1.

1 Abstract

Finance for small, and medium-sized enterprises (SMEs) has been a concern
for all stakeholders including entrepreneurs, financial institutions, and government
organizations. The key objective of the study was to identify various financial
problems and growth constraint faced by SMEs 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 SME
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 50 SMEs. The survey was conducted mainly in the
city of Mumbai covering a wide spectrum of sectors like precision tools, weavers,
jewelers, food retailers, metal works, textiles, and book shops etc. 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 SMEs, recommendations have been proposed for
entrepreneurs.

1.2 Introduction

Numerous studies have discussed that small and medium enterprises

(SMEs) are financially more constrained than large firms and are less likely to
have access to formal finance. Until recently, however, there was little cross-
country evidence on the extent to which size is a decisive factor in determining
growth obstacles or access to finance. Further, little cross-country evidence has
been accumulated on the policies to overcome SMEs growth obstacles and foster
1
their access to finance. Recently compiled cross-country firm-level databases
have facilitated more detailed research and have enhanced our understanding of
policies to foster SMEs’ access to finance.
Efforts targeted at the SME sector are based on the premises that (i) SMEs
are the engine of economic development, but (ii) market and institutional failures
impede their growth, thus justifying government interventions. Despite the
growing interest of the development com- munity in subsidizing SMEs, however,
there are skeptical views that question the efficacy of pro-SME policies.
Specifically, many critics stress the importance of the business environment
facing all firms, large and small. From this perspective, low entry and exit
barriers, well-defined property rights, effective contract enforcement, and firm
access to finance characterize a business environment that is conducive to
competition and private commercial transactions. The overview discusses cross-
country evidence that shows while there is a robust partial correlation between
the importance of SMEs in manufacturing and economic development, there is
no causal impact of SMEs. This does not mean that SMEs do not deserve policy
makers’ attention. Rather, it implies a change in focus, away from size-oriented
policies to policies that improve the playing field between firms of different sizes.
In recent cross-country evidence on the growth constraints faced by
SMEs and the role of financial and institutional development to overcome these
constraints. We review evidence that financing obstacles are more growth-
constraining for small firms and they prevent all firms from reaching their optimal
size. This is also reflected in financing patterns: small firms finance a smaller
share of their investment and working capital with formal financial sources than
large firms. We conclude this section with a historical comparison between
developing countries today and the North Atlantic core in the 19th century and a
discussion on the extent to which ethnic networks in Sub-Saharan Africa replace
formal financial markets.
The importance of financial market structure for easing SMEs’ access to
finance and specific financing tools to overcome small firms’ financing
constraints. Traditionally, relationship banking and thus the presence of small
banks have been considered the characteristics of an SME-conducive financial
system. The introduction of transaction-based SME financing tools, such as

2
factoring and credit scoring, however, has underlined the advantages of large
banks in providing finance to small opaque firms.
Small, and medium-sized enterprises (SME) have gained increased attention
in India in recent times, considering their strategic importance to the economy
and the country. SME play an important role in generating employment—48.8
million SME in the country provide employment to 111.4 million people. SME
in the manufacturing sector alone produce more than 6,000 products and
contribute 7.7% of the GDP of the country. Similarly, SME in the services sector
contribute 27.4% of the country’s GDP.

In spite of their contribution, SME in India face several challenges. They

often need to keep pace with rapidly changing technologies and face the risk of
becoming technologically obsolete. They also have to face high costs of credit
and are usually unable to identify their key competitive strengths to maintain
product standards and quality. SME also need to deal with the issue of protection
of their intellectual property and with the scarcity of skilled workers. Finally,
studies on SME have identified the importance of the availability of sources of
finance and the accessibility to these sources as the most crucial factors to
promote growth of SME in developing economies. In the Indian context, both of
these issues pose inherent challenges to financing of SME due to lack of
awareness of funding schemes among SME entrepreneurs and the limited role of
venture capitalists, nonbanking financial companies (NBFCs), foreign banks,
angel investors, and initial public offerings in financing SME.

In view of the fact that banks are the predominant source of finance in India,
the Reserve Bank of India includes micro and small enterprises in the list of
priority lending sectors. Banks have also been advised to achieve a year-on-year
growth of 20% in credit to micro and small enterprises and an annual growth of
10% in the number of microenterprise accounts. In view of such policies, this
study attempts to understand whether such incentives and schemes have
percolated down to the SME and if entrepreneurs are aware of them.

While carrying out preliminary interviews with entrepreneurs for this study,
it became apparent that SME have different types of requirements at different
stages of their life cycle. This led the authors to establish a better understanding

3
of different sources of finance used by SME during different stages of their life
cycle and to explore the challenges in accessing these sources. As there were no
studies that captured the financial needs of SME at different stages of their
existence, this study is a first-of- its-kind attempt to investigate these aspects.
Thus, the paper focuses on the sources of finance used by SME during different
stages of the enterprise life cycle, and on the awareness and usage of different
financial schemes made available by government.

The research objectives are threefold:

(i) to identify the different sources of finance used and the purposes they
are used for at different stages of the SME life cycle,
(ii) to identify challenges faced by SME while accessing finance from
different sources at different stages of their life cycle, and
(iii) to identify factors that lead to higher financial awareness.

4
1.3 BANK CREDIT TO SMALL AND MEDIUM
ENTERPRISES IN INDIA

Bank credit to Small and Medium Enterprises in India is a part of directed

credit policy of RBI and it is also part of social control measure. Integration of
banking operations and policies with planning priorities has made Commercial
Banks to reorient their operational polices to finance industry, specifically the
Small Scale Industries. Basic functions of Commercial Banks are to accept
deposit and finance short term requirements of trade and commerce. Industrial
financing accounted a small fraction of total bank credit. Initially scheme of social
control was introduced at the end of 1967. The basic objective of the social control
was to achieve a wider spread of bank credit and direct large volume of credit
flow to priority sector. The National Credit Council was established to assess the
demand for bank credit from various sectors of the economy and to determine the
priorities for granting the loans to the neglected sectors of the economy. In order
to achieve the social objective, fourteen major banks were nationalized on 19th
July 1969 with an aim to serve the needs of the economy. Tandon Committee
report on bank credit was a revolutionary development in rationing bank credit.
In order to meet the credit requirements of all the sector of the economy and make
bank credit available to meet the production requirements, the concept of priority
sector lending was accelerated. With the subsequent nationalization of banks in
1969, the scope of activities included under priority sector has been gradually
changed over the years. At present, Agriculture, Small Scale Industries, Small
Road and Water Transport Operators, Retail Trade, Small Business, Professional
and Self-employed, State Sponsored Bodies for SC and ST Education, Housing
and Consumption Loans form part of priority sector lending. On the basis of the
report submitted by the informal study group on statistics constituted by the RBI
in 1971, the description of the priority sector was later formalized in 1972.
Although initially there was no specific target fixed in respect of priority sector
lending, in 1974 banks were advised to raise the share to this sector in aggregate
advances to the level 331/3% by March 1979. At the meeting of the Union
Finance Minister with the Chief Executive Officer of public sector banks held in
March 1980, it was agreed that banks should aim at raising the proportion of their

