-To Address Funding Challenges For SMEs
The Venture Capital Trust Fund (VCTF) is advocating for a comprehensive review of its founding legislation, to tackle critical funding challenges that continue to hinder its ability to support Small and Medium Enterprises (SMEs).
According to General Manager, Percival Ofori Ampomah, outdated provisions in the Venture Capital Trust Fund Act, including the repeal of the national reconstruction levy as a funding source, have significantly limited the Fund’s capacity to provide much-needed financing to SMEs.
Speaking at a media breakfast meeting to mark the Fund’s 20th anniversary, Mr. Ampomah emphasized the urgent need for reforms to align the Act with Ghana’s current economic realities. “Clause 3 of the Act lists the funding sources for the Trust Fund, but one of the main sources, the national reconstruction levy, has been repealed. Yet it is still in the law,” he stated.
He added, “This is one thing we want to make sure to achieve – to review the Act for purpose and to bring it up to date with the current situation on the ground. In so doing, we will be able to convince the government to change that source of funding to a more permanent source of funding for us to be able to continue our work.”
The Venture Capital Trust Fund Act was designed to provide an alternative financing avenue for SMEs, addressing the financing gaps created by high interest rates, stringent collateral requirements, and limited access to credit. Clause 3 of the Act outlined multiple funding sources, including the now-repealed national reconstruction levy.
READ ALSO
However, he argued that the repeal of this levy and the absence of an updated funding framework have left the Fund without a reliable revenue stream.
“Venture capital by itself is established by an Act of Parliament. Some things impede the work of venture capitalists. So in the next immediate couple of years, we want to remove those impediments,” Mr. Ampomah explained.
He noted that the current legislation has created operational bottlenecks, limiting the efficiency of venture capitalists and preventing the Fund from meeting the increasing financial demands of SMEs.
SMEs play a crucial role in Ghana’s economy, contributing approximately 70% of GDP and providing over 80% of employment. These enterprises are key drivers of innovation, job creation, and local economic growth, spanning sectors such as agriculture, manufacturing, and services.
Despite their critical importance, SMEs face significant barriers to growth, particularly in accessing affordable financing. High lending rates, collateral constraints, and limited availability of credit facilities often restrict their ability to expand operations or innovate.
According to recent reports, over 50% of SMEs identify a lack of financing as their biggest challenge. The VCTF was created to address these gaps, providing venture capital and private equity financing to SMEs that lack access to traditional credit.
However, as Mr. Ampomah highlighted, the current legislative framework falls short of enabling the Fund to fully achieve this mandate.
“The Act itself must be reviewed because clause 3 of the Act tells us the list of sources of funding the Trust Fund is supposed to get. Now, after 20 years, that list needs to be looked at again because the national reconstruction levy has been repealed but it’s still in the law,” Mr. Ampomah stated.
He reiterated that revising the legislation would allow the Fund to secure a more stable and sustainable funding source.
Additionally, he said it will eliminate operational challenges and align the Fund’s activities with the evolving needs of the SME sector.
The proposed reforms aim to strengthen the Fund’s ability to support SMEs, enabling them to overcome financing barriers and contribute more effectively to national economic growth. Without these legislative updates, the Fund risks falling short of its mission to bridge the financing gap for SMEs, which is essential to Ghana’s development.
