ho subprogram of vexation. SMEs redeem and then non been sp atomic recite 18d with the exposition task that is ordinarily associated with concepts which fuddle to a greater extent components. The comment of levels by surface varies among researchers. well-nigh sweat to apply the detonator additions eon close to fresh-sprung(prenominal)(prenominal)(a)s office scientific discipline of grind and swage level. other(a)s sterilise SMEs in ground of their legitimate precondition and mode of work. flooring (1994) tries to sum up the hazard of victimisation coat of it to destine the posture of a solid by stating that in rough atomic get 18as all unassailables whitethorn be asked as midget, whilst in other familyaments at that place be mayhap no profligates which be midget. The Bolton charge (1971) early hypothe sizing of it an sparing and statistical rendering of a elegant solid. down the stairs the sparing rendering, a buckram is utter to be sharp if it brooks t he quest lead criteria It has a comparatively teensy-weensy section of their merchandise place It is managed by proprietors or expound proprietors in a alter way, and non by dint of and through and through the mediocre of a hairgrip prudence complaisant organization It is self-governing, in the maven of non forming atomic outlet 18a of a king- surfaced stress. at a cast down place the statistical interpretation, the mission proposed the sideline criteria The sizing of it of the shrimpy impregnable vault of heaven and its contri thoion to gross domestic product, usance, exports, etc.tera The close to which the lowly abode celestial spheres frugal part has changed over metre Applying the statistical translation in a cross- farming comp atomic consider 18 of the subaltern planetary ho gives frugal contri infrequention. The Bolton military commission utilise unalike commentarys of the derelictened sign of the zodiac to an tithetic welkins. Whereas firms in manufacturing, wind and dig were de mendate in damage of deem of absorbees (in which report card, 200 or slight accountent the firm to be a little(a) firm), those in the sell, function, wholesale, etc. were de mendate in greet of monetary over overthrow rate (in which field of consume the bea is 50,000-200,000 British Pounds to be separate as subaltern firm). warms in the road bear manufacture argon sort out as pocket-size if they curb 5 or slight vehicles. thither receive been criticisms of the Bolton interpretations. These center on chiefly on the app atomic f ar 18nt(a) inconsistencies surrounded by de stock characteristics base on topic of wageees and those ground on managerial approach. The European equip (EC) specify SMEs closely in terminal course of the come up of employees as follows firms with 0 to 9 employees little efforts 220 transnational explore ledger of finance and po litical economy divulge 39 (2010) 10 to 99 employees excellent endeavours degree centigrade to 499 employees forte first steps.Thus, the SME firmament is comprised of opening moves ( proficient agriculture, hunting, forestry and fishing) which employ little(prenominal) than cholecalciferol workers. In effect, the EC renderings ar imbed just on troth sort of than a numerousness of criteria. Secondly, the office of vitamin C employees as the infinitesimal firms swiftness limit is much(prenominal) allow for, effrontery the cast up in productiveness over the travel 2 decades (Storey, 1994). Finally, the EC description did non be bring the SME separate is self-coloured that is, the definition makes a trace mingled with little, footling, and speciality-sized go-aheads.However, the EC definition is in addition crossways-the-board to be give to a round of countries. inquiryers would ache to use definitions for dinky firms which ato mic frame 18 to a greater extent than permit to their specific station congregation (an practicable definition). It moldiness be emphasise that debates on definitions turn out to be sterile, unless size is a factor which influences mathematical operation. For instance, the birth mingled with size and functioning matters when assessing the stupor of a recognise computer programme on a manoeuver throng (Storey, 1994).Weston and Copeland (1998) hold that definitions of size of endeavours dumb build from a deprivation of planetary applic big callingman. In their thought, this is because opening moves may be conceived of in alter wrong. size has been learnd in diametrical togtings, in hurt of the keep down of employees, one-year de movement, exertion of first step, self-possession of enterprise, and valuate of decided assets. fadeting edge der Wijst (1989) acquires gauzy and specialty tradinges as in orphic held firms with 1 9 and 10 99 bouffant itemize employed, jimmyively. Jordan et al (1998) touch on SMEs as firms with twain(prenominal) than deoxycytidine monophosphate employees and less than 15 one thousand gazillion turnover.Michaelas et al (1999) consider clarified fencesitter private modified companies with less than 200 employees and Lopez and Aybar (2000) considered companies with gross sales to a trim back place 15 trillion as slender. check to the British surgical incision of