Costly Business Financing; a bane in Starting a New Business by Ghanaian Youth
While a small business owner may take out a loan or receive some financial backing down the line, they will be primarily bootstrapping their venture until it can eventually sustain itself. This ethos of independence distinguishes small business entrepreneurship from the rest
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Entrepreneurship by definition is a conscious activity that involves organizing, managing, and assuming the probable risks of a business or enterprise. It can also be defined as the act of starting a business in the hope of earning a profit. However, our modern perception of entrepreneurship has evolved tremendously.
Entrepreneurship requires a unique set of skills including self-determination, self-motivation and perseverance. Whether you have conceptualized a solution to a known problem or you have simply decided to work for yourself, you’ll want to establish a business and create a business website to cement your online presence from the start.
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Entrepreneurship also plays an important role in the economic development of our vibrant marketplace. It leads to better standards of living and generates new wealth, as well as increased employment and national income. Entrepreneurs also have the opportunity to help bridge the digital divide, the gap between those with access to internet and those without. Entrepreneurs may also become thought leaders in their fields, although this isn’t necessarily a distinguishing factor of someone in this role, but it can be a natural outcome.
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With technological advancements and market demand for new business ideas and innovation, the practice of entrepreneurship is growing rapidly. Today, more and more self-motivated individual Ghanaians are looking to become fully independent in their professional lives and are aspiring to create their own future. On the other hand, this article tries to also talk about what business organization entails. Business organization, an entity formed for the purpose of carrying on commercial enterprise. Such an organization is predicated on systems of law governing contract and exchange, property rights, and incorporation.
Business enterprises customarily take one of three forms: individual proprietorships, partnerships, or limited-liability companies (or corporations). In the first form, a single person holds the entire operation as his personal property, usually managing it on a day-to-day basis. Most businesses are of this type. The second form, the partnership, may have from 2 to 50 or more members, as in the case of large law and accounting firms, brokerage houses, and advertising agencies. This form of business is owned by the partners themselves; they may receive varying shares of the profits depending on their investment or contribution. Whenever a member leaves or a new member is added, the firm must be reconstituted as a new partnership. The third form, the limited-liability company, or corporation, denotes incorporated groups of persons—that is, a number of persons considered as a legal entity (or fictive “person”) with property, powers, and liabilities separate from those of its members. This type of company is also legally separate from the individuals who work for it, whether they be shareholders or employees or both; it can enter into legal relations with them, make contracts with them, and sue and be sued by them. Most large industrial and commercial organizations are limited-liability companies.
Types of business associations
The first feature, plurality of membership, distinguishes the business association from the business owned by one individual; the latter does not need to be regulated internally by law, because the single owner totally controls the assets. Because the single owner is personally liable for debts and obligations incurred in connection with the business, no special rules are needed to protect its creditors beyond the ordinary provisions of bankruptcy law.
The second feature, the possession of distinct assets (or a distinct patrimony), is required for two purposes: (1) to delimit the assets to which creditors of the association can resort to satisfy their claims (though in the case of some associations, such as the partnership, they can also compel the members to make good any deficiency) and (2) to make clear what assets the managers of the association may use to carry on business. The assets of an association are contributed directly or indirectly by its members—directly if a member transfers a personally owned business or property or investments to the association in return for a share in its capital, indirectly if a member’s share of capital is paid in cash and the association then uses that contribution and like contributions in cash made by other members to purchase a business, property, or investments.
Small businesses entrepreneurship
Small business entrepreneurship is the process of starting a business knowing you will not plan to turn it into a franchise or large corporation. Just looking at the multifaceted infrastructure of this type of entrepreneurship shows us that small businesses are an extension of the entrepreneurs themselves. From the restaurateur and book seller, to the fitness instructor down your block, these are people whose passions and skills serve their customers to the fullest extent on a small scale. They may hire employees or manage remote employees, or be a one-person business.
While a small business owner may take out a loan or receive some financial backing down the line, they will be primarily bootstrapping their venture until it can eventually sustain itself. This ethos of independence distinguishes small business entrepreneurship from the rest
Scalable startup entrepreneurship
Scalable startups set out to innovate. This type of entrepreneurship can be defined as a business model in which a person or group of individuals is guided by a unique business idea. Silicon Valley is the living embodiment of that practice.
