About Capital SME

Capital SME is an initiative aimed at boosting capital market activity in Ghana. Small and medium size enterprises (SMEs) comprise an overwhelming majority of registered businesses in Ghana and span both the formal and informal sectors. They are significant sources of employment and revenue and thus have the potential to grow and the potential to stimulate growth in the economy. Capital SME is a unified platform offering SMEs access to comprehensive information and a network of partnering institutions in order to encourage greater participation in capital markets.

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Our Partners

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industry: Public sector - diplomacy
British High Commission

Who We Are:
The British High Commission in Ghana is responsible for developing and maintaining relations between the UK and Ghana. We represent the British government and deal with a wide range of political, commercial, security and economic issues of interest to both countries.

Capital SME has been developed through the Foreign & Commonwealth Office’s Africa Prosperity Fund , which has an overarching theme of “Improving the Business Environment in Sub-Saharan Africa”.


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industry: Financial Services
InvestCorp Asset Management Ltd.

Who We Are:
InvestCorp is an investment banking and asset management firm. Our business is to invest on behalf of our clients – individuals, companies, institutions and governments. Our uniqueness is a dedicated focus on our clients in a way that blends innovation with tradition. We welcome our target clients to work with us in creating a better financial future and sustainable businesses.


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industry: Financial services – private sector
Databank Financial Services

Founded in April 1990, Databank’s mission is to empower its customers to achieve financial independence by promoting financial literacy and offering a diverse range of investments products. To deliver on our mission, we provide innovative and responsive corporate finance, brokerage, fund management and research services to local and foreign individuals, multinational companies, institutions and portfolio investors for the ECOWAS sub-region. We also assist those who are looking for private equity financing through our private equity group.


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industry: Private sector – banking
Barclays

Who We Are:
Established in 1917, Barclays Bank of Ghana Limited is remained a leading financial services provider with a well-established local presence. Barclays Ghana is a member of the Barclays Africa Group Limited (BAGL), which is majority-owned by Barclays Bank PLC. Barclays Africa Group is one of Africa’s major financial services institutions offering personal and business banking, credit cards, corporate & Investment banking and wealth management as well as bancassurance. We combine our global expertise and product knowledge with the rich experience and appreciation of the local environment to bring the best of banking to our people, like no other.


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industry: private sector
Ghana Stock Exchange

Who We Are:
The Ghana Stock Exchange since 1990 has been gradually facilitating the development of capital market in Ghana. The Exchange has put in place facilities for businesses and the Government to raise long-term capital as well as for investors to obtain liquidity, reasonable capital safety and diversity of investments. Since its establishment, many companies as well as the government have raised funds through the floatation of company shares to the general public.


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industry: Public sector – financial services
Securities & Exchange Commission

Who We Are:
The Securities & Exchange Commission (SEC) is responsible for ensuring transparency and compliance in the Ghanaian securities market, and promoting integrity in the activities of all participants through adherence to the Securities Laws. SEC acts as a supervisor and regulator over the market. We work to protect investors by educating them, along with policy makers and market operators, of their respective rights and obligations.


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industry: public sector
Ministry of Finance and Economic Planning

Who We Are:
The Ministry of Finance, as the sector ministry for the financial sector, has a mandate to ensure the growth, development, and stability of the financial system. In carrying out this mandate the ministry as a central agency collaborates with relevant ministries, departments, and agencies (MDAs) through various initiatives and interventions.


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industry: Business services – public sector
National Board for Small Scale Industries

The National Board for Small Scale Industries (NBSSI) is the apex governmental body for the promotion and development of the Micro and Small Enterprises (MSE) sector in Ghana. It was established in 1985 by an Act of the Parliament of the Third Republic of Ghana (Act 434 of 1981) because Government views the sector as having the potential to contribute substantially to the reduction of the high unemployment rate and to the growth of the economy of Ghana.


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industry: Financial Services – public sector
Venture Capital Trust Fund

The Venture Capital Trust Fund (“VCTF” or “Trust Fund”) was established by an Act of Parliament (ACT 680) in 2004 to provide equity and quasi equity financing to eligible Venture Capital Finance Companies (VCFCs) to support SMEs. A seed capital of GH22.4 million, representing 25% of the proceeds from the National Reconstruction Levy from 2003 through 2006 was then allocated to the Trust Fund.


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industry: Business services
Association of Ghanaian Industries

The Association of Ghana Industries (AGI) is a business association composed of over 1200 member organizations ranging in size from micro, small, medium, and large scale enterprises. Our members represent a range of industries. AGI acts as a voice for the manufacturing industries in Ghana. We are dedicated to advocating for policies that promote the development of industries, facilitating international trade throughout the sub-region, strengthening industry associations through networking and sharing information, knowledge, and experience.


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industry: Financial services – International organization
International Finance Corporation

Who We Are:
IFC, a member of the World Bank Group, is the largest global development institution focused on the private sector in emerging markets. Working with more than 2,000 businesses worldwide, we use our capital, expertise, and influence, to create opportunity where it’s needed most. From July 1, 2014 to June 30, 2015, our long-term investments in developing countries rose to nearly $18 billion, helping the private sector play an essential role in the global effort to end extreme poverty and boost shared prosperity.


