Finance for Micro, Small, and Medium-Sized Enterprises in India: Sources and Challenges

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. Kishinchand Poornima Wasdani is a consultant at the Indian Institute of Management in Bangalore, India.The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org AbstractFinance for micro, small, and medium-sized enterprises (MSMEs) has been a concern for all stakeholders including entrepreneurs, financial institutions, and government organizations. The key objective of the study was to identify various challenges faced by MSMEs in sourcing of finance during different stages of their life cycle. This study is a first-of-its-kind attempt to focus on these aspects. The study further explores whether the financial awareness of MSME entrepreneurs is a major limitation in the identification and utilization of sources of finance. Data was collected through personal interviews using a structured questionnaire from a sample of 85 MSMEs. The survey was conducted mainly in the city of Bangalore covering a wide spectrum of sectors like precision tools, weavers, jewelers, food retailers, metal works, textiles, and book shops. The results reinforce the findings of other studies that utilization of formal sources like banks is significantly small compared with informal sources like personal and family wealth. The study found that the main challenges faced in underutilization of formal sources were inadequacy of collateral assets and lack of financial a...

Indian Government Interventions in Micro, Small and Medium Enterprise Development: An Enterprise Life Cycle Perspective

“…Abid Hussain Committee suggested various institutional arrangements, policies and programmes for meeting long-term and short-term requirements of the smallscale industries (Hussain, 1997). A spurt of research on Indian MSMEs has taken place in the recent past on various issues such as government intervention on credit facility (Singh & Wasdani, 2016;Ayyagari et al, 2016;Das, 2015), market opportunities (Thukral et al, 2008;Sharma, 2012), skill development (Ghosh & Rajaram, 2015), cluster development (Das et al, 2007), rural and agro-enterprises (Banerjee, 2011;Aayog, 2017), economic reforms (Chakraborty & Nunnenkamp, 2008), start-ups (Sunita & Srija, 2016), innovation (Abhyankar, 2014), the impact of globalisation (Das, 2007), sickness (Goyal et al, 2012;Rastogi & Yadava, 2013), competitiveness (Mulimani et al, 2012) and technology up-gradation (Bhavani, 2011;Lahiri, 2012), etc.…”

A Study of the Factors Affecting Small and Medium Enterprises (SMEs) Access to Finance. A Case of Lusaka Based SMEs

“…According to Singh and Wasdani (2016) the primary sources of finance available to SMEs include loans from banks and non-bank financial institutions. It is however unlikely that these institutions will fully fund SMEs, especially startups, so called Greenfields, given the high financial risk associated with them and, the general unviable perception of SMEs businesses by most banks reflected in low credit ratings.…”

Financial Literacy: The Impact on the Profitability of the SMEs in Kuching

“…Surprisingly the origin and the law of funding of the capital fund is often neglected by many entrepreneurs once the business begins to operate. Singh and Wasdani (2016), established that funds for micro, small, and medium-sized enterprises (MSMEs) remains a key concern for all partners despite their lack of proper response to take responsibility of its implications. They listed personal savings, loans from friends and family, bank loans, microfinance foundations, and equity funds as the common sources of business financing.…”

“…An observational examination by Keasey and McGuinness (1990) showed that remotely increased fund was related to greater profit when contrasted with fund raised from within the company. However, the intrinsic constraints of formal sources of funds which has prerequisite for security or an assurance, inflexible policies, high rates of loaning, convoluted techniques, and business owners' inadequate financial knowledge of applicable schemes hinders SMEs at start-up stage from benefiting from the range of schemes targeted to assist this group of self-employers (Singh & Wasdani, 2016).…”