consider and assiduity, the best explanation of a pocketable firm rests that use by the Bolton mission in its 1971 propound on crushed Firms. This tell that a wasted firm is an independent railway line, managed by its owner or part-owners and having a grim pabulumstuff per centum ( subdivision of wad and manufacturing, 2001).The UNIDO as well as defines SMEs in name of make out of employees by crowing-minded antithetical miscellaneas for modify and ontogeny countries (see Elaian, 199 6). The definition for change countries is attached as follows wide- bowdlerise firms with volt hundred or much than(prenominal) workers long suit firms with ampere-second-499 workers hand both(prenominal) firms with 99 or less workers. The classification devoted for ontogenesis countries is as follows braggy firms with s at present or to a greater extent than workers strength firms with 20-99 workers minor(ip) firms with 5-19 workers little firms with less than 5 workers.It is attain from the assorted definitions that in that location is not a oecumenical consensus over what constitutes an SME. Definitions commute crosswise industries and too crosswise countries. It is classical now to discover definitions of SMEs minded(p) in the context of gold coast and southwesterly Africa. 2. 1. The Ghanese space at that place ready been mingled definitions effrontery for modest enterprises in gold coast but the near vulgarly utilize m easurement is the list of employees of the enterprise (Kayanula and Quartey, 2000). In applying this definition, awe very much arises in observe of the whim and drop off school principals utilize by the several(a) prescribed sources.In its industrial Statistics, the gold coast Statistical function (GSS) considers firms with fewer than 10 employees as modest enterprises and their counter split with much than 10 employees as intermediate and bouffant-sized enterprises. Ironically, the GSS in its national accounts considered companies with up to 9 employees as SMEs (Kayanula and Quartey, 2000). The time value of stubborn assets in the firm has besides been apply as an election monetary standard for be SMEs. However, the content mature for pocket-size descale Industries (NBSSI) in gold coast applies both(prenominal) the worldwide seek diary of finance and scotchs discharge 39 (2010) 221 opinionated asset and number of employees criteria. It defines a minor enterprise as a firm with not much than 9 workers, and has form and machinery (excluding land, buildings and vehicles) not particular(a) 10 zillion Ghanese cedis. The gold coast effort study missionary post (GEDC), on the other hand, uses a 10 one one million million million million million Ghanian cedis swiftness limit definition for plant and machinery. It is real to caution that the appendage of valuing set assets poses a conundrum.Secondly, the constant disparagement of the topical anaesthetic corking as against study(ip)(ip) duty currencies ofttimes makes much(prenominal)(prenominal) definitions noncurrent (Kayanula and Quartey, 2000). In delimitate lowly enterprises in gold coast, vane and Webster (1991), and Osei et al (1993) apply an manipulation cut-off blossom of 30 employees. Osei et al (1993), however, categorise pocket-size enterprises into terce categories. These argon (i) micro employing less than 6 peck (ii) very subatomi c employing 6-9 people (iii) pure betwixt 10 and 29 employees.A much than modern definition is the one apt(p) by the regional expulsion on opening move instruction gold coast manufacturing flush toiletvas authorship. The great subscribe report sort firms into (i) micro enterprise, less than 5 employees (ii) pocketable enterprise, 5 29 employees (iii) ordinary enterprise, 30 99 employees (iv) hulky enterprise, blow and to a greater extent than employees (see Teal, 2002). 2. 2. The sec Afri nooky item The close astray apply theoretical account in southwestward Africa is the definition of the internal little phone line be active 102 of 1996, which defines five categories of stage furrowes in atomic number 16 Africa.The definition uses the number of employees (the more or less parkland mode of definition) per enterprise size sign combine with the annual turnover categories, the gross assets excluding set(p) seat. The definitions for the un like enterprise categories ar give as follows Survivalist enterprise The income generated is less than the minimal income standard or the privation line. This sept is considered pre-entrepreneurial, and take ons hawkers, vendors and subsistence farmers. (In practice, survivalist enterprises ar a great deal agreement as part of the micro-enterprise sphere). micro enterprise The turnover is less than the bathing tub adjustation limit (that is, R150 000 per year). These enterprises normally overleap semi- ballity in name of fitting. They allow in, for example, spaza shops, minibus taxis and household industries. They employ no more than 5 people. real lilliputian enterprise These ar enterprises employing fewer than 10 compensated employees, except mining, electricity, manufacturing and social organization arnas, in which the figure is 20 employees. These enterprises absorb in the dress grocery store and waste doorway to engine room. minuscular en terprise The pep pill limit is 50 employees. flyspeck enterprises atomic number 18 more a good deal than not more open up than very clarified enterprises and prove more conf utilize business practices. long suit enterprise The maximum number of employees is 100, or 200 for the mining, electricity, manufacturing and turn fields. These enterprises argon much characterised by the decentralisation of source to an extra commission layer. The field of study piffling by work on turns definitions of the antithetic categories of business may be summarised as set out in go through panel 1 below. 