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industry: Non-profit sector
Techno Serve

TechnoServe is a non-profit organization that develops business solutions to poverty by linking enterprising people in the developing world to information, capital and markets. TechnoServe’s work is rooted in the idea that hardworking people can generate income, jobs and wealth for their families and communities. Having worked in more than 40 countries across Africa, Latin America, and Asia, and with more than four decades of proven results, TechnoServe believes in the power of private enterprise to transform lives.


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How capital markets work


Capital markets are markets for the buying and selling of medium and long term financial securities. SMEs can use this market to raise capital for medium and long term projects and expansions. It is ideal that SMEs use the capital market to raise money for all capital expenditure. Other forms of funding such as bank loans are more suitable for short term financing.

Firms who wish to raise capital for their businesses will list, or register, on the stock exchange and put a specific percentage or monetary value of their business up to float in the initial public offering (IPO). The value that is issued is the amount of the company that is available to be bought, sold, and traded on the market by public and private investors.

The value of the issue is divided into equally sized shares which represent the units of the company traded on the market. As share prices fluctuate as does the total value of the firm.

A security refers to any tradable financial asset. The financial assets traded on capital markets generally fall into two categories: equity securities or debt securities.

Equity is the value of an asset minus the value of any liabilities (or financial obligations to be paid) on the asset. Therefore an equity security is a financial asset which holds its own value less the value of any financial obligation made on the part of the investor in order to purchase the asset. The most common equity security is common stock i.e. a number of shares in the firm.

Debt refers to money borrowed from another party which is owed in repayment. Therefore a debt security is a financial asset purchased primarily through some means of borrowing. Examples of debt securities include loans (money borrowed from a financial institutions which must be repaid with interest), bonds (in which the issuer borrowers a principal amount of money from the bond holder and must pay back with interest), and debentures (an instrument for companies to borrow money and repay at a fixed interest rate). Debts are traded on the market in the same fashion as equities. Both firms and investors can make use of equity and debt securities when dealing in the market. As of April 2016 there are eight companies listed on the Ghana Alternative Market (GAX). Four of these eight companies have listed equity assets while the other four have listed debt assets.

Debt: Why would anyone borrow money to make money?
Firms can borrow money to reach the minimum capital requirements for listing. Depending on the terms of the asset, once sufficient capital has been raised the money must be repaid to the debt holder with interest.

Investors can borrow money to finance the purchase of common stock. As share prices increase, they make returns on their investments which can be used to repay outstanding debts. Returns in excess of the debt value are profits for the investor.

Capital markets are colloquially referred to in both singular and plural form (i.e. "the capital market" or "capital markets"). When one mentions the "capital market" singularly, it is with general reference to the several distinct and interconnected market places where financial assets are traded.

Capital markets can typically be divided into primary and secondary markets.

A primary markets is the market where securities are created. This is the initial market where firms first issue shares of their company to the public in the IPO. A secondary market is the market where previously issues securities are traded between investors. This is the larger market where the majority of activity occurs. Most of the casual public discourse about capital or stock markets, for example topics such as stock prices and share value, are with reference to the secondary market.

Furthermore market authorities, in Ghana this is the Ghana Stock Exchange (GSE), have their own methods of regulating the markets. GSE has divided its listing categories into two. The first listing category comprises the main GSE exchange; this Official List is for any eligible company. The second category is targeted at SMEs; this is the GAX. The GAX operates as a parallel though distinct market to the First Official List. Having the GAX operate as a distinct market means that movements in the First Official List will not directly shock GAX listed companies, although movements in the one market will inevitably reverberate across other markets, likewise stock markets trends have a notable influence on the wider economy.

There are clear benefits to be rendered from entering into capital markets. Firms can raise funds for their business expenses, increase liquidity in their assets, increase the company’s net worth, and render profits. However expectations must be controlled and anyone entering into the stock market should do so fully aware that there are risks involved. Shocks to demand and supply, variance in economic trends, and movements in other markets will influence domestic capital markets. Money can be lost as quickly as it is gained. It is important for firms to educate themselves and take the necessary precautions to protect their investments.

Firms: By listing with the stock exchange, firms provide the financial assets to be traded on the market.

Investors: Investors conduct the buying and selling thereby generating capital market activity. Investors generally work with the assistance of a professional trader or stock broker. Such professionals will belong to a financial institution.

Financial Institutions: Financial institutions act as intermediaries, working to connect buyers and sellers with profitable investments and to efficiently allocate funds on the market often for a fee. Some financial institutions also offer programmes to assist firms with the listing process.

Ghana Stock Exchange (GSE): GSE is the authority over Ghana’s principal stock exchange. Securities & Exchange Commission (SEC): SEC is the regulatory authority over the securities market in Ghana. The stock exchange is just one, albeit the principal, securities market which SEC has a hand in regulating. SEC and GSE work very closely together.

