SME’s have gained wide recognition as a viable alternative means to grow the economy of a nation. This view point of SME’s would have earned the necessary support in terms of financing. However, SME’s are plagued with funding gap which inhibits the growth expected. In gaining help, SME’s had sought financial support primarily from commercial banks who demand collateral and high interest rates that are not met by SME’s.
Prudently, SME’s could have turned to Venture Capital Financing as the best source of financial intermediary, which has dual benefits of funding and provision of managerial expertise. The inability to access venture capital financing is attributed to varied factors including the process involved,inability of entrepreneurs in Ghana to share ownership and low education on venture capital financing opportunities. In view of these challenging elements thought to be inherent with venture capital financing, the venture capitalist, and the SME’s generally have the fear to engage in venture capital financing. For instance, the venture capitalists fear they could lose their capital if they took part in such investment on one hand, and the investee organization fear they could lose their business to the venture capitalist.
These among others are delimiting against the patronage of venture capital financing even though it is a good financing option for SME’s. The study used two active and practicing organizations as the venture capitalists and 112 (one hundred and twelve) SME’s selected from the Ghana Association of Industries, who are potential investee SMES using effective sampling methods for suitable representation. The results of the study revealed that over the past 5 years, more SMEs are approaching venture capital Companies for financing, more SMEs now meet the venture capital criteria for financing, intensive media campaign on equity financing and venture capital financing is yielding results and SME owners have more knowledge in venture capital as business financing option. Most of the respondents stated that more education, free follow of information, simplifying the process of venture capital financing and several exit methods are ways to resolve challenges of Venture Capital Financing.
The recommendations among others were for effective campaign and education to promote venture capital financing in Ghana. The findings on the prospects of venture capital in Ghana points to only one direction and that are that the future is bright. These findings imply that in spite of the numerous challenges and risk confronting stakeholders in the sector, it can be seen that venture capital financing will be major player in the financial sector. There is however a caveat. It is incumbent on VCs to do more than they are doing presently in terms of education, proper and enhanced procedures and being more innovative in terms of their risks assessments.
Authors:
Ernest Ofori Asamoah
Kwame Nkrumah university of Science and Technlogy,Institute of distance Learning, Kumasi
Edward Kofi Sasa Buckman
Kwame Nkrumah university of Science and Technlogy,Institute of distance Learning,Kumasi