5
advances to priority sector to 40%. Financing to SSI‟s (now SME‟s) will be
reckoned in computing performance under the overall priority sector target of
40% of average net bank credit or credit equivalent amount of off balance sheet
exposure whichever is higher. No sub targets for SME financing, but 60% of SSI
advances should go to Micro Enterprises. Domestic Banks can fix their own target
in lending to SME‟s to achieve a minimum of 20% year on year growth and 15%
annual growth in number of Micro units. (PM Task Force). Foreign Banks lending
should not be less than 20% of average net bank credit. Any short fall in SME
lending, foreign banks are required to contribute to Small Enterprises
Development Fund. Lending to Micro and Small enterprises is under priority
sector lending whereas lending to Medium sector is non- priority sector lending
for Commercial Banks in India. Various literature on access to bank credit by
SMEs finds that Micro, Small and Medium enterprises face a chronic shortage of
bank financing. Identifying the difficulties in accessing credit from formal
financial institutions and banks is highly discussed topic across the world. Census
on Micro, Small and Medium Enterprises reports the high financial exclusion of
this sector from formal financial institutions in India. The Constraints faced by
SMEs in accessing finance from Commercial Banks continues to persist in spite
of tireless efforts by Government and Reserve Bank of India. Problems faced by
Micro, Small and Medium Enterprises in accessing funds are gathered under the
concept called finance gap.

6
 1.4 CONCEPTUAL FRAME WORK

State Government/RBI, Commercial Banks and Micro, Small and Medium

Enterprises are the important stakeholders for Bank financing to SMEs. Commercial
Banks in India direct credit to this sector based on the RBI guidelines. They act as the
mediating agency to execute the policy measures towards SME sector. Ultimate
beneficiaries of the State Government policy are SMEs. The possibilities of existence
of gap can be between policy makers and Commercial Banks or/and between
Commercial Banks and SMEs.

7
 Figure 1.3: Conceptual Frame Work

THE CONCEPT OF FINANCE GAP

Many countries do not report the existence of finance gap as it is not a popular term
in the financial market, though the fact is that SMEs do have difficulty in accessing
timely and adequate finance. Finance gap or financing problems are two sides of the
same coin. Financing is necessary for SME‟s in their startup, expansion and
development and lack of availability of funds or obstacles in securing funds from
financial sector is known as finance gap. Finance gap was earlier known as
McMillan gap, evolved as the outcome of the report submitted by Lord McMillan,
Chairman of the committee which was setup by the British Government to enquire

8
in to banking, finance and credit in November 1929. Lord McMillan in his report
has postulated the concept of finance gap in three hundred words in his report. Since
then the concept has been reiterated in many instances. Radcliff Commission 1959,
Bolton Committee 1971 and Wilson Commission 1979 reports addressed the
provision of finance to firms in SME sector and identified a shortage of financing
for startup and those firms wishing to expand.

An SME financing gap can be understood as a situation where a small

enterprise is unable to receive finance for its growth needs, due to unwillingness of
financial intermediaries to offer credit or services to this sector.

AjlouniandHebakamale numerate finance gap as unavailability of either debt or equity

finance and the existence of gap can be debated not only by supplier of funds but also
by the demand for funds.

The term finance gap is used to mean that the sizable share of economically significant
SME‟s are not able to obtain finance from banks.A sizable share of economically
significant small enterprises cannot obtain finance from banks, capital markets or their
suppliers of finance. Furthermore, it is often alleged that many entrepreneurs who do
not currently have access to funds and would have the capability to use those funds
productively if funds were available.

In other words, finance gap is a term which is typically meant to imply that the
sizable share of otherwise economically relevant SMEs cannot obtain finance from
banks, capital markets or otherwise supplier of finance for their viable projects. The
flow of credit would be affected by changes in either demand of supply of credit.

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 1.5 EXISTENCE OF FINANCE GAP

The study undertaken by McKinsey and IFC to measure the credit gap globally finds
that out of 365-445 million enterprises in emerging markets, approximately 85% suffer
from credit constraint and only 15% can either fully access the credit they need or do
not need it because they are able to finance themselves either through internal capital
or informal source of finance.

The credit gap for micro enterprises identified in the study was 1.4 to 1.7 trillion.The
International Finance Corporation and Government of Japan have made an assessment
of SME finance gap in India. The overall finance gap of INR 20.9 trillion, split in to
debt gap of INR 19 trillion and equity gap of INR 1.9 trillion. The survey has also
identified sector wise finance gap of 16.2 trillion INR in Micro, 3.9 trillion INR in Small
and 0.8 trillion INR in Medium enterprises respectively. The study also evaluates the
viable and addressable gap in debt and equity.

The National Commission on Micro Enterprises had estimated the credit gap of 72% in
un-organized sector for micro enterprises as at the end of March 2012. Sub group on
flow of private sector investment for SME sector set up by Planning Commission has
estimated the credit gap at 62% which is expected to reduce to 43% by March 2017
during the twelfth plan period. study made by the International Finance Corporation,
McKinsey and Company reports that there are around 364 – 445 million Small, and
Medium Enterprises in emerging markets of which 25-30 million are formal SMEs,
while the rest are informal enterprises. According to this study close to 45-55% of
formal SMEs do not have access to formal finance.

The statistics compiled in the fourth census of SME sector revealed that only 5.18 % of
the units (both registered and unregistered) had availed finance through institutional
sources and 2.05% had finance from non-institutional sources. Hence the key challenge
is to extend the credit facilities to SMEs.

The International Finance Corporation survey has identified the viable and addressable
finance gap in Karnataka as a part of rest of India to be 0.91 trillion accounting for 31
% of debt gap in MSME sector.

The slow growth of this sector is broadly attributed to lack of financing. Many banks
10
 also treat credit to this segment as necessity for meeting compliance norms rather than
opportunity. In India, Small and Medium Enterprises operate in a challenging
atmosphere despite the fact that India stands third rank in ease of doing business index.
According to Greyhound, SMEs are said to be the backbone of the India’s economy,
however, not much is being done to promote their healthy growth and development.

1.6 DEFINITION

Definitions of Micro, Small & Medium Enterprises In accordance with the provision
of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro,
Small and Medium Enterprises (MSME) are classified in two Classes:

1. Manufacturing Enterprises-he enterprises engaged in the manufacture or production

of goods pertaining to any industry specified in the first schedule to the industries
(Development and regulation) Act, 1951) or employing plant and machinery in the
process of value addition to the final product having a distinct name or character or use.
The Manufacturing Enterprise are defined in terms of investment in Plant &
Machinery.

2. Service Enterprises:-The enterprises engaged in providing or rendering of services

and are defined in terms of investment in equipment.

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2.1 Objectives of the study

It is generally accepted that the broad goal of SME policy is to accelerate economic
growth and in so doing alleviate poverty. While there are many developmental
constraints on the SME sector, bridging the financing gap between SMEs and larger
enterprises is considered critical to economic growth.

The study is designed with the major objective of identifying and examining the
financial problems and growth constraint of SME in Mumbai city.

