Government Intervention In Micro Finance as Financing For Development of MSMEs.

1. Government Intervention In Micro Finance as
Financing For Development of MSMEs.
By Nii Kwao

2. Outcomes
• Explain the channels through Government supports small businesses
• Explain the rationale for public sector interventions
• Discuss the role of public sector in MSME development
• Identify government and donor support funding schemes

3. Introduction
• MSMEs play a pivotal role in every economy, thus government needs
to provide support for them.
• Previously efforts by government came in the form of direct
assistance through state or parastatal agencies.
• In the 1980s, small enterprise development was seen as a strategic
initiative tied to the policies aimed at reducing the negative impact of
structural adjustment.
• Currently, the MSMEs forms more than 70% of the business economy
of Ghana and they are mostly in the informal sector.

4. Channels of Government Support
for MSMEs
• Measures for influencing enterprise behavior and environment.
Ghana has a National Vocational Training Institute (NVTI) to provide
technical and vocational skills for MSMEs. Also National Board for
Small Scale Industries (NBSSI) provides support and training for
MSMEs.
• Support provided by intermediary agencies in the promotion of inter-
firm linkages and networking. In Ghana, the government has
established MASLOC as a state owned financial agency to provide
micro finance solutions for MSMEs.
• Government role in the development of the financial system.

5. Measures aimed at Influencing MSMEs
Behavior
• Tax, subsidies, relaxation of regulatory requirements and
procurement policies
• Taxes and subsidies are used to facilitate linkages between large and
small firms and encourage sub contracting (tax and subsidy schemes
for large firms that create opportunities to benefit SMEs
• Subsidies – provide direct support to MSMEs in areas of R&D,
training, trade fairs etc.

6. Rationale For Public Sector Interventions
• Improving Business Conditions
• Assisting MSMEs to meet financing requirements
• Making the financial system more accessible to MSMEs
• Expanding the Supply of Finance through the Non-Financial Private
Sector
• Providing guarantees and export credits to MSMEs through EXIM
banks to promote exports

7. The Role of the Public Sector In MSMEs
Development
• Creating an Enabling Regulatory Environment
• Improving Access to Finance
• Providing Business Development Services

8. Creating an Enabling Regulatory Environment
• Stable macro economy, an open trade and investment regime,
competitive, financial sector.
• Well – developed infrastructure, transportation, port facilities,
communication networks, expand markets, facilitate transactions.
• Social infrastructure- education and healthcare.
• Clearer understanding of relevant laws, protection of legal rights,
assuring MSMEs that government will not unfavorably change basic
conditions underlying their business decisions.
• Publicity of laws.

9. Improving Access to Finance
• Government supplies credit through banks
• In the past, MSMEs benefitted from subsidized credits. This still exists.
• The main objective of subsidized credit programme is to increase
access

10. Providing Business Development Services
• Include a wide variety of non-financial services towards the
development of MSMEs.
• Training and managing; providing extension, consultancy, and
counselling, assisting them in marketing their products and services,
as well as providing information services for the MSMEs.
• Assisting in developing up-to-date technology and helping them in
the ultimate diffusion of the technology.