Bond: a loan of a principal amount of money to an entity to be repaid at either a fixed or variable interest rate

Common stock: ordinary shares in a company

Debenture: a form of loan in which a company can borrow money and repay at a fixed rate of interest

Debt: money borrowed that must be repaid with interest

Equity: the value of an asset minus the value of any liabilities on the asset

Initial Public Offering (IPO): the act in which a newly listed firm first issues shares of the company to the public

Interest: an additional fee on a sum of money that has been borrowed, usually either a fixed or variable percentage of the principal or compounded sum

Issue: the setoff financial securities that a company offers for sale to the public

Liability: financial obligations to be fulfilled e.g. debt or loans to be repaid

List: (verb) to register a company on the stock market; (noun) the catalogue of companies which have registered on the stock market

Loan: a sum of money that is lent with the condition of repayment with interest

Principal: the value of the initial amount of money borrowed

Securities: tradable financial assets

Shares: portions or units of an asset (usually a company) available for trading on the stock market

Stock exchange: the market for the buying and selling of stock (shares) and financial securities

Trading: the buying and selling of securities on financial markets

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How the GAX works

The Ghana Alternative Market or GAX is a distinct stock market administered by the Ghana Stock Exchange to accommodate small and medium sized enterprises (SMEs). The purpose of the GAX is to make it easier for business owners to access the capital, funding, and liquidity that they need to develop and expand their enterprises. This markets endeavours to cater to small businesses with high potential for growth.

The main GSE exchange has long struggled to attract smaller businesses. Thus the establishment of the GAX was based on four foundational principles, each intended to accommodate SMEs:

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Listed SMEs

Since its inception in 2013 the GAX has successfully listed eight companies. Click on their individual profiles below to read about their challenges, successes, and journey to listing.


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Frequently Asked Questions (FAQs)


  • What is a Capital Market?
    Capital markets are markets for the buying and selling of medium and long term financial securities. Our video Explainer provides a very short presentation of how this works.
  • How will it help me make money for my business to grow?
    SMEs can use this market to raise capital for medium and long term projects and expansions. Our video Explainer provides a very short presentation of how this works.
  • I do not want to release my private business information publically.
    Companies are expected to provide financial information to the GAX Committee as part of the application process. The Committee uses these records, along with all other relevant information provided, in order to assess the company’s suitability for listing.

    Once listed, your company’s financial information becomes of interest to shareholders and potential investors. This transparency is intended to enhance the investment process and make it easier for investors to decide where to place their money. Having your business’ financial records publicly available is no cause for bashfulness or embarrassment. Rather, it acts as an incentive for your company to adhere to all relevant financial regulations and keep its books in order.
  • Why should I give ownership of my company to strangers and risk losing control of my business?
    Once a company lists on the GAX all shareholders become part owners in the business. Shareholders bring their money to invest in your business by providing capital funding for the firm. In exchange for the investment part-ownership is given to the investors in the form of stock shares. This is called public ownership. However, allowing part of the company to be publicly owned does not mean that you will lose control. As the business owner, you are the chief decision maker at all points in the listing process, in association with advisors, lawyers, and sponsors. You will decide how much of the company you are willing to offer to the public, how much capital you wish to initially raise. You will decide what rights will be afforded to shareholders. This enables the business owners to retain the controlling interest in the company.
  • I have had bad experiences in the past in trying to partner with other stakeholders and investors. How can I trust this process?
    The GAX is administered by the Ghana Stock Exchange in close association with the Securities & Exchange Commission. All actors – be it listed SMEs or investors – must meet specific requirements before they are permitted to engage in the market; they must then adhere by the GAX rules in order to continue to participate. The close monitoring of the market ensures credibility in all transactions and accountability from all participants. Like the main exchange, dealings on the GAX are subject to GSE regulations and the relevant Ghanaian laws.
  • The listing process is too long and arduous.
    As part of the objective of the GAX to accommodate small businesses the requirements have been reduced and the process has been shortened. GSE has endeavoured to make it as easy as possible for business to access capital on the stock exchange while upholding the necessary regulatory standards. The application procedures are in place in order to ensure that GAX companies are fully prepared for the market upon entry. The potential pay-offs make the application process worthwhile.
  • I do not have enough money to pay the costs involved. You need money to make money!
    While the listing process can be costly there are programmes and funds in place to offer assistance. The GAX Listing Support Fund was set up to help SMEs cover the costs associated with listing. SMEs that meet the criteria may be offered funding covering up to one hundred per cent of the advisory and legal services. It is a revolving fund and thus subject to repayment. Furthermore the GAX listing rules require that the company’s sponsor to underwrite the minimum offer to be raised through the initial public offer (IPO). The underwriting guarantees that the company will receive the desired amount whether or not the IPO is successful.
  • My company is too small to participate in capital markets.
    Capital markets have long been misconceived as a “big boys’ playground”. Many believe that only large, well established, and even multi-national companies are suited for stock markets. This is untrue. The GAX remains distinct from GSE’s main exchange in order to allow SMEs to interact and compete with one another for investment while they expand and develop. Any SME that can meet the basic requirements is eligible.
  • I am ready to list. Where do I start?
    See our How the GAX works page for details on the application process.
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Contact Us

British High Commission
Ghana

Julius Nyerere Link-Off Gamel Nasser Avenue
P.O.Box 296, Accra
+233(0)302 213200