1. To review policy framework for financing Small and Medium

Enterprises in India and to analyse the status of financial problems to
SME sector
2. To identify and evaluate the factors contributing to finance gap Small
and Medium Enterprises

3. To examine the extent of finance gap across the Micro, Small and
Medium Enterprises
4. To assess the Bank’s perception towards lending to Small and Medium
Enterprises
5. To assess the Small and Medium Enterprise’s perception towards
Bank lending services
6. To assess the impact of finance gap on the performance of Small and
Medium Enterprises.

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2.2 NEED FOR THE STUDY

A small enterprise is generally born as an idea, later grows and finds its place
and then becomes Mega Corporation. It plays a crucial role in developing an economy.
It is rightly said that small and large enterprises are like the two legs of industrialization
process. Hence they have been given an important place in the frame work of Indian
planning. Modern SSIs (now SMEs) in India were almost non-existent prior to Second
World War. It was during the war period that number of SSIs (now SMEs) was
established. After Independence, organized efforts were made to its development. The
development of this sector is dependent on timely, adequate finance at reasonable rate
of interest and this responsibility is shouldered by the Commercial Banks in India.
Many studies have identified finance as the most important factor for determining the
survival and growth of SMEs. Access to finance allows them to undertake productive
investments, expand their business and to acquire latest technology thus ensuring their
competitiveness. The efforts of commercial bank to provide financial assistance began
in 1956 and are being carried on till date. Their dependency on bank loans is very high
amongst the various sources. Various research studies right from conceptualization of
bank credit to SMEs have been analysing and suggesting innumerable measures to
improve the flow of credit to the vibrant sector of Indian economy. But even today the
same situation persists. Hence it is necessary to examine the issue of non-availability
of adequate and timely credit to SMEs. Any study to resolve this problem made from
one side i.e. either from SME‟s perspective or from commercial bank’s perspective
would be incomplete. Therefore there is a need to analyse this issue from both the
perspectives which in turn can provide wide opportunities to Commercial Banks and
also make significant contribution to SME sector in their growth and development.

SMEs are spread across the length and breadth of the country and having a strong
presence in rural areas, their growth also leads to more balanced and sustainable
development. The need for research in improving credit flow to SME sector remains
important even today as large segment of this sector continues to be deprived of
access to credit from formal financial system.

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2.3. SCOPE OF THE STUDY

The city - Mumbai has been spearheading the growth of Indian Industry. The
structure of Mumbai at presents consist of a blend of modern high tech goods and
knowledge industries on one hand and traditional consumer goods industries on the
other. Small and Medium Enterprises form an important and growing segment of
Mumbai as an Industrial sector. In fact Mumbai is called as the cradle of banking in
India.

2.4. SIGNIFICANT OF THE STUDY

An important focal point of prior research on SMEs is to understand their

dependence on credit and cash flow. SMEs face numerous obstacles in borrowing funds
because they are small, less diversified, and have weaker financial structures.

The economic and banking importance of the small and medium enterprise
(SME) sector is well recognized in academic and policy literature. It is also
acknowledged that these actors in the economy may be under-served, especially in
terms of finance. This has led to significant debate on the best methods to serve this
sector.
Although there have been numerous schemes and programs in different economic
environments, there are a number of distinctive recurring approaches to SMEfinance.

Collateral based lending offered by traditional banks and finance companies is

usually made up of a combination of asset-based finance, contribution based finance,
and factoring based finance, using reliable debtors or contracts.
Information based lending usually incorporates financial statement lending, credit
scoring and relationship lending.

Viability based financing is especially associated with venture capital.

Reliable for all the small ticket loan [clarification needed].
The entity type not depending on the value of the business.

SMEs are important to almost all economies in the world, but especially to
14
developing countries like Namibia with major income discrepancies between the rich
and the poor, and with a headache of unemployment. On what we may call the “static”
front, SMEs contribute to output by participating in the mainstream economy and to the
creation of some “decent” jobs especially to the few that runs the SMEs. All that
information, coupled together will make SMEs the biggest employer and can close the
inequality between the rich and the poor.

On the other hand SMEs are a nursery for the larger firms of the future - more
and more large firms started as SMEs before there grew large. It is therefore with this
regard that SMEs are the next and important step up for expanding micro enterprises;
they contribute directly and often significantly to aggregate savings and investment for
any nation, and they are involved in the development of appropriate technology also.
With increasing competition within the SMEs new solutions will be brought forth
across different sectors.
In asking ourselves an important question, how “important” the SME sector is we must
of course go beyond simply looking at its share of output, employment or any other
aggregate variable to the key question - How much difference does it make to overall
economic performance whether the SME sector is large or small, or whether it grows
rapidly or slowly?

It is a fact of life, at any level of a country’s development, that some needed

activities involve few or no economies of scale while others involve considerable higher
economies of some sort. The size of this distribution is greatly influenced by SMEs.
That distribution can also be influenced by international trade. An important challenge
in Namibia is to assure that a significant share of output takes place outside the overly
capital intensive large scale sector by giving the SMEs some chuck of the activities in
the economy. Achievement of this goal is more difficult if SME activity in general is
discouraged by policy or setting from within.
It can be facilitated when large firms, subcontract majority of their work or part of that
process to smaller more labor intensive SMEs. It can also be facilitated by the
phenomenon referred to as “clusters” in which small firms collaborate together to
handle those aspects of the business that are indeed characterized by economies of scale.
By getting together the SMEs can achieve massive solution while on the same time

15
contributing aggressively in the national affairs.

The ideal setting within which SMEs can play their positive contribution to the
maximum in the economy includes taking cognizance of the foresaid structures. In a
country like Namibia with large informal or micro enterprise sectors, SMEs should
constitute the middle of the size range, a fact that explains much of their strategic
importance. In terms of organizational structure, SMEs are, on average, considerably
more complicated, involving largely the self-employed and people employed in other
larger companies.
Government policy, including tax policy, can make a considerable difference to how
well the SME sector fulfils its potential role in contributing to a healthy economy. One
of the significant characteristics of a flourishing and growing economy is a booming
and blooming small and medium enterprises (SMEs) sector. SMEs play an important
role in the development of a country and mainly by employing a good number of people.
According to the United Nations Industrial Development Organization (UNIDO),
for developing countries like Namibia, integration into the global economy through
economic liberalization, deregulation, and democratization is seen as the paramount
way to coup poverty and inequality. Significant to this process, is the development of a
private sector, in which SMEs can play a central role.
SMEs have an inclination to employ more labor-intensive production processes
than large enterprises. Consequently, they contribute significantly to the provision of
productive employment opportunities, the generation of income and, eventually, the
reduction of poverty. SMEs can become a major contributor to private sector
employment.
SMEs play significant contribution in the transition of agriculture-led economies
to industrial ones furnishing plain opportunities for processing activities which can
generate sustainable source of revenue and enhance the development process. SMEs
shore up the expansion of systemic productive capability. They help to absorb
productive resources at all levels of the economy and add to the formation of flexible
economic systems in which small and large firms are interlinked. Such linkages are
very crucial for the attraction of foreign direct investment (FDI). Investing larger
corporations look for sound domestic suppliers for their supply chains. SMEs are the
major growing force behind the fastest growing economy of China, in terms of

