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989:6). In the United Kingdom (UK), the Companies Act of 1985 states that a company is ‘small’ if it satisfies at least two of the following criteria: a turnover of not more than ￡5.6 million; a balance sheet total of not more than ￡2.8 million; not more than 50 employees. A medium sized company must satisfy at least two of the following criteria: a turnover of not more than ￡22.8 million; a balance sheet total of not more than ￡11.4 million; not more than 250 employees. For statistical purposes, the Department of Trade and Industry in he UK and governments all-around EU usually uses the following definitions: micro firm: 0 - 9 employees, small firm: 0 - 49 employees (includes micro), medium firm: 50 - 249 employees and large firm: over 250 employees (Edit Lukàcs; 2006:7).

In Ghana, the National Board for Small Scale Industries (NBSSI) defines SMEs based on production unit and the quantum of financial investment. It has it that any production unit that engages primarily in manufacturing outside the residence with an investment potential of not less than 10 million and which engages less than nine people (NBSSI Annual Report; 1997:6) However, for the purpose of this study and based on the value of our domestic currency, total assets, and variation in turnovers, our working definition will be limited to the one often used by the Ministry of local government and rural development (MLGRD). The ministry criterion is based on the size of an enterprise. It states that “any establishment that employs 1 to 9 employees is a small-scale enterprise, 10 to 20 employees as medium-scale enterprise and above 20 employees as a large scale enterprise.

2.5.1 Characteristics of SMEs

A distinguishing feature of SMEs from larger firms is that, the latter have direct access to international and local markets whereas the former are excluded because of the higher intermediation costs of smaller projects. SMEs can be categorized into urban and rural enterprises. The former can be sub-divided into “organised” and “unorganized” enterprises. The organised enterprises tend to have paid employees with registered office whereas unorganized ones are made of artisans who work in open wooden structures, or at home and employ little or in some cases no salaried workers (Bedard and Kotter; 1998:7) Another feature worth-mentioning has to do with the fact that operators of SMEs rarely keep records of transactions. This is due to the high level of illiteracy associated with most of them. Besides this is that they have limited or no access to financial services. Most of their funds are generated from within. This seriously affects economies of scale (Rose Mwaniki; 2006:5).

SMEs lack the conventional collateral required by formal banks. In order to support them, innovative, alternative forms and substitutes to such collateral are necessary. This seems to be the factor behind the use of group-based systems. SMEs require small and short-term loans especially initially. These are considered costly and of high risk by formal financial institutions. High turnover is necessary for profitability and growth of both the programs and the clients (Rose Mwaniki; 2006:5).

The enterprises of micro and small entrepreneurs have limited capital and as a result they are generally unstable. They really use technology and when they do, the technology itself is simple and rudimentary. Majority of SMEs are so