Though they begin small, successful startups expand rapidly and generate big profits, including Google, Wix and Airbnb. These types of companies often require outside investors and more capital in order to scale and break into different global markets.
Large company entrepreneurship
Large company entrepreneurship refers to companies that have a finite life cycle. They can grow and sustain by creating new products or offering other services around their main target markets. For example, a jeans manufacturer may decide to start selling denim backpacks, hats and even sneakers, as they already have the production process in place to do so.
This type of entrepreneurship is based on creating new opportunities that help expand an existing company’s reach and stay competitive. In other words, they are different from all the other business models on this list because they do not rely on opening an entirely new venture. Rather, their motivation to reinvent themselves may come from outside pressure to evolve or technological advancements that have rendered them obsolete.
Social entrepreneurship
Social entrepreneurship focuses on creating products or services that benefit society. These individuals work for the betterment of the world, and keep this mission at the front of mind even while sustaining a profitable business.
Why should you become an entrepreneur?
Entrepreneurship is risky, but it’s also rewarding. Not everyone has what it takes to start and run their own venture – but if you are self-motivated, creative, resourceful and undeterred, you’re ready to reap the benefits. Here just some of the advantages of pursuing this career path:
Be your own boss
When you are your own boss, you gain complete autonomy. You have the unique opportunity to call all the shots and decide how you work. Entrepreneurship also lets you pick and choose the aspects of running a business that bring you the most pleasure. Then, you can simply outsource certain tasks to others and focus on the areas of the business that matter to you most.
Have a flexible schedule
Many people are drawn to the idea of entrepreneurship because it liberates them from the confines of nine to five and two-week vacations per year. That said, remember that running a business means you’re going to work really hard and face long hours. Luckily, as an entrepreneur, you can control the workflow, manage your own time, and determine your own workplace – whether it’s at home or in an office.
Create a career aligned with your values
What makes you thrive? Your answer will help you identify what the perfect job looks like for you. From your company culture and mission statement to the types of employees you bring onboard, you can prioritize your values in everything tied to your business.
Become a problem-solver
At its core, entrepreneurship is about taking risks and working hard in the name of solving problems. As an entrepreneur, you’ll learn how to be a critical thinker and focus on coming up with unique solutions as an agent of change. Using your creativity, you’ll also be able to improve upon existing services or products and better address the public’s needs.
Becoming an entrepreneur
Now that you know the reasons why entrepreneurship is appealing to so many, the next step is to actually learn how to become an entrepreneur. Here are 5 essential steps:
01. Identify a problem
The first step is to identify a problem you want to solve. Your ultimate goal is to work for yourself and disturb the current market with a groundbreaking idea. So, this is the time to throw all your ideas at the wall and see what sticks. Consider your previous work experience, skillset and, most importantly, what kind of business you have the grit and motivation to bring to life. After all, you’re starting a business from scratch and it’s on you to make it happen, so you’ll want to have some deep seated inspiration.
02. Do your research
The motto “knowledge is power” couldn’t be more fitting. You’ve determined a pain point and now is the time to dive in and learn all you can about the industry. Whether it’s a completely new field or a market you’ve worked in before, take advantage of the abundance target marketCoursera Udemy
03. Create a solution
Entrepreneurs are known for their fresh perspectives and ability to think outside the box. Your solution should be something that hasn’t been executed before in your given market. Consider creative and innovative approaches that will appeal to your target audience – this is what’s going to gain traction and attract potential investors. However, you don’t need to have every detail ironed out at this stage. Start with a general solution and fill in the details to see which option is the most realistic and attainable.
04. Build your network
Networking
This tries to talk about the situation whereby an individual entrepreneur establishes some business rapport and connections with other set of entrepreneurs with the sole aim and intention of transacting business for profits.
Business Characteristics
Business associations have three distinct characteristics: (1) they have more than one member (at least when they are formed); (2) they have assets that are legally distinct from the private formal systembankruptcy
Why should The Ghanaian Youth become an entrepreneur?
Entrepreneurship is risky, but it’s also rewarding. Not everyone has what it takes to start and run their own venture – but if you are self-motivated, creative, and resourceful and undeterred, you’re ready to reap the benefits. Here just some of the advantages of pursuing this career path:
Be your own boss
When you are your own boss, you gain complete autonomy. You have the unique opportunity to call all the shots and decide how you work. Entrepreneurship also lets you pick and choose the aspects of running a business that bring you the most pleasure. Then, you can simply outsource certain tasks to others and focus on the areas of the business that matter to you most.