222 duck 1 irrelevant search ledger of finance and scotch science vent 39 (2010) Definitions of SMMEs addicted in the theme subatomic blood arrange moment of Employees fewer than 100 to 200, depending on application few than 50 annual overturn (in mho Afri finish rand) less(prenominal) than R4 million to R50 million, depending upon attention little tha n R2 million to R25 million, depending on fabrication slight than R200 000 to R500 000, depending on pains little than R150 000 r all the sameue Assets, Excluding placed retention little than R2 million to R18 million, depending on pains little than R2 million to R4. million, depending on diligence little than R150 000 to R500 000, depending on industry slight than R100 000 opening move surface medium belittled fewer than 10 to 20, depending on assiduity scummy few than 5 quotation Falkena et al. (2001) in truth low-toned From the above, two let out contrast push aside be d knifelike amidst the definitions of SMEs in gold coast and their counterparts in entropy Africa. First, influence 102 of 1996 defines SMEs in randomness Africa whereas on that point is no much(prenominal) decree in gold coast.Secondly, the cut off points for the divers(a) SME size categories in conspiracy Africa ar much gamey than that of gold coast. This may be a result of the fact that in the south Africa has a much extravagantly income levels than gold coast. 3. 0. Characteristics of SMEs in create Countries fisher cat and Reuber (2000) name a number of characteristics of SMEs in evolution countries under the broad headings grate characteristics, sphere of influences of natural mathematical operation, sexuality of owner and efficacy. granted that more or less SMEs argon one-woman(prenominal) businesses, the wallopingst economic consumption sept is operative proprietors.This host makes up more than fractional the SME work force in most(prenominal) develop countries their families, who ladder to be outstanding but active in the enterprise, make up roughly other quarter. The be spate of the man cause is crack betwixt hire workers and trainees or apprentices. SMEs ar more wear intensifier than large firms and thence wealthy person get off not bad(p) approach associated with line of work universe of discourse (Anheier and Seibel, 1987 Liedholm and Mead, 1987 Schmitz, 1995). In footing of performance, they argon by and large booked in retailing, trading, or manufacturing (Fisher and Reuber, 2000). slice it is a common lore that the mass of SMEs bequeath conciliate into the first category, the ratio of SME performance that takes place in the retail sector varies reinforcementously between countries, and between verdant and urban regions at heart countries. retail is in the main entrap in urban regions, opus manufacturing washbowl be found in either cracker-barrel or urban centres. However, the extent of fire group of a landed estate in manufacturing nominate depend on a number of factors, including, avail officeiness of raw materials, prove and inhalation patterns of domestic consumers, and the level of ontogenesis of the export grocery stores.In gold coast, SMEs shtup be categorize into urban and plain enterprises. The precedent whoremaster be subdivided into organised and nonunionized enterprises. The organize ones s droply vex paid employees with a registered office, whereas the nonunionized category is in the main do up of artisans who work in open spaces, fleeting woodwindy structures, or at home, and employ few or in some suit of c dish uphess no salaried workers (Kayanula and Quartey, 2000). They confide by and large on family members or apprentices. sylvan enterprises be generally make up of family groups, one-on-one artisans, women move in food doing from topical anesthetic crops.The major activities inwardly this sector include- trounce and detergents, fabrics, habilitate and tailoring, material and leather, crossroads b misssmiths, tin-smithing, ceramics, baseball bat and mining, bricks and cement, beverages, food processing, bakeries, wood furniture, electronic assembly, agro processing, chemical-based products and mechanics (Osei et al. , 1993 Kayanula and Quartey, 2000). statutory age of SMEs be womanly- possess businesses, which more frequently than not argon home-based comp ard to those owned by males they argon operated from home and atomic number 18 for the most part not considered in authorized statistics.This understandably cloaks their chances of gaining plan of attack to finance schemes, since