Corresponding Author Affiliation*: University College of Management Studies, Accra, Ghana

Abstract:

This descriptive study evaluated the challenges and prospects associated with reducing high risk factors associated with financing small and medium scale enterprises (SMEs) in Ghana with the search light on the operations of Universal Merchant Bank. The study adopted the cross-sectional research design to conduct the study and this enabled the researcher to solicit information from both customers and officials of Universal Merchant Bank for their views. Purposive sampling technique was used to select officials of the bank. The study employed qualitative research analytical tools which focused on the use of tables, pie charts, percentages and bar charts in analyzing and interpreting the data captured from the field. The study found out that although SMEs constitute the engine of growth in the Ghanaian economy and therefore ought to be financially fluid, banks often discriminate against them in their loan investment portfolios owing to serious financial injuries often sustained in the process of providing the badly needed funds. Numerous challenges associated with financing SMEs in Ghana stretch from deliberate efforts at misapplying solicited short-term funds for capital expenditure such as buying land or vehicles which results into repayment challenges. The study noted with surprise that unfair trade practices especially dumping of cheap Chinese products on the local market also result in poor sales for the SMEs leading to difficulty in honoring structured loan repayment schedules. The study made key recommendations.

Keywords: Credit Risk, Financial Management, Small and Medium Enterprises.