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The Impact of Credit Constraints on MSME Performance: Insights from the Financial Ecosystem of Delhi-NCR

In: Proceedings of the International Conference on Policies, Processes and Practices for Transforming Underdeveloped Economies into Developed Economies (PPP-UD 2025)

Author

Listed:
  • Seema Joshi

    (Kirori Mal College, University of Delhi, Department of Commerce)

  • Bhawna Thakran

    (Delhi School of Economics, University of Delhi, Department of Commerce)

Abstract

The financial ecosystem for Micro, Small, and Medium Enterprises (MSMEs) in India continues to face barriers that restricts their productivity, sustainability and growth. Despite good banking infrastructure in Delhi–National Capital Region (NCR), credit inaccessibility persists. This study investigates the credit accessibility challenges confronting MSMEs in Delhi-NCR, examining their effects on business performance, employment generation and innovation. Study assesses the role of financial institutions and Information and Communication Technology (ICT) solutions in bridging the credit gap. A mixed-method approach was employed, drawing on secondary data from the Ministry of MSME, National Bank for Agriculture and Rural Development (NABARD) and the Reserve Bank of India, along with national surveys. Descriptive statistics and interpretive analysis were used to examine the structural patterns with contextual realities. Findings reveal that a small proportion of total banking advances in Delhi are directed to MSMEs, even though the sector contributes significantly to India’s Gross Domestic Product (GDP) and employs millions. Further a large majority of non-agricultural enterprises in Delhi operate informally. Government schemes such as Micro Units Development and Refinance Agency (MUDRA) and Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) exist to ease collateral barriers, yet their utilization is hampered by low awareness and procedural hurdles. ICT-driven innovations offer potential solutions but face challenges of uneven adoption, digital literacy gaps and cybersecurity risks. The study highlights the urgent need for simplified lending processes, financial and digital literacy interventions and integrated policy frameworks that align traditional banking with fintech innovations to strengthen MSME financial inclusion in Delhi-NCR.

Suggested Citation

  • Seema Joshi & Bhawna Thakran, 2025. "The Impact of Credit Constraints on MSME Performance: Insights from the Financial Ecosystem of Delhi-NCR," Advances in Economics, Business and Management Research, in: Anuradha Jain & Sachin Gupta (ed.), Proceedings of the International Conference on Policies, Processes and Practices for Transforming Underdeveloped Economies into Developed Economies (P, pages 243-255, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-894-3_17
    DOI: 10.2991/978-94-6463-894-3_17
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