Impact of fraud on Ghanaian SMEs and coping mechanisms

Abstract

Purpose-Small and medium-scale enterprises (SMEs) are the engine of growth of most developing countries, as they employ a large number of people as opposed to large firms. Consequently, these enterprises should succeed in expanding to become significant employers and producers. However, what seems obvious at least through cursory observation is that the current state of SMEs betrays an economic loss with respect to the benefits that ought to be forthcoming from their potential. This loss can be triggered by a number of factors. The study determines the drivers of internal fraud and their impact on Ghanaian SMEs and prescribes coping mechanisms. Design/methodology/approach-Primary data collected on 250 SMEs collected from various sectors across Accra, the capital of Ghana, are used for this study. Using a cross-sectional regression, the authors identify the key drivers of internal fraud that hamper the growth of Ghanaian SMEs. Findings-The regression results show that although several fraud variables impact negatively the growth of the SME sector, it is only accounting fraud which is significant. This study also revealed that stealing, fake currency issued for the payment of goods or service and non-payment of goods or service account for almost 83 per cent of fraud cases experienced by SMEs. Research limitations/implications-The study was limited to the SMEs located in the Accra, the capital of Ghana. Practical implications-The study will offer SMEs owners methods that will assist in their determination to fight fraud in the business that they manage. Social implications-The survival of SMEs is paramount to job creation. Consequently, combating fraud that stifle the growth of SMEs will allow SMEs to grow to their full potential and create more job opportunities for the unemployed. This will minimizes the social vices such as robbery, stealing, drug trafficking and prostitution that confront nations.

Examining the predictors of fraud in state-owned enterprises: an application of the fraud triangle theory

“…The Association of Certified Fraud Examiners (ACFE), in their 2018 Report to the Nations (ACFE, 2018) for instance, documents that about 5% of the total revenue to organizations are lost annually due to fraud. Several studies on fraud have also emphasized how fraudulent activities have affected businesses and economies globally over the years (Andoh et al , 2018; Asmah et al , 2019; Gullkvist and Jokipii, 2013; Mustafa and Youssef, 2010; Zahari et al , 2020). The unfortunate reality is that the number of fraud cases continues to increase, posing more threats to businesses and economies.…”

Corporate Governance and Performance of Pension Funds in Ghana: A Mixed-Method Study

“…Aside from the top five challenges with the corporate governance practices, other challenges include aggressive and unhealthy competition in the pension industry, causing the pension funds to compromise their standards on corporate governance (Jara et al 2019). In the short term, the lowering of the standards might cause an increase in the market shares of the pension funds, but this will affect them negatively later (Andoh et al 2018). The weak legal framework could also be blamed for the inefficiencies in the pension fund activities.…”

Entrepreneurial Fraud: A Multidisciplinary Review and Synthesized Framework

“…Failed authentic entrepreneurial fraud erases wealth (Henriques, 2018) and takes money out of local, regional, and/or national economies (Al-Mataani et al, 2017;Ampratwum, 2009). In turn, this negatively effects subsequent investment (Karedza & Sikwila, 2016) as evidenced by SME sectors in developing economies where high concentrations of entrepreneurial fraud result in slow or no growth (Andoh et al, 2018). In some cases, entrepreneurs who use deception to acquire resources for authentic ventures and fail can cause spillover business failure (Box et al, 2019).…”