Have a flexible schedule
Many people are drawn to the idea of entrepreneurship because it liberates them from the confines of nine to five and two-week vacations per year. That said, remember that running a business means you’re going to work really hard and face long hours. Luckily, as an entrepreneur, you can control the workflow, manage your own time, and determine your own workplace – whether it’s at home or in an office.
Create a career aligned with your values
What makes you thrive? Your answer will help you identify what the perfect job looks like for you. From your company culture and mission statement to the types of employees you bring onboard, you can prioritize your values in everything tied to your business.
Become a problem-solver
At its core, entrepreneurship is about taking risks and working hard in the name of solving problems. As an entrepreneur, you’ll learn how to be a critical thinker and focus on coming up with unique solutions as an agent of change. Using your creativity, you’ll also be able to improve upon existing services or products and better address the public’s needs.
Becoming an entrepreneur
Now that we know the reasons why entrepreneurship is appealing to so many a Ghanaian, the next step is to actually learnhow to become an entrepreneur. In fact, here are the Five (5) essential steps to follow strictly:
4.Build your network
Types of Entrepreneurship
Concept of Entrepreneurship
In economics, entrepreneurship connected with land, labour, natural resources and capital can generate a profit. The entrepreneurial vision is defined by discovery and risk-taking and is an indispensable part of a nation’s capacity to succeed in an ever-changing and more competitive global marketplace.
Meaning of Entrepreneur
The entrepreneur is defined as someone who has the ability and desire to establish, administer and succeed in a startup venture along with risk entitled to it, to make profits. The best example of entrepreneurship is the starting of a new business venture. The entrepreneurs are often known as a source of new ideas or innovators, and bring new ideas in the market by replacing old with a new invention.
It can be classified into small or home business to multinational companies. In economics, the profits that an entrepreneur makes are with a combination of land, natural resources, labour and capital.
In a nutshell, any Ghanaian who has the will and determination to start a new company and deals with all the risks that go with it can become an Entrepreneur.
Characteristics of Entrepreneurship:
Actually, not all Ghanaian youth entrepreneurs are successful; there are definite characteristics that make entrepreneurship successful. A few of them are mentioned below:
Ability to take a risk- Starting any new venture involves a considerable amount of failure risk. Therefore, an entrepreneur needs to be courageous and able to evaluate and take risks, which is an essential part of being an entrepreneur.
Innovation- It should be highly innovative to generate new ideas, start a company and earn profits out of it. Change can be the launching of a new product that is new to the market or a process that does the same thing but in a more efficient and economical way.
Visionary and Leadership quality- To be successful, the entrepreneur should have a clear vision of his new venture. However, to turn the idea into reality, a lot of resources and employees are required. Here, leadership quality is paramount because leaders impart and guide their employees towards the right path of success.
Open-Minded- In a business, every circumstance can be an opportunity and used for the benefit of a company. For example, Paytm recognized the gravity of demonetization and acknowledged the need for online transactions would be more, so it utilized the situation and expanded massively during this time.
Flexible- An entrepreneur should be flexible and open to change according to the situation. To be on the top, a businessperson should be equipped to embrace change in a product and service, as and when needed.
Know your Product-A company owner should know the product offerings and also be aware of the latest trend in the market. It is essential to know if the available product or service meets the demands of the current market, or whether it is time to tweak it a little. Being able to be accountable and then alter as needed is a vital part of entrepreneurship.
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Importance of Entrepreneurship:
Creation of Employment- Entrepreneurship generates employment. It provides an entry-level job, required for gaining experience and training for unskilled workers.
Innovation- It is the hub of innovation that provides new product ventures, market, technology and quality of goods, etc., and increases the standard of living of people.
Impact on Society and Community Development- A society becomes greater if the employment base is large and diversified. It brings about changes in society and promotes facilities like higher expenditure on education, better sanitation, fewer slums, a higher level of homeownership. Therefore, entrepreneurship assists the organization towards a more stable and high quality of community life.
Increase Standard of Living- Entrepreneurship helps to improve the standard of living of a person by increasing the income. The standard of living means, increase in the consumption of various goods and services by a household for a particular period.
