GSE Deputy Managing Director advises small business to consider equity capital
The Deputy Managing Director of the Ghana Stock Exchange (GSE), Abena Amoah, has urged small businesses to consider long-term equity capital as they pursue growth.
Speaking during the development finance series on Tuesday, she noted a lack of value in equity capital among small businesses.
“What we are finding is that a lot of our business owners do not want to give up what we call equity capital or share capital.”
“Many businesses will rather own 100 percent of a GHS10 company than give up 40 percent so that someone else’s money can come in and transform that GHS 10 company into a GHS100,000 company, which you own 60 percent of,” Ms. Amoah explained.
Not taking advantage of equity capital can leave small businesses at the mercy of the relatively high interest rates that accompany loans in Ghana, she added.
“So a lot of businesses now turn themselves and their structure to borrowing, when long term capital includes some level of borrowing but also some level of patient capital.”
But she argued that opting for equity capital could free small businesses from taking loans.
“The good thing about equity investment is that you don’t have to pay it back but you have to manage the business well so that it makes a profit and when you make a profit, you are able to give some back to your investors,” she said.
The Development Finance Series is on the establishment of the Development Bank Ghana (DBG).
The new National Development Bank or the Development Bank Ghana (DBG) is a wholesale and non-deposit-taking bank that will increase access to long-term finance and boost job creation for thousands of businesses in key sectors, including agribusiness, manufacturing, ICT tourism, and other services across Ghana.
The Bank is also expected to provide funds to existing commercial banks, and other qualifying financial institutions, to provide long-term lending and other innovative products that are presently lacking in the system.