Entrepreneurship Development and Communication Skills

7.2.7.Factors affecting MSMEs

Some of the key constraints that are being faced by the Indian MSMEs are:

a. Accessing adequate and timely financing on competitive terms, particularly longer tenure loans.

b. Accessing credit on easy terms in the backdrop of current global financial crisis and the resultant liquidity constraints in the Indian financial sector, which has held back the growth of SMEs and impeded overall growth and development.

c. Constraints attributable to a combination of factors that include policy, legal/regulatory framework (in terms of recovery, bankruptcy and contract enforcement), institutional weaknesses (absence of good credit appraisal and risk management! monitoring tools), and lack of reliable credit information on SMEs.

d. Difficulty for lenders in assessing risk premiums properly, creating differences in the perceived versus real risk profiles of SMEs.

e. Limited access to skilled manpower, R&D facilities and marketing channels.

f. Lack of availability of finance at cheaper rates, skills about decision-making and good management and accounting practices, and access to modern technology.