Supports research and development- New products and services need to be researched and tested before launching in the market. Therefore, an entrepreneur also dispenses finance for research and development with research institutions and universities. This promotes research, general construction, and development in the economy.
Who is the father of entrepreneurship?
Joseph Alois Schumpeter is regarded as the father of entrepreneurship. He introduced the concept of entrepreneurship.
What are the two main types of entrepreneurship
Generally speaking, there are many types of entrepreneurship, two examples of such are:
Small business entrepreneurship
Large company entrepreneurship
What are the key concepts of entrepreneurship?
The 4 key concepts of entrepreneurship are as follows:
Innovation
Risk taking
Vision
Organization
What are Ghanaian entrepreneur traits?
Centrally, some of the most important entrepreneurial traits of Ghanaians are:
Passion
Risk taking ability
Persisting nature
Innovative
Leading from the front
Ethical in nature
Functions of Ghanaian commercial banks
In every economy, there are several kinds of banks. The commercial banks are the most common as they provide most of the services required by everyone in society. There so many commercial banks but you will realize that they provide very similar services. Making a choice of what bank mostly depends on preference based on how efficient these services are.
The functions below are the general services provided by the different commercial banks in Ghana.
1. They provide individuals with the most reliable way of safeguarding their money. This allows customers to deposit money in their care and they can come to withdraw anytime they desire.
2. Customers enjoy lending services from these banks. The lending services take different forms, either cash or documents such as guarantee papers or letters of credit.
3. Trading Forex.
4. Selling and buying of securities.
5. Clearing of checks on behalf of their customers.
6. Money transfer and other special services.
7. Provide assistance to their clients with respect to the payment of bills. These bills include payment for light, water, phone, and cable television.
8. Standing as trustees for certain customers.
List of Some Banks in Ghana and Their Interest Rates (2022)
1.Agricultural Development Bank. The majority of the shares (52%) of this bank are owned by the government. It was established in 1965 and has grown to have 78 branches in Ghana today. The current interest rate is 27.60%.
2.Barclays Bank of Ghana. This is one of the oldest and largest banks in Ghana. It has several branches in different parts of Ghana and has an interest rate of 21.55%.
3.CAL Bank. This bank was established in 1990. Though it has been around for a short while, it has grown in leaps and bounds. It has a reputation as the most invitational bank in the country and has an interest rate of 28.50%.
4.Fidelity Bank. This bank is among the most recently established foreign investors own it. A couple of Ghanaian stakeholders have also invested in the bank including SSNIT. The current interest rate lies at 30.50%.
5.The Ghana Commercial Bank. This is the biggest indigenous bank in the country as it has the highest number of branches and ATMs scattered around Ghana. The bank’s interest rates sit at 25.05%.
6.International Commercial Bank of Ghana. This bank is an offshoot of the renowned ICB banking group which has its base in Switzerland. The bank has an interest rate of 22.95%.
7.National Investment Bank. This bank provides a dual-range of services. Firstly, it is a commercial bank before acting as a development bank. The bank’s interest rate lies at 27.33%.
8.Prudential Bank. This bank was established in 1993 and has grown very fast to having several branches in different parts of the country. It has a 27.50% interest rate.
9.Energy Bank Ghana. This is one of the youngest banks in Ghana as it was started in 2011. The bank has a current interest rate of 24.88%.
10.Standard Chartered Bank Ghana. This bank is a subsidiary of the UK-based Standard Chartered PLC. The bank has been in operation for over a century and it has an interest rate of 23.56%.
11.Stanbic Bank of Ghana. This bank is highly reputed for its efficient services. The current interest rate is 28.50%.12.
12.Bank of Africa. This bank provides a series of services including SME and Corporate Banking. The interest rate stands at 27.15%
13.Bank of Baroda Ghana. This bank is an offshoot of an Indian bank which is one of the largest in India. The bank hit the Ghanaian shores in 2008 and has a current interest rate of 15.16%.
14.SG-SSB Limited. Societe Generale is one of the largest banks in Ghana and the current interest rate stands at 22.45%.
15.Guaranty Trust Bank. This bank spread to Ghana in 1991 and has grown to be among the few banks to have a triple-A rating in the country. The current interest rate is 26.75%.
