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Scopes and Challenges Associated with MSME Finance

MSMEs are rightly termed as the backbone of the economy of India as they contribute 45% towards the manufacturing output, and 40% towards exports. In addition to these figures, MSMEs contribute 8% to India’s Gross Domestic Product (GDP).

Despite all such positive figures, MSMEs face many challenges at various stages of their operations. Themost common challenges of MSME finance faced by them have been listed below:

Aserious issue faced by MSMEs is the lack of up-to-the-mark technology. This has led to outdated production methods, limited growth capacity, and inability to access new business prospects.

The workforce behind an establishment needs to be skilled- here, we mean for every level of the establishment. Good labor comes at a cost and when there is a lack of funds, business owners have to settle for unskilled individuals, which eventually affects the productivity and profits.

When cash flow is irregular, the working of a small business takes a hit. In such times, access to credit can be of great help, but sometimes, even that seems far off for some businesses. Easy to avail business loans from banks and NBFCs are the need of the hour for small businesses reeling under financial disturbances.

Having said that, several steps have been taken to help improve the situation for MSMEs Finance in India. This includes introduction of small business-friendly policies by the government, and new loan schemes and debt instruments like a business line of credit by some NBFCs.

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