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Land rights and SME credit: evidence from Ghana

  • Daniel Domeher
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    Purpose – The purpose of this paper is to establish whether or not the absence of registered property titles is a barrier to credit access amongst small to medium-sized enterprises (SMEs) in Ghana. Design/methodology/approach – The study involved the conducting of surveys amongst credit officers of financial institutions in Ghana; participants were from both microfinance institutions and universal banks. To achieve the aim of this study the survey was designed to study the attitudes of credit officers towards the use of property as security for SME credit. Their experiences in handling such issues were captured through a series of closed ended questions. Participants were randomly sampled and the data analysed descriptively using SPSS. Findings – The results amongst other things show that most formal lenders accept landed property for collateral purposes irrespective of whether they are covered by registered property titles or not. Also found were differences existing between traditional banks and the microfinance institutions. Originality/value – Small businesses are exposed to several challenges which hinder their growth and have potential to contribute to the overall agenda of poverty reduction. Prominent amongst these challenges is the difficulty in raising funds for investments purposes. Whilst some have attributed this to the lack of assets which could be used as collateral, others have argued that it is the result of the absence of formal property titles which have made land an unacceptable form of collateral. Previous studies have focused on the demand side however; the supply side is the focus of this study.

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    Article provided by Emerald Group Publishing in its journal International Journal of Development Issues.

    Volume (Year): 11 (2012)
    Issue (Month): 2 (July)
    Pages: 129-143

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    Handle: RePEc:eme:ijdipp:v:11:y:2012:i:2:p:129-143
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    1. Benjamin, Daniel K, 1978. "The Use of Collateral to Enforce Debt Contracts," Economic Inquiry, Western Economic Association International, vol. 16(3), pages 333-59, July.
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    9. Klaus Deininger, 2003. "Land Policies for Growth and Poverty Reduction," World Bank Publications, The World Bank, number 15125.
    10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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    12. Inderst, Roman & Mueller, Holger M., 2007. "A lender-based theory of collateral," Journal of Financial Economics, Elsevier, vol. 84(3), pages 826-859, June.
    13. Beck, T.H.L., 2007. "Financing constraints of SMEs in developing countries : Evidence, determinants and solutions," Other publications TiSEM 85aac075-08b5-44ce-bf1a-9, Tilburg University, School of Economics and Management.
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