Be cautious when taking loans: GIZ schools SMEs on efficient financial management

The President of the Ghana Micro Finance Institutions Network (GHAMFIN), Yaw Gyamfi, has advised Ghanaian entrepreneurs not to rush into taking loans to expand their businesses.

According to him, because most entrepreneurs do not understand the terms and conditions attached to obtaining loans from most financial institutions in the country, they get the loans and are unable to repay them, resulting in debts for themselves as well as their respective families.

He said it is not every business that needs to be expanded with loans, and even those that need loans to thrive still must be carefully thought through on where to acquire the said loan and how much one is supposed to pay as interest on the loan before going for it in the first place.

“Some of the advice includes that every entrepreneur has a vision and mission that run his or her business. You had planned on expanding for five years, but within one week of operations, you changed your mind and wanted to expand faster. You will have to pay for salaries, SSNIT contributions, tax, and all of that. Meanwhile, you don’t have the financial muscle to do so,” he indicated.

“Even with the loans you go for, where do you get them from? From which financial institution? When you first went, they told you this is the interest rate involved; did you understand it before taking the loans? All those little things are what we are here to teach them before they go for such loans,” he added.

Mr. Gyamfi suggested that financial assistance may not be necessary for every business decision, as businesses can save to cater for those expenses at the appropriate time.

He gave this advice during the Financial Literacy and Education campaign forum organised by GIZ in collaboration with other key stakeholders in the financial sector, such as the Finance Ministry, the Bank of Ghana, and the Ghana Micro Finance Institutions Network, which happened in Accra.