16
contribution to the national GDP (accounting for 40%), scale of assets, diversification
of products, and the creation of employment. Similarly, the role of SMEs is well
acknowledged in other countries such as Japan, Korea, and all other industrialized
economies in terms of creating employment, reducing poverty and increasing the
welfare. There are a number of factors responsible for the importance of SMEs in
Namibia. First, SMEs bolster an entrepreneurial spirit and put forward flexibility in the
economy. Second, SMEs emanate the fastest growing export sub-sectors, such as maize
farming and construction. Third, they can support the poverty alleviation endeavors
through employment generation process. Above all, SMEs are more efficient in
resource allocation as compare to that of large scale companies from a social point of
view. They provide for and facilitate for a more number of people.
It is level-headed to say that Namibia`s economy is an economy of that can
easily be grown by SMEs. However, efforts had remained restricted focusing on the
large enterprises, and neglecting SMEs which are the back bone of the economy. For
instance, institutions established to facilitate business activities, have been focusing
their efforts on large companies leaving the SMEs. SMEs are a distinctive mainstay of
the economy that requires owing special treatment.
The evidence from the Namibia shows that small firms are discriminated against
relatively large firms in most cases due to experience. Large scale firms can cope and
solve their hurdles due to possessing sound experience and financial position. SMEs
due to their small size and the resulting peculiarities are far less capable of adjusting
and carrying on successful business which in most cases require push start from the
procurement company.
There are also some hidden and apparent obstacles in the path of growth of SMEs
in Namibia. The most important are; law and order situation; financial constraints;
energy crisis; taxation problems; labor issues; lack of coordination and regular
information exchange mechanism among institutions, etc.
What it requires is to
pursue the precise policy and regulatory reforms to turn SMEs into an effectual
instrument for the enhancement of economic growth and employment. Furthermore,
the setting for SME is incessantly changing, especially in the scenario of globalization
and openness of the economies. Therefore, the course of action for SMEs should be set
for long-run period keeping in mind the predictable behavior of all stockholders.

17
 With the introduction of the MSME Act in the year 2006, the service sector that
was not yet included in this sector was included in the definition of the Micro, Small &
Medium sized Enterprises making a historic change to this Act, and thus leveraging the
scope of the sector even now government simplified the MSME Registration Online
with the paperless work.

Share of MSME in Manufacturing, Exports and Employment sectors in India:

Sector Percentage(%) share

1 Manufacturing 45
2 Exports 40
3 Employment 69
The contribution of MSME to other sectors has been immensely instrumental.
It is the biggest employer after agriculture sector, despite the fact that agriculture
sector’s contribution to GDP is less than MSME. While it contributes about 45% to
manufacturing sector, and perhaps 40% to Exports, it forms the highest share of
Employment sector in India, contributing around 69% to it.

Let us take a look at some of the key importance of this sector in the development
of India both in terms of economic, and social development:

1. Creates large scale employment:

Since the enterprises falling in this sector require low capital to start the business,
it creates huge employment opportunities for many unemployed youth. India
produces about 1.2 million graduates per year, of the total number about 0.8 million
are engineers. And, there is no economy in the world that can provide jobs to so
many fresh graduates in one year. MSME is the boon for many of these fresh
manpower.

2. Economic stability in terms of Growth and leverage Exports:

MSME is a significant growth driver in India, with it contributing to the tune of
8% to GDP. As mentioned in the table, Exports sector in India constitutes about

18
40% of contribution from MSME alone. Looking at the kind of contribution of
MSME to manufacturing, exports and employment, other sectors are also
benefitting from MSME. MNCs today are buying semi-finished, and auxiliary
products from small enterprises, for example, buying of clutches, and brakes by
automobile companies. It helps create a linkage between MSME and big
companies. Even after the implementation of the GST 40% msme sector also
applied GST Registration which increase the government revenue by 11%.

3. Encourages Inclusive Growth:

About 50% of wealth in India in owned by just 100 people which is due to unequal
distribution of wealth. Inclusive growth is on top of the agenda of Ministry for
Medium, and Small, and Medium sized enterprises for several years. While poverty
and deprivation are a deterrent to the development of India, including marginalized
sections of society is a key challenge lying before the Ministry of MSME.

4. Cheap Labor and minimum overhead:

In large scale organizations, one of the key challenges is to retain the human
resource through an effective human resource management professional manager.
But in case of an MSME, the requirement of labor is less, and it does not need a
highly skilled laborer. Hence, the indirect expenses incurred by the owner is also
low.

5. Simple Management Structure for Enterprises:

MSMEs do not require a huge capital to start. With limited resources available
within the control of the owner, decision-making becomes easy and efficient. As
in case of a large corporation wherein a specialist is required for every departmental
functioning because of complex organizational structure, a small enterprise does
not need to hire an external specialist for its management. The owner
himself/herself can manage it. Therefore, it can be run single-handedly.

6. Plays an important role in making “Make in India” possible:

Post the inception of ‘Make in India’, a signature initiative by the prime minister

19
of India, the process of incorporating a new business has been made easy. Since
the MSME is the backbone in making this dream a possibility, the government has
directed the financial institution to lend more credit to enterprises in MSME sector.

20
 IMPORTANT TERMS AND CONCEPTS USED

SMEs stand for Small and Medium enterprises. Small Scale Industries were
renamed as Small and Medium Enterprises after the enactment of MSMED Act 2006.
According to this legislation, Small Enterprises includes Micro enterprises. Thus,
Small Enterprises stands for Micro and Small Enterprises.

MICRO ENTERPRISES

Micro Manufacturing: Enterprises having investment in plant and machinery not

exceeding 25 lakhs are grouped under Micro manufacturing enterprises.

Micro Service: Enterprises having investment in equipment‟s not exceeding

10 lakhs are grouped under Micro manufacturing enterprises.

SMALL ENTERPRISES

Small Manufacturing: Enterprises having investment in plant and machinery

exceeding 25 lakhs but not exceeding rupees 5 crore are grouped under Small
Manufacturing Enterprises.

Small Service: Enterprises having investment in equipment‟s exceeding 10 lakhs

but not exceeding 2 crore are grouped under Small Service Enterprises

MEDIUM ENTERPRISES

Medium Manufacturing: Enterprises having investment in plant and machinery

exceeding 5 crore but does not exceed rupees 10 crore are grouped under Medium
Manufacturing enterprises.

Medium Service: Enterprises having investment in equipment‟s exceeding 2crore

but not exceeding 5 crore are grouped under Medium Service Enterprises.

PRIORITY SECTOR*

Priority Sector refers to those sectors of the economy which may not get timely
and adequate finance in the absence of special dispensation.

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CATEGORIES UNDER PRIORITY SECTOR

1. Agriculture
2. Micro and Small Enterprises
3. Education
4. Housing
5. Export credit
6. Others

FINANCE
GAP

A sizable share of economically significant Small Enterprises cannot obtain

finance from banks, capital markets or their suppliers of finance.