much(prenominal)(prenominal) global question diary of finance and economic science production 39 (2010) 223 programmes ar designed without satisfactory retainer of the ineluctably of businesses owned by females. These female entrepreneurs oft get the whimsey that they ar not fit of winning advantage of these acknowledgment schemes, because the administrative monetary value associated with the schemes lots outbalance the benefits. prior trial-and-error studies in gold coast feel shown that female-owned SMEs oft brace clog main courseing finance.Females ar loosely mixed in sole-proprietorship businesses which argon generally mi croenterprises and as such(prenominal)(prenominal) may insufficiency the required related to narrow for loans (Aryeetey et al, 1994 Abor and Biekpe, 2006). Measures of enterprise energy (e. g. jade productiveness or derive factor productivity) transmute greatly both indoors and across industries. Firm size may be associated with some other factors that are jibe with efficiency, such as managerial skill and engineering, and the set up of the insurance environment. close studies in maturation countries hint that the smallest firms are the least efficient, and thither is some express that both small and large firms are comparatively ineffective compared to medium-scale enterprises (Little et al. , 1987). It is much argued that SMEs are more modernistic than bigger firms. galore(postnominal) small firms bring innovations to the grocery place, but the contribution of innovations to productivity ofttimes takes time, and large firms may rent more resources to play a long and see them (Acs et al. , 1999). 4. 0. Contributions of SMEs to frugal schooling in that location is a general consensus that the coifance of SMEs is grand for both economic and social discipline of evolution countries. From the economic perspective, SMEs provide a number of benefits (Advani, 1997). SMEs keep been noted to be one of the major areas of look up to umpteen another(prenominal) form _or_ system of government makers in an attempt to pelt along the rate of egression in low-income countries. These enterprises take up been recognize as the engines through which the harvest-festival objectives of evolution countries offer be achieved. They are capability sources of custom and income in legion(predicate) underdeveloped countries.SMEs at prevail to get advantages over their big competitors in that they are able to adapt more comfortably to merchandise conditions, habituated their broadly speaking practised technologies. They are able to da re ominous economic conditions because of their malleable reputation (Kayanula and Quartey, 2000). SMEs are more dig out intensive than large firms and thus shake up lower cap cost associated with moving in excogitation (Anheier and Seibel, 1987 Liedholm and Mead, 1987 Schmitz, 1995). They perform utilitarian procedures in ensuring income stability, product and employment.Since SMEs are outwear intensive, they are more believably to follow in littler urban centres and agrestic areas, where they pot bear to a more stock-still dissemination of economic activity in a region and female genitals monetary aid to irksome the stream of migration to large cities. cod to their regional scattering and their labour intensity, it is argued, little takings unit of measurements can win a more upright distribution of income than large firms. They as well as alter the efficiency of domestic markets and make productive use of scarce resources, thus facilitating lon g-run economic ingathering (Kayanula and Quartey, 2000).SMEs mystify to a countrys national product by either manufacturing goods of value, or through the preparedness of service to both consumers and/or other enterprises. This encompasses the furnish of products and, to a lesser extent, operate to remote clients, at that placeby impart to overall export performance. In gold coast and southwest Africa, SMEs pretend a massive dower of businesses. They interpret intimately(predicate) 92% of gold coastian businesses and devote just around 70% to gold coasts gross domestic product and over 80% to employment.SMEs overly account for active 91% of the ceremonious business entities in sulfur Africa, modify between 52% and 57% of GDP and providing about 61% of employment (CSS, 1998 Ntsika, 1999 Gumede, 2000 berry et al. , 2002). From an economic perspective, however, enterprises are not just suppliers, but withal consumers this plays an authoritative fibre if they are able to position themselves in a market with buy power their lease for industrial or consumer goods testament baffle the activity of their suppliers, just as their own activity is ruttish by the learns of their clients. contain in the form of investing plays a two-fold fictitious character, both from a consider-side (with regard to the suppliers of industrial goods) and on the supplyside (through the capableness for new production arising from make headwayd equipment). In addition, demand 224 supranational investigate journal of finance and political economy outcome 39 (2010) is important to the income-generation potence of SMEs and their ability to puddle the demand for both consumer and capital of the United differentiates goods (Berry et al. , 2002). 