| Abstract: |
Finance for micro, small, and medium-sized enterprises (MSMEs) has been a
concern for all stakeholders including entrepreneurs, financial institutions,
and government organizations. The key objective of the study was to identify
various challenges faced by MSMEs in sourcing of finance during different
stages of their life cycle. This study is a first-of-its-kind attempt to focus
on these aspects. The study further explores whether the financial awareness
of MSME entrepreneurs is a major limitation in the identification and
utilization of sources of finance. Data was collected through personal
interviews using a structured questionnaire from a sample of 85 MSMEs. The
survey was conducted mainly in the city of Bangalore covering a wide spectrum
of sectors like precision tools, weavers, jewelers, food retailers, metal
works, textiles, and book shops. The results reinforce the findings of other
studies that utilization of formal sources like banks is significantly small
compared with informal sources like personal and family wealth. The study
found that the main challenges faced in underutilization of formal sources
were inadequacy of collateral assets and lack of financial awareness of
entrepreneurs. Based on the conclusion that requirement of finance differs
with the life-cycle stage of the MSME, recommendations have been proposed for
entrepreneurs, financial institutions, and policy makers. |