Financial Intermediation for the Poor: Credit Demand by Micro, Small and Medium Scale Enterprises in Ghana - A Further Assignment for Financial Sector Policy

This study draws on Ghana's experience with financial liberalization to investigate how access to finance by micro, small and medium scale enterprises (MSEs) has been affected by the Financial Sector Adjustment Program (FSAP). FSAP began in 1988 with technical assistance from the IDA. The authors find that post-reforms:

• The Ghanaian banking sector is primarily privately owned;
• Branch diffusion network has decreased;
• Major players have closed rural branches and have introduced minimum deposit requirements;
• Positively, banking technology has advanced and universal banking practices have been introduced.

The study also finds that access to credit is not the primary constraint for MSEs in Ghana, and many proposals are rejected by banks because they are not considered worthy of bank loans, not because banks lack loan-able funds. The paper concludes with the suggestion that financial reforms must entail interventions, which go beyond the delivery of financial services, such as:

• Building managerial capacitie;
• Encouraging entrepreneurs to offer products that are demanded in the market.