SMALL SCALE INDUSTRIES

An industrial undertaking in which investment in fixed assets in Plant and

Machinery, whether held on ownership terms or on lease or by Hire purchase, does
not exceed rupees 100 lakhs as on 31st March 2001.

MSMED ACT 2006

Micro, Small and Medium Enterprises Development Act 2006 was enacted to
facilitate the development of Micro, Small and Medium Enterprises sector and also
to enhance the competitiveness of this sector.

RESERVE BANK OF INDIA

Reserve Bank of India is Central Banking Institution. It formulates and

implements the Government’s monetary policy, issue bank notes and coins, manages
the country’s international payments, acts as investment bank to central and State
Governments and extends credit to, Commercial Banks.

22
2.5 LIMITATIONS OF THE STUDY

Although SMEs have been growing at a faster rate than overall industrial
sector, they experience multiple constraints that are hindering their growth. According
to IFC survey on Micro, Small and Medium Enterprises in India, 32% of units
experience in-adequate linkages, 29% of SMEs are impacted by lack of infrastructure,
28% of SMEs are constrained by inadequate finance, 24% lack managerial competence
and 22 % are constrained by obsolete technology. According to this survey of SMEs
sector, enterprises consider access to finance as one of the biggest constraints in growth.
The survey also finds that the multiple growth constraints can be largely linked to
inadequate access to finance. The report of working group on re-habilitation of sick
SMEs by RBI also finds lack of adequate and timely access to working capital finance
is one of the key reasons for sickness in the sector. Financial constraints are having a
negative impact on Small and Medium enterprise’s development and also limiting their
potential to drive the national economy as expected. The SME census has reported that
only 5% of enterprises in this sector had access to some form of formal finance and
while over 92% of the units are unable to access to any form of finance. This Sector is
un-served and under-served despite the policy efforts and more responsive formal
financial sector, SMEs continues to face timely and adequate finance constraint. The
problems of SMEs to obtain finance are often gathered under the umbrella concept of
finance gap. The existence of gap leads to unfavourable situations to both banks and
SMEs and in turn affects the welfare and growth of the economy as a whole. IFC study
of 2012 has quantified the total finance gap and addressable gap by financial institutions
in the near terms. There are many research studies which have been undertaken on these
issues of problems on SME financing either from the perspective of bank or from the
perspective of SME. But no literature is available in India which addresses the issue of
finance gap from both the perspectives.

Most of the unregistered SMEs would predominantly comprise micro enterprises,

particularly confined to rural India, operating with obsolete technology, limited access
to institutional finance etc. And there is a need to transform the huge unregistered SME
into registered SME.

23
 Need to improve the competitiveness of the overall SME sector.
Access to technology.
IPR related issues.
Design as a market driver.
Wasteful usage of resources/manpower.
Energy inefficiency and associated high cost.
Low ICT usage.
Low market penetration.
Quality assurance/certification.
Standardization of products and proper marketing channels to penetrate new markets.
The definition for SMEs must be updated – considering inflation and availability of
better technologies since the last change in 2006.

They have more difficulties to find funding. Normally, SMEs do not have the financial
power that large companies have. For this reason, they will usually need external
financing, which will also be more limited and in worse conditions, without the ability
to access financial instruments available to large corporations, such as listing on stock
markets, capital increases, etc.

It may be difficult to reach a large number of customers and earn their trust.
The task of reaching its customers can be very hard for an SME. The financial power
of large companies allows them to make themselves known through mass media by
advertising, but for small and medium companies, reaching a significant number of
customers can be a task that requires years of effort. In addition, being less well-known
than its larger competitors, SMEs may find it more difficult to convey to their customers
the security that a large company can offer them.

The costs are higher

SMEs will have enormous impediments to benefit from the economy of scale,
which will cause costs to be higher in certain types of business, as well as creating
difficulties to adjust the prices offered to users.

24
 It is not easy to endure prolonged periods of crisis despite being more flexible
in dealing with changes, the lack of financial capability can cause major problems for
an SME if it is forced to endure long periods of crisis. For this reason, during economic
depressions, small and medium-sized enterprises often face enormous difficulties to
survive, which causes the closing of many of them.

Low bargaining power with suppliers and customers.Being a large company,

and therefore generating huge amounts of business, provides a position of power when
negotiating with suppliers and customers. For an SME, it is much more difficult to
achieve beneficial conditions and are often forced to give in more than they would like.

Access to less skilled personnel.

Given the greater limitations that an SME usually offers to develop a career
(there will be fewer possibilities of advancement), it will be more difficult to attract
talented and well-prepared workers who will usually be more tempted to develop their
skills in a large enterprise. However, this does not mean that an SME cannot attract
talent, but will often have to offer other incentives.

They will have more difficulty in accessing technologyunfortunately, and again

for financial reasons, an SME will have more difficulties to adapt to technological
changes, which could lead to obsolescence. However, there are very interesting
technological solutions that SMEs can access.

And now that we have already seen some of the advantages and disadvantages
of being an SME, here comes a question: Do you know about Integria IMS? Integria
IMS is a software that has many tools that can help your company to not fall behind.

• As Small and Medium Enterprises population is large and widely spread

across the State, convenient sampling is used as sampling method.
• There are many other Financial Institutions extending credit to this
sector, but the focus of the study is only on Enterpreneure.

25
 • The study is confined to qualitative aspect of finance gap. It does not
attempt to quantify the finance gap.
• The study attempts to evaluate only debt gap.
• The information provided by the respondents is assumed to be accurate.
• Responses of the Commercial Banks and Small and Medium
enterprises are analyzed individually.

2.6 PERIOD OF THE STUDY

Initially, before identifying the research problem a thorough interaction with the
stakeholder’s viz. Entrepreneurs was needed to be undertaken to validate the
relevance of the study. After review of literature, a preliminary opinion survey was
conducted of 50 respondent. A pilot study was conducted among fifty enterprises
during September and mid October 2018. After testing the reliability and size of the
sample, the final questionnaire were administered during the period ranging from
September’18 to mid-October 2018.

26
 3.1 REVIEW OF LITREATURE

Mishra (1984)aims to analyze the nature of financing and role of various

agencies including Commercial Banks in meeting the need of finance in North Bengal
and to examine the problems faced by entrepreneurs. The researcher has considered the
Commercial Banks as one of the agencies along with the other agency and it is based
on the secondary source of information. More attention is given on demand side issues.

Singhania(1998)examines the flow of bank credit to Small Scale Industries in

India and also evaluates the impact of various packages of measures announced by RBI.
The author finds that the actual flow of assistance under working capital during five
year period 1991-92 to1995-96 fell short of the requirement lay down by the Nayak
Committee. An analysis of the bank credit made available to the SSI sector in last ten
years reveal that in 1995-96, there is a decline in the credit flow to the SSI sector. Author
opined that in a significant number of cases, bank branches have departed from the
guidelines subjecting to SSIs and suggest for rethinking on the part of Government,
27
Commercial Banks and SFCs to address the big gap between the demand and supply of
working capital and term loans.

