What constitutes financing gap in Indian SMEs – owners’ perspective?

Abstract

PurposeThis exploratory study aims to investigate the financing issues faced by Indian small and medium enterprise (SME) owners. It also classifies the financing constraints into four financing gaps, namely, demand, knowledge, supply and benevolence. Design/methodology/approachThe study uses the convergent interviewing technique to highlight the key issues being faced by SME owners in financing. Forty-four owners from different industries and having dispersed demographics have been interviewed in the study. FindingsThe findings reveal the real-time issues being faced by SME owners. SMEs faced both demand- and supply-side constraints. The most common financing challenges are high cost of credit, complex procedures of lending institutions, information asymmetry, creditworthiness and self-abstaining from external financial resources. Issues pertaining to lack of knowledge and awareness about the financial products and services are also being noticed by the researchers. Research limitations/implicationsThis study identifies the major financing concerns of SMEs and thereby provides a directional approach to the policymakers in the area of SME financing. Originality/valueThe study offers a better and data-based understanding of financing issues being faced by the SME owners. The usage of convergent interviewing allows the researchers to highlight the common issues raised by the SME owners.

Claimants’ views on total and permanent disability insurance claims

“…Qualitative research methods based on in-depth interviews were used for this study. Interviews are often used to gather detailed insights from specific individuals about a new issue (Rao et al, 2017). In-depth interviews are particularly valuable when dealing with vulnerable groups such as those with a disability (Liamputtong, 2012).…”

“…Open questioning gave claimants freedom to respond in their own way and with as much detail as they wanted (Rao et al, 2017). Toward the end of their interview, each interviewee was invited to offer suggestions/changes which may be helpful to the TPD claims process.…”

Examining the determinants and consequences of financial constraints faced by Micro, Small and Medium Enterprises' owners

“…Also, the limitation of financial resources further reduces the survival possibilities for MSMEs (Heckmann et al, 2009;Singh and Kaur, 2019). Other than operational-financial constraints, scholars have confirmed that financing issues, credit gap, insolvency and bankruptcy negatively affect the survival probabilities of small firms (Awasthi, 2011;Yadav, 2012;Nag and Das, 2015;Gautami, 2018;Sekhar and Radha, 2019;Rao et al, 2017;Bansal et al, 2019).…”

“…Since MSMEs are not able to compete with the large enterprises due to constrained cash inflows and savings, the accessibility to outside credit becomes significantly low for smaller firms (Laxmi and Kumar, 1999;Osei-Assibey et al, 2012;Yadav and Tripathi, 2018). The difficulty in obtaining formal finance is preoccupied with issues such as easiness, availability, flexibility and affordability; therefore, most firms remain seriously constrained or resort to unorthodox means of financing (Neeley, 2004;Rao et al, 2017).…”

Analyzing financial risks in small and medium enterprises: evidence from the food processing firms in selected cities in Ghana

“…There is a tendency for lenders to withhold information from their clients. Extant studies (Yen et al, 2019;Ol ah et al, 2019;Haniff et al, 2017;Rao et al, 2017;Bbenkele, 2007) report owner-manager complaint about lack of transparency in credit granting contract with FIs. Lenders have often relied on their previous experience and transactions with SMEs in setting credit granting criteria.…”