Financial Literacy MSMEs
Like any other living entity, every business requires a lifeline for growth and sustainability.
Financial literacy skills are one of such basic lifelines that support business growth from birth, through the different stages to maturity, and sustainability. It is a relevant skill to possess in managing the finances of your business irrespective of the size and nature. Amma of M-DoZ Consulting is heavily involved in this field with Ghana’s MSME sector and looks at the phenomenon.
Why Financial Literacy?
Financial literacy is the ability to understand and apply financial skills to manage your personal and business finances. Financial literacy is a must for making wise and informed decisions regarding your finances, avoiding unnecessary levels of debt, and having adequate income in retirement. Adequate financial literacy knowledge and practice are necessary for both personal and business financial security.
Financial Literacy in Ghana
As important as it is, financial literacy in Ghana is relatively low amongst certain business groups. They do not appreciate its relevance in the running of their businesses. This article seeks to highlight the financial literacy gaps that are killing businesses in Ghana’s MSME sector.
Ghana’s MSME Sector
The Micro Small and Medium Enterprise (MSME) sector is the largest business sector in Ghana. It currently accommodates about 70% of the country’s workforce. A sector with great potential to alleviate poverty for the masses of Ghanaians but saddled with huge challenges that impede its capabilities.
Financial Literacy in Ghana – Gaps in the MSME sector
Financial literacy is largely lacking in Ghana’s MSME sector. As evidenced in the frequent occurrences of mismanagement of business finances, the eventual poor access to credit and a sense of financial indiscipline. Thus, business growth in the sector suffers, and there is a frequent collapse of businesses. I have personally supported several businesses in the MSME sector that were near collapse due to loss or the mismanagement of business capital. With the potential to alleviate poverty amongst millions of Ghanaians, these lapses, and the threats they pose to the viability of businesses in the MSME sectors remain a grave issue. The financial literacy gaps in Ghana’s MSME sector, as discussed below, were identified through observations, one on one and group discussions, interviews, and research.
  • Financial Literacy in Ghana – Inadequate Financial Management skills
Poor financial management results in losses and the eventual shutdown of any business venture. Managing finances has more to do with the judicious use of available financial resources, rather than the availability of funds. A significant section of the MSME sector lack understanding of the basics of managing business finances. They may not appreciate the importance and the strategies for separating business finances from personal finances.  They also seem to have low awareness of budgeting and interpreting revenue differently from profit.  Business collapse is rampant in the sector due to poor financial management skills.  M-DoZ Consulting is an organisation that has widely embarked on financial literacy in Ghana among a large cross-section of informal groups. The experience usually encountered among the MSME population is the seeming nonchalance to this need.
  • Low Awareness & Patronage of Beneficial Financial Products
Another gap is the limited knowledge and patronage of personal financial products or services that are beneficial to them. They are therefore heavily excluded from formal beneficial schemes such as insurance and pensions that are now available at the micro-level. There are frequent stories of disasters such as fire, theft and floods completely destroying businesses in the MSME sector because of the inability to access micro-insurance products. The low awareness and poor financial management imply they are unable to make meaningful savings towards the crucial stage of retirement. This poses a real threat to their livelihoods in the long term. They may also fall victim to financial scams and lose hard-earned capital to fraudulent schemes. These factors threaten the very existence of businesses in the MSME sector.
  • Financial Literacy in Ghana – Poor access to credit
Money is the bloodline of every business. From the start-up through the entire life of the business access to finance is of prime importance.  M-DOZ Consulting has conducted several business surveys/feedback activities where access to finance is mentioned by over 70% of entrepreneurs as the biggest threat to their business. Limited financing hinders business growth. Failed loan and business funding applications largely account for the poor access to finance in the MSME sector.
Food Vendors in a Ghana Market, credit;
To a large extent financial illiteracy and indiscipline hampers access to credit for MSMEs. Another school of thought may name reasons such as the unwillingness of financial institutions to offer credit to small businesses, and the inability of small businesses to meet loan application requirements. However, the root causes for such stringent requirements can be traced back to poor financial literacy in Ghana. In my work within the MSME sector, I have witnessed several incidences where entrepreneurs divert loans into frivolous assets. Repayment of such monies becomes difficult and what follows is credit default. The result is a bad credit rating which further aggravates the problem of poor access to credit. This is when I have to offer support to streamline the re-implementation of a simple loan servicing process that is totally gone wrong due to poor financial education. Such behaviours render the MSME sector unattractive to lenders. The little available credit comes at exorbitant rates that further burden the businesses. Creditors consider the MSME sector as high risk because of perceived knowledge of mishandling finances
  • Financial Literacy in Ghana – The Telecom Companies
Over the past decade, telecom companies have attempted to fill the financial inclusion gap through Mobile Money. Mobile money provides the electronic platform to save, earn interest on monies, facilitate money transfers, and access micro-credit products for all and sundry. The MSME sector was not left out of accessing this novelty. However, the crucial aspect of endowing users with the relevant financial literacy skills to particularly manage credit whilst using the platform was missing. To a large extent, the micro-credit service has been abused, resulting in loan defaults. Additionally, inadequate financial literacy limits the capacity of businesses in the MSME sector to make an informed decision with regard to sourcing financing for a business. Do they opt for debt financing or equity financing? With each option having its peculiar pros and cons, a lack of understanding may hinder an informed decision, threatening the very existence of the business. In an attempt to fill the gap M-DoZ Consulting has partnered with at least one telecom company with the flagship financial literacy program Sika Nkommo (Money Matters). Sika Nkommo delivers SMS messages to mobile phone subscribers. M-DoZ Consulting has created over 200 text messages in investments, savings, pensions, financial fraud and insurance for a telecom company to beam to its subscribers who have expressed interest in such content.

Identifying these factors is the first step to rectifying them. Watch out for the second part of this article, which will analyse the means to bridge the financial literacy gap and create a more robust and thriving MSME sector in Ghana.

Financial Literacy Ghana, M-DoZ Consulting
Amma A Antwi, Financial Literacy Expert
Amma is a Management Consultant and a Financial Literacy expert with M-DOZ Consulting. Contact her on 0247247200, or email

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