Vimala (2003) analyzes the performance of different bank groups in their

advances to SSI in the state of Kerala between 1993 -94 to 2000-01. The author
concludes that there is no significant difference between the performances of different
bank groups in their SSI advances. The researcher has taken supply side evaluation in
terms of performance in enhancing the credit to this sector.

ShilpaKulkarni (2004) examines the relationship between growth of small

scale industries and supply of bank credit and also the expectations of the small scale
industries as perceived by the banks. Author makes an attempt to identify the various
constraints associated with credit supply. Field survey of stakeholders reveals that the
supply of institutional credit is too less and often delayed and Small Scale Industries
have many other expectations from bank. The study has limited application of
quantitative techniques for the analysis and sample size for the field survey was very
small.

OECD (2006) in its study on SME finance gap, identifies both weak demand
from SMEs and limitation in supply of funds as the indicative of gap. The responsibility
is attached to both the financial sector as suppliers of funds and SMEs as the demanders
of the fund. Asymmetric information, relationship, performance of SMEs and
conservative nature of the financial markets are some of the reasons for finance gap
identified in OECD countries.
JuliusKakuree (2008)aim to explore the experiences of Bank officers and SME
borrower in credit extension to the SME sector in Uganda. The study used a
triangulation of qualitative and quantitative research methodologies to examine the
experiences of loan officers and SME borrowers in relation to factors that influence
credit flow to SME sector. Data was collected both from supply side and demand side
through structured and semi- structured interviews and also through direct observation.
Data was analyzed using Factor Analysis, Multi Co Linearity Analysis, Spearman‟s
Rank Correlation Analysis and NVIVO software. The researcher recommends

28
designing lending guidelines that integrate both supply and demand factors.
ManivoneSiharath (2012) the objective of the study is to consider the factors
impeding both the demand and supply side SME operations in relation to their financial
practices and to find out how the banking can best be strengthened in order to overcome
the issue of insufficient funding for SMEs. The research process comprised of a three
part process. Series of interviews with Government, Banks and SMEs were conducted
by taking 5 Banks (2 State- owned, 1 locally owned and 2 foreign banks), 3 SME
stakeholders and 4 stakeholders as sample size. In-depth interview was based on a semi
structured panel of open ended questions were adopted and note taking method was
used. The researcher suggests for Government subsidies and policies to enhance credit
to SME sector.
The predominant sources of finance used by MSMEs are bank loans; loans
from nonbanking institutions (e.g., NBFCs); venture capital; microfinance institutions
loans from family, relatives, and friends; equity finance; and own funds (Mallick et al.
2010; International Finance Corporation 2012; Asian Development Bank 2014).
According to International Finance Corporation (2012), the supply of finance to the
MSME sector is estimated to be 32.5 trillion Indian rupees (Rs). This total comprises
contributions from informal finance, formal finance, and self-finance. Informal sources
and self-finance contribute Rs25.5 trillion to the sector, of which informal finance
accounts for Rs24.4 trillion. In other words, 78% of the finance used by MSMEs is met
by informal sources and self-finance. The remaining 22% (Rs6.9 trillion) is provided
by banks and NBFCs, of which banks provide the bulk (91.8%).
It is unlikely that the financial services offered by banks sufficiently address the
requirements of early-stage small and medium-sized enterprises (SMEs) (Banerjee
2006). There are several conditions that hinder the provision of bank credit to early-
stage SMEs in India. Early-stage SMEs do not have an established credit history and
have unstable equity patterns. Biswas (2014) noted that access to external finance apart
from banks is costly and limited, and poses a challenge to SMEs, although it is essential
for the maintenance of long-term opportunities and targets. These external loan
products also require collateral and are highly priced. SMEs use finance from NBFCs
and informal sources at higher rates of interest, particularly in the early stages.
The dominance of the informal sector in addressing the financial requirements
of MSMEs is due to the inherent limitations of formal sources of finance. The Asian

29
Development Bank (2014) has pointed out that barriers to accessing finance by SMEs
in India from formal institutions include the requirement for collateral or a guarantee,
inflexible policies, high rates of lending, complicated procedures, and entrepreneurs’
lack of financial knowledge of applicable schemes. Ambrose (2012) also identified
barriers to effective financial assistance to SMEs, which included absence of
collateralized security, and the regulatory framework. In addition, the unavailability of
skilled workers, the lack of infrastructure, and an inability to raise capital through
the stock market (especially for MSMEs with a net worth of less than Rs100 million
(about $1.5 million) are other challenges (Lahiri 2012). Barriers have also been
examined in the context of gender (Irwin and Scott 2010), firm size, the length of a
lending relationship, and the use of overdraft credit (Bebczuk 2004). The Reserve Bank
of India (2005) identified the following issues in financing SMEs: (i) inadequate access
to finance by tiny firms due to lack of financial information and nonformal business
practices, with a lack of access to private equity, venture capital and secondary market
instruments; (ii) fragmentation of markets with respect to their inputs as well as
vulnerability of products due to market fluctuations; (iii) lack of easy access to interstate
and international markets; (iv) limited access to technology and product innovations,
and lack of awareness of global best practices; and (v) considerable delays in settlement
of dues and payment of bills by large-scale buyers.
The perception of an SME as a high-risk and commercially unviable proposition
to lend to has resulted in only a few SMEs receiving formal financial assistance
(Ambrose 2012). Prasad (2006) highlighted that Indian banks in particular are not
inclined to finance small enterprises, due to reasons such as the inability to provide
collateral, high levels of nonperforming assets, high transaction costs, and the inability
to verify the creditworthiness of applicants.
Grant Thornton and FICCI (2011) concluded that the cost of capital is high for
MSMEs, and that there is a need to reduce the time and documentation required for
procuring finance. Lahiri (2012) pointed out that with MSMEs’ rising need for short-
term and long-term capital, banks should move toward more innovative methods of
lending to provide for those firms’ financial needs.
In light of the abovementioned barriers, the Government of India (2015b) initiated
several policy measures: (i) achievement of universal financial inclusion of MSMEs in
a time-bound manner, ensuring that every registered MSME has a bank account linked

30
to the Udyog Aadhar; (ii) operationalization of an Rs100 billion equity fund for the
MSME sector; and (iii) expanded coverage and enhanced utilization of credit guarantee
schemes with inclusion of a wider set of credit providers such as NBFCs and
microfinance institutions, which could involve a sevenfold increase in the corpus from
Rs40 billion to Rs280 billion.

31
3.2 RESEARCH METHODOLOGY

The design of the present study is descriptive and analytical in nature. The
study attempts to describe and analyze the financial problems and growth constraint
of SME with reference to Mumbai city.

3.3 SOURCE OF DATA

The study is based on both primary and secondary data. Secondary data is
collected from different published sources such as Brochures of Reserve Bank of
India, Commercial Banks Government departments, Planning Commissions,
World Bank, District Information Center, State Level Banker’s Committee,
Commercial Bank’s Training Institutes and Agencies promoting SME’s.
Moreover, the available literature was obtained from the College Library. For the
purpose of collecting primary data, Questionnaire survey method was used.
Interviews and observation were also part of primary data collection, wherever
required.

