Manufacturing businesses struggling for growth due to high cost of financing investments

Financing is one of the biggest challenges for local manufacturers
By Sanna Camara
Ms Yassin Jah, a food processor and proprietress of Jal Yassin Enterprise is an example of Gambian enterprises struggling for growth over ten years:
“I struggle to invest in the expansion needs of my business. I cannot go to banks to get funding for the machines and other needs of my business. I had bad experiences from borrowing money to finance my business.
“I recently bought a groundnut roasting machine for D75, 000… and I am currently planning to purchase a packaging machine. My clientele are increasing locally and internationally,” she told me.
Banks do not have the solution
Her efforts in sustaining her enterprise won her the SME of Year Award 2007 from the GCCI. Despite her yearning for expansion, Ms Jah said the commercial banks don’t have the financial solutions for financing her business.
High costs of financing, energy, logistics, and other inputs like raw materials needed for production impacts the final product on shelves, explains Mr Almami Taal. He is the chief executive of GCCI.
“These add-on to the price, quality and competitiveness of Gambian products. In a country where prices and costs are high, it makes Gambian goods less competitive than others made from outside.
Alternative financing methods
“However, government should establish new and different financing mechanism and framework. Financing investment is one of the biggest challenges investors face in The Gambia, said Almami Taal.
Mr. Taal said financing investment is one of the biggest challenges investors and other businesses face in The Gambia. Despite the existing investment-incentive packages available to investors, this is still a problem.
Huge gaps in investment financing
He laments as “unfortunate” that the dominant financial service providers in the country do not have the right solutions for investment financing.
“This has left a huge gap for investment financing as businesses shy away from the lending terms and conditions of commercial banks,” he said.
Over-bearing interest rates
“In the conventional banking environment, it is a fact that borrowers are sometimes rendered miserable and frustrated. This leads to failure as a result of over-bearing interest rates.
“The irony is that while lending rates are always in an upward course, deposit rates are very low,” states Professor Ekpo.
He is the Director General of the West African Institute for Financial and Economic Management (WAIFEM). The institute was established in July 1996 by the Central Banks of The Gambia, Ghana, Liberia, Nigeria and Sierra Leone.
The institute is tasked with building sustainable capacity for improved macro-economic and financial management in the constituent countries.
Doing Business in The Gambia ‘more difficult’
The Gambia’s ‘Ease of Doing Business’ ranking in 2012 stands at 120 from the 2011 ranking of 114. It means the ranking has gone down by 6 points.
According to the World Bank’s Doing Business Report, economies are ranked on their ease of doing business, from 1 to 183. A high ranking on the ease of doing business index means the regulatory environment is more conducive to the starting and operation of a local firm.
Fact Box
• Starting a business ranking of The Gambia has gone down six points from 114 in 2011 to 120 in 2012.
• Starting a business ranking of Senegal in 2012 stands at 154 against 157 in 2011.
• Starting a business in Senegal ranking in Senegal has improved by 10 points.
• Mali was ranked 150 in 2011 and has improved by 2 points to 148 in 2012. Starting business also improved by 2 points from 117 in 2011.
• Manufacturing contributes less than 5 percent of Gross Domestic Product according to a World Bank report released in 2011.
• Tourism contributed 14 per cent of GDP by end 2011.

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