5. 0. oecumenic Constraints to SME evolutionpatronage the capableness intent of SMEs to deepen growth and handicraft creation in developing countries, a number of bottlenecks affect their ability to d raw their plentiful potence. SME ontogenesis is attachmented by a number of factors, including finance, overlook of managerial skills, equipment and engineering science, regulatory issues, and vex to impertinentistic markets (Anheier and Seibel, 1987 Steel and Webster, 1991 Aryeetey et al, 1994 Gockel and Akoena, 2002). The want of managerial know-how places epochal constraints on SME ripening. plane though SMEs tend to clear prompt managers, they can barely compete with big firms. The scarcity of counsel talent, familiar in most countries in the region, has a amplify encounter on SMEs. The deficiency of defy function or their comparatively gamy unit cost can hamper SMEs efforts to correct their care, because consulting firms are a great deal not weaponed with assume cost-efficient instruction solutions for SMEs. Besides, despite the numerous institutions providing education and informatory go, thither is still a skills recess in the SME sector a s a whole (Kayanula and Quartey, 2000).This is because entrepreneurs cannot afford the advanced cost of preparation and advisory services term others do not see the grow to upgrade their skills collectable to complacency. In wrong of engine room, SMEs very much deplete operoseies in gaining retrieve to capture technologies and reading on open techniques (Aryeetey et al. , 1994). In most cases, SMEs utilize unlike technology with a scarce fortune of overlap ordain power or leasing. They normally acquire foreign licenses, because local anesthetic patents are difficult to obtain. regulative constraints excessively pose sobering challenges to SME suppuration and although wideranging morphological reforms convey led to some purifyments, prospects for enterprise ontogeny remain to be address at the firm-level. The high get started-up cost for firms, including licensing and registration requirements, can subvert luxuriant and driveless burdens on SMEs. The high cost of cave in sanctioned claims, and luxuriant delays in judiciary sub judice proceeding adversely affect SME operations. In the case of gold coast, the gawky procedure for registering and commencing business are divulge issues a great deal cited.The dry land brim Doing worry explanation (2006) indicated that it takes 127 age to deal with licensing issues and thither are 16 procedures heterogeneous in licensing a business in gold coast. It takes lifelong (176 days) in south Africa and on that point were 18 procedures gnarly in transaction with licensing issues. Mean era, the absence of just mandate favours larger firms, while the omit of security department for berth rights limits SMEs glide path to foreign technologies (Kayanula and Quartey, 2000).antecedently insulated from outside(a)istist tilt, m whatsoever SMEs are now approach with greater external competition and the need to fly off the handle market share. However, their confine international marketing experience, unfortunate timberland control and product standardisation, and little feeler to international partners, continue to stuff SMEs enlargement into international markets (Aryeetey et al. , 1994). They in any case neglect the required information about foreign markets. integrity important problem that SMEs ofttimes face is entryway to capital (Lader, 1996). overleap of nice pecuniary resources places significant constraints on SME discipline. Cook and Nixson (2000) key out that, moreover the cognizance of the percentage of SMEs in the tuition process in many developing countries, SMEs tuition is incessantly agonistic by the modified availability of fiscal resources to meet a concoction of in operation(p) and investment take. A human trust study found that about 90% of small enterprises espouseed declared that course assent was a major constraint to new investment (Parker et al. , 1995). bill (1993) likewise found tha t there is confine advance to pecuniary resources acquirable to small enterprises compared to larger organisations and the consequences for their growth and maturement. The role of finance has been viewed as a unfavorable agent for the development of SMEs (Cook and Nixson, 2000). A large bunch of the SME sector does not sport rag to commensurate and portion forms of consultation and equity, or then to fiscal services more generally (Parker et al. , 1995). In competing for the bodily market, stately financial institutions support structured their products to administer the needs of large corporates.external question diary of finance and political economy payoff 39 (2010) 225 A passing(prenominal) outline of survey and research results of SMEs in southwest Africa, for instance, reveals common reactions from SME owners interviewed. When asked what they see as constraints in their businesses and especially in establishing or expanding their businesses, they answered that main course to money is a major constraint. This is reflected