3.4 SOURCES OF FINANCE AND CHALLENGES

IN ACCESSIBILITY

Finance Used by MSMEs in Different Stages of the Life Cycle

The survey results revealed the major financial needs of MSMEs at different stages of
their life cycle and the predominant sources of finance used to meet those requirements.
Enterprises were not restricted to reporting this data for the current stage of their life
cycle but could also report perceptions and experiences for other stages. The values
have been computed as the percentage of enterprises reporting the sources of finance
used in different stages. Therefore, the total of all reporting enterprises will be different
from the total number of enterprises in the sample (Table 4).
Start-up stage: Enterprises in this stage reported the use of funds from personal
and family sources, from friends, and from public (i.e., government-owned) banks
largely for the purpose of working capital. The other highly reported use of an
institutional source was public banks for collateral financing. This implied a high
degree of preparedness or risk aversion, or both, while starting an enterprise.
Survival stage: Working capital, short-term loans, and overdrafts were the
primary purposes for which enterprises in the survival stage sought financial assistance.
32
Finance for working capital was sourced largely from public banks and moneylenders,
followed by personal funds and private banks. Private banks were also used to secure
short-term loans and overdraft facilities. Enterprises also reported use of moneylenders,
though to a lesser extent. The trend of using formal sources or trusted informal sources
seemed to continue from that reported by enterprises in the start-up stage. Enterprises
in this stage would be looking to pay off debts, for which they would require smooth
day-to-day functioning with adequate availability of working capital for the same.
Growth stage: Enterprises at this stage required working capital, collateral
financing, and short-term loans. Working capital was sourced from public banks,
personal and family sources, and to a lesser extent from private and cooperative banks.
Collateral financing was obtained from public banks, and to a lesser extent from
cooperative banks. Private and cooperative banks were used for obtaining short-term
loans, although the use of moneylenders did find a mention. This observation possibly
means that enterprises were more focused on their specific financial needs and the
sources required to fulfill them. The dominant use of public banks for collateral
financing and the use of the banking system and family wealth to meet working capital
needs are indicative of the role played by trust in securing this type of finance. As
cooperative banks were also mentioned as a source to fulfill multiple financial needs of
enterprises at this stage, it needs to be seen if these banks’ policies and procedures are
conducive to providing the quick access to short-term finance needed by enterprises in
the growth stage.
Sustenance stage: Enterprises in this stage reported the use of finance from
personal funds, cooperative banks, public banks, and private banks for the purpose of
working capital. Cooperative banks were also used for collateral financing and to secure
short-term loans. Working capital, collateral financing, and short-term loans seem to
dominate the landscape of requirements of enterprises at this stage. This continues the
trend, noted above, of using finance from sources that are perceived to be trusted by
enterprises. An enterprise in this stage would choose to borrow from sources with which
it has well-established relationships and those which could be trusted. Enterprises at
this stage reported the dominant use of cooperative banks for working capital, collateral
financing, and short-term loans, and it would be interesting to examine the reasons for
this prevalence.

33
 :Major Sources of Finance Used by Enterprises in Different Stages
(%)

Working Personal funds/savings 64.4 18.2 12.0 19.4

capital loan Money borrowed from15.6 0.0 0.0 12.9
friends
Public banks 13.3 27.3 28.0 16.1
Family 11.1 0.0 12.0 3.2
wealth
Moneylender 4.4 27.3 4.0 6.5
s
Private banks 2.2 18.2 8.0 9.7
Cooperative bank 0.0 0.0 8.0 19.4
Collateral Public banks 17.8 0.0 20.0 3.2
financing Cooperative banks 2.2 0.0 8.0 12.9
Short-term Moneylenders 0.0 9.1 8.0 3.2
loan Private banks 0.0 9.1 16.0 6.5
Cooperative banks 4.4 0.0 12.0 9.7
Overdraft Public banks 6.7 0.0 4.0 6.5
Private banks 2.2 9.1 4.0 3.2
Cooperative banks 0.0 0.0 4.0 3.2
Personal funds/savings 0.0 0.0 0.0 3.2
Long-term Moneylenders 2.2 0.0 0.0 0.0
loan Public banks 2.2 0.0 0.0 6.5
Private banks 2.2 0.0 0.0 0.0
Cooperative banks 2.2 0.0 4.0 6.5
SIDBI 0.0 0.0 4.0 0.0
Personal funds/savings 0.0 0.0 0.0 3.2

S = S = 11)
t 4 u
Purpose Sources of Finance a 5 r
r ) v
t a i
- v
u a
p l
S S
t t
a a
g g
e e
( (
N N

34
Growth Stage (N = 25) S
u
s
t
e
n
a
n
c
e
S
t
a
g
e
(
N
=
3
1
)

35
 SIDBI = Small Industries Development Bank of India.

As enterprises could report the sources of finance used in multiple life-cycle

stages, the sum total of enterprises reporting the data may vary from the total
number of enterprises in the sample.

Sources of Finance Not Used by Enterprises in Different Stages

A number of sources of finance were not used by enterprises in different
stages of the life cycle (Table 5). Enterprises from all four stages did not avail
themselves of financing from angel investors, other entrepreneurs, foreign banks,
initial public offerings, pawnbrokers, and venture capitalists. In the survival stage,
the number of unused sources of finance was more pronounced than in other
stages, suggesting that enterprises at this stage were quite risk averse and intent on
breaking even with their existing level of investment, which had been financed
previously by other sources.: Sources of Finance Not Used by Enterprises in
Different Stages

Source of Finance Start-Up Surviva Growt Sustenance

l h
Angel investors X X X X
Another entrepreneur X X X X
Cooperative banks X
Family wealth X
Foreign banks X X X X
Initial public offering X X X X
Microfinance institutions X X
Money borrowed from friends X X
Money borrowed from relatives X X
Pawnbrokers X X X X
SIDBI X X X
Venture capitalists X X X X
✓ – used, X – not used.
SIDBI – Small Industries Development Bank of
India.

36
 Challenges in Accessing MSME Finance

Enterprises were asked to report the challenges they faced in accessing finance,
including in stages other than their current stage. A scale of 1–3 was used, in which 1
means not at all challenging, 2 is manageable, and 3 is challenging. Percentage values
were calculated from the number of enterprises rating an issue challenging and the total
number of enterprises that rated at least one issue challenging at each stage (Table 6).
Start-up stage: Major challenges in accessing finance reported by enterprises in this
stage included the difficulty in providing collateral or a guarantee, processing time for
loan applications, lack of knowledge about available schemes, and procedural
complications, in that order. Enterprises also felt that high service fees for loan requests
and difficulty in completing required documentation were challenges. Enterprises in the
start-up stage may not be able to provide collateral for a loan and they lack knowledge
about available schemes, which may hinder them from choosing the most effective
option for financial assistance.
Survival stage: The major challenges encountered by enterprises at this stage were
similar to those reported by enterprises in the start-up stage, though the order was
different. The difficulty in providing collateral or a guarantee and procedural
complications were jointly rated the highest. The four issues of lengthy processing time,
lack of knowledge about available schemes, high service fees for processing loan
requests, and difficulty in completing the required documentation were rated to be
equally challenging. Enterprises in this stage would usually be looking to break even
with regard to investments made at start-up, and would also like to grow in their
markets. They would therefore need working capital to meet their day-to-day needs.
These enterprises cannot be expected to provide collateral, and would be hindered by
complicated procedures and delays in loan disbursals. They also continue to lack
knowledge of available financial assistance schemes.

