Barriers and potential solutions for MSMEs in developing economies: Evidence from India

Abstract

Micro, small and medium enterprises (MSMEs) have emerged as an accelerator of economic growth with a sizeable contribution in job creation, innovation development, and reduction of regional disparities in most world economies. This paper investigates the influence of external and internal factors affecting the growth of MSMEs in poor-performing Bihar state, India. The objective of the study is to identify the major deep-rooted causes for the inability of MSMEs to compete in developing states and identify potential solutions. The study is based on an empirical database; it tested various dimensions of MSMEs barriers in their potential growth. The target group included MSMEs of Bihar state, India, using a sample of 450 entrepreneurs. The paper adopted a multistage stage sampling and multivariate analysis technique. The results showed that there are twelve major potential barriers, both endogenous and exogenous, faced by MSMEs, such as availability of raw materials, financial issues, labor force challenges, technology inefficiency, power/electricity scarcity, poor marketing, competition, knowledge-related challenges, government and administration problems, infrastructure inefficiency, etc. The findings show that these barriers affect the promotion and growth of MSMEs in developing regions. In future, it is suggested to focus on the implementation of good governance that helps to remove effectively the major barriers of MSMEs in underdeveloped states, such as Bihar, India.

The Role of Sharia Financial Innovation and Literacy in Improving the Performance of MSME Actors

“…However, MSMEs are often faced with various challenges in their business development and expansion efforts, especially amid increasingly fierce competition on a global scale. MSMEs often need help in their business development and expansion efforts, including Limited Access to Capital and Financing, Limited Human Resources, Technology and Innovation Constraints, and Low Financial Literacy (Prakash et al, 2021). Therefore, increasing the ability and application of innovation and Islamic financial literacy is critical in helping MSMEs develop economic sustainability imbued with Sharia principles (Rohayati & Qolbi, 2022).…”

Innovativeness as the Key to MSMEs’ Performances

“…Considering their crucial role, there are some factors that hinder MSMEs' performance, for instance: human resources/social capital/norms [8][9][10], marketing [8,9,11], low productivity [5], lack of management ability [6,9], low access to technology [10], finance [8][9][10][11], bureaucracy, government, policy [12], infrastructure [8], competitiveness [10,11], and low innovation [13,14]. In addition, the source of the problem of the poor performance of MSMEs (MSMEs cannot develop) is the low dynamic ability of MSMEs.…”