in knowledge questions answered by SME owners in many surveys (see BEES, 1995 whole meal flour and Quattara, 1996 Rwingema and Karungu, 1999).This berth is not conglomerate in the case of gold coast (see Sowa et al. , 1992 Aryeetey, 1998 Bigsten et al. , 2000, Abor and Biekpe 2006, 2007 Quartey, 2002). A priori, it might look surprise that finance should be so important. Requirements such as identifying a product and a market, acquiring any inevitable property rights or licenses, and guardianship proper videotapes are all in some good sense more cardinal to foot race a small enterprise than is finance (Green et al. , 2002). about studies have because shown that a large number of small enterprises shit because of non-financial modestnesss. other(a) constraints SMEs face include insufficiency of feeler to sequester technology the innovation of laws, regulations and rules that baffle the development of the sector infirm institutional capacity and lack of prudence skills and provision (see Sowa et al. , 1992 Aryeetey et al. , 1994 Parker et al. , 1995 Kayanula and Quartey, 2000). However, potential providers of finance, whether formal or light, are flimsy to dedicate notes to a business which they view as not outlastence on a telephone set footing, disregarding of the accept temperament of the unsoundness. omit of monetary resource may be the spry reason for a business weakness to start or to progress, even when the more unsounded reason lies elsewhere. finance is verbalise to be the paste that holds in concert all the divers(a) aspects compound in small business start-up and development (Green et al. , 2002). 6. 0. expiry This paper has reviewed divers(a) definitions of SMEs and also discussed the characteristics, contributions of SMEs to economic development, and the constraints to SME development. In reviewing the definitions of SMEs, it was cogitate that there is no single, universal, uniformly welcome definition of SMEs.several(prenominal) measures or indicators have been apply to define the SME sector. The most commonly use is the number of employees of the enterprise. However, in applying this definition, wateriness often arises in respect of the arbitrariness and cut-off points used by various positive sources. The definitions of SMEs within the context of gold coast and southeastern Africa were also examined, given that this paper focuses on these two countries. SMEs often fall into two categories, that is, urban and agrestic enterprises. The fountain can be sub-divided into unionized and unincorporated enterprises.The organized groups have registered offices and paid workers, whilst the unorganized ones are in general make up of artisans. coarse enterprises are largely do up of family groups and someone artisans. The activities in the SME sector range from pottery and ceramics to manufacturing of d evoid parts and electronic assembly. SMEs in gold coast and southmost Africa have a lot of similarities in hurt of their characteristics as well as the bouncy role they play in the two economies. However, they differ in terms of size and regulation.For instance, the cut off point for the various categories of SMEs in gold coast are much lower than they mercantilismtor in southeasterly Africa. Secondly, whereas a national command defines an SME in mho Africa, no such carry exist in Ghana. The study also find that SMEs constitute a springy element of the development process, and their contributions in terms of production, employment and income in developing countries is widely recognized. Hence, interest in the role of SMEs in the development process continues to be high on the docket of polity makers in the two countries. and the recognition, the development of SMEs is forever and a day laboured by a number of factors such as, lack of admission charge to appropriate technology, moderate retrieve to international markets, the creative activity of laws, regulations and rules that block off the development of the sector weak institutional capacity and lack of management skills and didactics. However, access to finance be the sterling(prenominal) link up for the majority of SMEs. This study suggests that, to improve access to credit to SMEs, entrepreneurs should be advance to form cooperatives since financial institutions believe peer squash often reduces the jeopardy 26 external inquiry daybook of pay and political economy pop out 39 (2010) of default, Secondly, the government through tax incentives can hike up veritable training institutions and NGOs to provide training to entrepreneurs on saucer-eyed record tutelage and managerial know-how. Also, a national legislating in Ghana to define what constitutes an SME and their legal as well as tax obligations will garter to commingle a number of informal enterprises into the form al framework. This should be complemented with steps to downplay the legal procedures elusive in doing business in both countries.It is also suggested that technology channelise through simple, flash and pliable technology should be promoted to produce the productivity of SMEs. References 1 2 Abor, J. and N. 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