Little success has been achieved in financing assistant programmes for contractors in developing countries. This paper focuses on the experience of the Bank for Housing and Construction (BHC) of Ghana. Factors accountable for underachievement of its programme include: contractor's lack of managerial and technical capability; inability to obtain contracts; persistent delayed payments by major clients; and the deliberate refusal to repay loans. Suggestions offered for improving the effectiveness of programmes, on the academic and practical front, relate well with developments in small and medium-size enterprise (SME) finance. A survey in Ghana found that there was a strong desire to establish a contractors' bank. There would be the need for the contractors association to reform before it could play a meaningful role in the proposed bank. The importance of effective governance in achieving success cannot be overemphasized, likewise the role of government and donors in encouraging the setting up of a conducive regulatory framework.Developing Countries, Ghana, Contractors, Sme, Finance,
Lack of access to bank finance is one of the major constraints on the development of small contractors in developing countries. Efforts by governments and interested donor agencies to mitigate the problem have achieved little. Banks perceive that the risk and transaction costs involved in dealing with small businesses in general are high. They also lack information about small business owner-managers and their businesses to better evaluate their loan proposals. Furthermore, several factors make it difficult to acquire adequate collateral to compensate for the risk. Theoretical and empirical analysis has recognized the importance of developing a closer working relationship between the bank and the small business in addressing the problem and, hence, improving the latter's access to bank loans. Microcredit schemes, which dwell on the principles of small business-bank relationships, have been successful in this respect. This paper reviews the factors affecting bank financing of small businesses and examines their implications for small contractors in developing countries. Based on the concept of microcredit, a model for financing small contractors in developing countries has been developed.Developing countries, contractor development, small contractors, bank finance, microcredit,
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