MSME Financing Gaps – Research Review 1995-2017

Micro, small and medium enterprises have been an area of great research interest. Credit is reported as a crucial inputfor promoting the growth ofthe MSME sector. The paper aims atfinding out the role of MSMEs in the development of an economy and the issues associated with institutional lending to MSMEs. MSMEs have been revolutionary in the development of economies, especially among the developing countries. Financial constraint has been identified by the previous studies as a major hindrance to MSME growth. MSMEs find it difficult to obtain credit from formal institutions, and banks find it difficult to give credit to them. However, formal lending sources are indispensible to MSME development. Reliance on informal sector is not a healthy option for the small sector. The important factors that influence lending to MSMEs are competition among banks, legal framework, credit policies and lack of information about SME borrowers, firm characteristics and firm size. Various schemes have been introduced over time directed at MSMEs ’development which have uplifted the sector but it still remains ineffective in many areas. The District Industrial Centres in India are responsible for registration and implementation ofvarious government schemes, also with supporting organisations like KVIC, KVIB, Coir Board. But interestingly, only a negligible number of MSMEs have registered with DICs till date. Also, very limited studies have been found on unregistered and informal MSMEs.