Effect of legal and regulatory framework on SMEs growth in the Accra Metropolis of Ghana

Abstract

Entrepreneurship has been generally recognized as one of the most important dynamics leading to development. However, promoting entrepreneurship depends on an enabling business climate. The study sought to explore the effect of legal and regulatory frameworks on small and medium enterprises (SMEs) growth in Ghana. The study was quantitative and primary data comprised 382 owners who were conveniently sampled for the study. The results were analysed using structural equation model-partial least square. Bureaucracy, unstable policy climate, unfriendly customs and trade regulations, tight monetary and credit policies, corruption, and excessive tax regimes, workforce and labour regulations were found to negatively affect SMEs growth in Ghana. It is concluded that for SMEs growth to thrive, sound legal and regulatory systems are needed. The government must create relaxed credit policies that support the development of entrepreneurship by simplifying loan conditions, ease the registration processes for SMEs, lower and reform the tax systems, engineer effective price stabilization policy and create flexible customs and port regulations, while maintaining transparency and accountability among public officials in charge of SMEs regulation. The study adds to the few works conducted in sub-Saharan Africa, especially in Ghana. The new empirical insights are significant to SME and entrepreneurship development in Ghana.