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

Author

Listed:
  • Purnima Rao
  • Satish Kumar
  • Vidhu Gaur
  • Deepak Verma

Abstract

Purpose - This 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/approach - The 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. Findings - The 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/implications - This study identifies the major financing concerns of SMEs and thereby provides a directional approach to the policymakers in the area of SME financing. Originality/value - The 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.

Suggested Citation

  • Purnima Rao & Satish Kumar & Vidhu Gaur & Deepak Verma, 2017. "What constitutes financing gap in Indian SMEs – owners’ perspective?," Qualitative Research in Financial Markets, Emerald Group Publishing Limited, vol. 9(2), pages 117-131, May.
    • Handle: RePEc:eme:qrfmpp:qrfm-01-2017-0001
    DOI: 10.1108/QRFM-01-2017-0001
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    Citations

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    Cited by:

    1. Ansita Aggarwal & Satya Ranjan Acharya, 2019. "Choosing Equity As A Source Of Finance: Perception Of Sme Promoters," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 8(4), pages 27-46.
    2. Dwivedi, Abhishek & Pawsey, Nicholas, 2023. "Examining the drivers of marketing innovation in SMEs," Journal of Business Research, Elsevier, vol. 155(PB).

    More about this item

    Keywords

    SMEs; Convergent interviewing; Financing issues; Missing middle; J31; J38;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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