BUSINESS FINANCING REGIME IN GHANA
By business financing, what this simply means is that, the conditions underlying how business operations are funded in Ghana. Traditionally, businesss in Ghana are financed with or by Loans, Overdrafts, Family Savings, Personal Investments, Venture Capital among others . Carefully analyzing the current economic turbulence or downturns faced by the economy of Ghana, one will not be far from right to rule out that, it is costly to start a new business and even continue operating existing business in Ghana. However, with reference to the list of some banks and their interest rates as listed previuosly above, it’s therefore concluded that, funding or financing businesses both new ones and existing ones is now extremely high and this is a bane of the Ghanaian youth wishing and desiring to open their own businesses to expand the economy.
CURRENT POLICY RATE OF THE CENTRAL BANK (BANK OF GHANA)
Policy rate is simply defined as the average rate of interest charged on loans lended out to the banking institutions. However, the current policy of the Bank of Ghana stands at 22.0%. In fact, it is at this rate that the commercial banks buy money from the central bank and add their own price (interest) on it; sell to the Rural banks, companies, corporations, individual business operators among others. Furthermore, it has been strongly argued by the Ghanaian business community that, the 22.0% is considered relatively high. This, however, doesn’t create favourable condition for doing business in the economy of Ghana.
LENDING RATE IN GHANA
In Ghana, the bank lending rate is the average rate of interest charged on short term loans by commercial banks to companies. The average Commercial Banks Lending Rate (%) stands at 22.53% as at May, 2022. However, this is an information available on the Bank of Ghana’s website.
COMMENTARY
In analyzing all the facts, figures and information provided in this article, I would like to make a few comments accordingly. The concept or philosophy of entrepreneurship by the Ghanaian youth will tend to be a big disillusion and a mirage for that matter in the midst of the prevailing economic quagmires in which Ghana finds her self. Nevertheless, as it said that, the bus finally stops with the govornment in the management of our economy to creating more comforting conditions for both the citizeny and businesses, it is commented that, governments both present and future should ensure that conducive environment is created for the business community to thrive in order to ease the pressure of employing more people in the public sector in Ghana. Once again, it is an irrefragable fact that, when business thriving environment and conditions are created or put in place by the government, it has the potency and tenacity of boosting Ghana’s economy by way of employment creation, payment of taxes, fees, charges and so on. Undisputably, there have been a number of interventions by the Nana Addo Dankwa Akufo Addo’s government in the area of business and entrepreneurial skills & training development in the business community. In fact, in the Akufo Addo’s government, a whole ministry known as Ministry of Business Development has been created with an annual budget allocation. Indeed, during the peak of the deadly COVID-19, substantial amount of money was disbursed to the business community through NBSSI (Now Ghana Enterprises Agency) and others like Ghana Cares (OBAATANPA) Programme to as it were, cushion the business community. However, these interventions seem to be not enough or panacea to solving the plethora of problems associated with the business community in Ghana.
sRECOMMENDATIONS PROFFERED
Respectfully, it is recommended in this article to help ammeliorate the plight or bane of the Ghanaian youth who aspire to becoming entrepreneurs to help grow and boost the economic prospects of our dear country as follows:
There should be massive education and campaign about the need and essence of the Ghanaian youth desiring and aspiring to becoming entrepreneurs and business owners in this country.
Entrepreneurship should be a fully fretched programme taught at our various universities to inculcate the spirit of creating businesses into our graduates.
There should be a national budget set aside by the government through the Ministry of Finance to cater for all Ghanaians who wish and desire to establish their own businesses in Ghana.
The banking institutions and other Financial Services should also make it a policy to lend to those up and coming Ghanaian youth who have comprehensive business plans and want to venture into the entrepreneurial and business sector of our economy.
CONCLUSION
In bringing my article to a close, I would like to say that, many a Ghanaian youth have some entrepreneurial desire, ideas, and vision to realize and actualize but, most times, these young enterprising Ghanaian youth are financially handicapped and their dreams, visions and ideas are thwarted or shuttered. However, in order to keep those visions, dreams and ideas of them alive, the government should try and resource them sufficiently through agencies such as the various Business Resource Centres across the country and several others. In fact, I wish to reiterate the fact that, the expensive nature of credit or business financing in Ghana is an extremely de-motivating factor that kills or shoots down the entrepreneurial spirit and enthusiasm of the Ghanaian youth.
By Justice Reuben Adusei
Email: [email protected]
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