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Financing MSMEs Rife with Problems—A Demand Side Analysis

In: Current Issues in the Economy and Finance of India

Author

Listed:
  • Chinmayee Sahoo

    (School of Humanities and Social Sciences, National Institute of Science Education and Research)

  • Alok Ranjan Behera

    (Utkal University)

Abstract

MSMEMSME sector faces a number of marketing, infrastructural, financial and other constraints and challenges which put hindrance on the way to achieve a faster growth of this sector. Among the other constraints, lack of access to sufficient financing especially in developing countries, has been identified as a major bottleneck in realising the potential of this sector. Odisha is one of the top ten States in creation of job (20,839 person in 2006–07 and 107,011 in 2014–15) by MSMEMSME sector although it is positioned at 11 in respect of number of MSMEMSME units set up as compared to other States. Credit flow to the MSMEMSME sector declined during recent period in the state (41%) as against an increasing trend in the country (48%) (RBI Report 2015). This brought to the forefront to study about the demandDemand side issues for accessing institutional finance by MSMEMSME because of banks are reluctant to provide credit to this sector. The study is conducted in Bhubaneswar city (No 1 smart city in IndiaIndia ) of Odisha and chosen two clusters through cluster sampling technique. The total of 60 enterprises has been drawn randomly for the demandDemand side analysis. To collect the data Personal interview method is used by taking semi structured questionnaire schedule for sample entrepreneurs. Factor analysis with rotate varimax normalization method is used to find out the major constraints faced by the MSMEs and to rank their problem, is presented through an index. It identified six major factors among its interest rate is the number one constraint in the demandDemand side which impedes the growth of MSMEs not only is the financial problem but also in addition to that competition from well-running firm and lack of Labour are the major problem faced by the sample entrepreneurs. The results plot that manufacturing sectorManufacturing sector rife with more financial issues.

Suggested Citation

  • Chinmayee Sahoo & Alok Ranjan Behera, 2018. "Financing MSMEs Rife with Problems—A Demand Side Analysis," Springer Proceedings in Business and Economics, in: Aswini Kumar Mishra & Vairam Arunachalam & Debasis Patnaik (ed.), Current Issues in the Economy and Finance of India, chapter 0, pages 171-186, Springer.
    • Handle: RePEc:spr:prbchp:978-3-319-99555-7_11
    DOI: 10.1007/978-3-319-99555-7_11
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