37
 Growth stage:

Major challenges reported by enterprises in this stage included a lack of

knowledge about available schemes, high service fees for processing loan requests,
difficulty in provision of collateral or guarantee, high rates of interest, and
difficulty in completing the required documentation.

As there would be both working capital and short-term loan requirements for
enterprises in this stage, a lack of knowledge regarding specific schemes could
hinder owners from making the most appropriate choice of financing for their
enterprise. Though enterprise owners may be more inclined to seek formal
financial assistance, high service fees and high rates of interest could be a deterrent.
Enterprises in the growth stage also would be in a state of rapid transition and
therefore the need to provide documentation for securing financial assistance
would be a deterrent to accessing funds.

: Challenges in Accessing Finance at Different Life Cycle Stages

Challenges Start-Up Survival Growth Suste

Stage (N = Stage Stage Stage
24)a (N = 11) (N = 24) (N=3
Difficulty in collateral/guarantee 87.5 63.6 54.2 83.3
High rates of lending 54.2 45.5 54.2 50
Procedural complications 70.8 63.6 45.8 63.3
Lack of knowledge about available schemes 75 54.5 62.5 60
Lengthy processing time for the loan application 87.5 54.5 45.8 60
High service fees for processing loan requests 62.5 54.5 58.3 56.7
Difficulty in procuring/completing the required documentation 62.5 54.5 50 56.7
Lack of available infrastructure 41.7 0 4.2 10
Lack of availability of skilled workers 29.2 0 8.3 13.3
Absence of current account (active for 6 months) 16.7 18.2 8.3 0
No formal accounting system 20.8 18.2 12.5 3.3
Tax compliance issues 16.7 18.2 16.7 16.7
Labor law compliance issues 12.5 0 12.5 16.7
Registration of enterprise 12.5 0 20.8 16.7

As enterprises could report the sources of finance used in multiple life-cycle

stages, the sum total of enterprises reporting the data may vary from the total
number of enterprises in the sample.

38
Sustenance stage:

Common challenges to accessing finance reported by enterprises in this stage

included difficulty in provision of collateral or a guarantee, procedural
complications, lack of knowledge about available schemes, lengthy processing
time for loan applications, high service fees for processing loan requests, and
difficulty in completing required documentation. A reasonable number of
enterprises also reported high rates of interest to be a challenge. Although
entrepreneurs in this stage reported procedural difficulties, processing time, and
high rates of interest to be challenges in accessing finance, the role of a lack of
knowledge about available schemes and its influence on other challenges needs to
be examined. The entrepreneurs were concerned about the requirement to have
collateral or security. This would suggest that banks or lending institutions need to
be more realistic about lending to MSMEs that have already established
themselves in the market.

To summarize, MSMEs face numerous challenges at each stage of the life cycle.
Each issue regarding financing was rated challenging by at least one enterprise in
both the start-up and growth stages. In the survival stage, enterprises did not
feel that infrastructure, labor, labor law compliance, or enterprise registration were
challenges in accessing finance. Enterprises in this stage have access to adequate
labor and infrastructure. Enterprises in the sustenance stage would most likely have
active current accounts, and therefore did not feel that to be a challenge.

39
 Challenges Faced by MSMEs in Accessing Finance

Challenges Start- Surviva Growt Sustenance

Up l h
Difficulty in collateral/guarantee
High rates of lending
Procedural complications
Lack of knowledge about available schemes
Lengthy processing time for the loan
Application
High service fees for processing loan requests
Difficulty in procuring/completing the required
Documentation
Lack of available infrastructure X
Lack of availability of skilled labor X
Absence of current account (active for X
6 months)
No formal accounting system
Tax compliance issues
Labor law compliance issues X
Registration of enterprise X
✓ – challenging, X – not challenging.

MSMEs – micro, small, and medium-sized enterprises.

Other Challenges: Processing Times and Fees

Enterprises were asked to report loan processing times and processing fees,
and to rate the experiences they had with banks, nonbanking financial companies
(NBFCs), and microfinance institutions. This was done to assess the ease of access
with which enterprises were able to secure financial assistance from formal
financial institutions.

Enterprises in the start-up stage reported a very high average processing time
for bank loans. The average value was, however, influenced by the highest
reported time, which was 1 year. The average time taken for loan processing was
low for NBFCs and microfinance institutions at 4 and 10 days, respectively. The
lone reporting enterprise in the survival stage reported a processing time of 1 day
for loans taken from a microfinance institution. For enterprises in the growth stage
it took 35 days to secure a loan from a bank, which was nearly six times the period
for NBFCs (6 days).

40
In the sustenance stage, banks took on average one-and-a-half times longer than
NBFCs to process loan requests for MSMEs. Microfinance institutions were
reported to take 1 week on average. The average processing time for loan requests
by banks for enterprises in the survival and growth stages were similar. Although
quicker to process loan requests than banks on average, NBFCs took almost four
times longer at this stage than at the growth stage. It may be premature to conclude
anything with regard to microfinance institutions considering the small number of
enterprises reporting on this aspect. It is possible, however, that a higher degree of
due diligence on the part of banks and NBFCs could be the cause for the longer
processing times for enterprises at the growth and sustenance stages.

Average Loan Processing Times for Loans Sought from

Banks, NBFCs and MFIs
(days)

Stage of Source of No. of

Enterprise Finance Used Mean Minimu Maximum Median Responses
m
Start-up Bank 114 2 365 44 4
NBFC 4 1 7 4 2
MFI 10 10 10 10 1
Survival MFI 1 1 1 1 1
Growth Bank 35 15 73 29 18
NBFC 6 3 9 6 5
Sustenance Bank 38 22 82 33 30
NBFC 24 14 33 24 3
MFI 7 7 7 7 1
MFI - microfinance institution, NBFC - nonbanking financial company.

Very few enterprises in the start-up and survival stages reported loan
processing fees. In the survival stage, only one enterprise reported a fee for loans
taken from microfinance institutions. The number of reporting enterprises in the
growth and sustenance stages was significantly higher compared with the start-up
and survival stages. In the start-up stage, the processing cost for loans by banks
was reasonably low. The average processing costs for bank loans to enterprises in
the growth stage was nearly double that for enterprises in the sustenance stage,
though the median values were comparable. The average processing fee for loans
from NBFCs was negligible for start-up enterprises, but increased significantly for
41
enterprises in the growth stages, with the cost being almost three times the
average processing cost for enterprises in the sustenance stage. The average
processing cost of loans from microfinance institutions was significantly higher
for enterprises in the survival stage when compared with the sustenance stage.
Though average cost of processing reported in the case of banks was higher, a
larger number of reporting enterprises suggested a preference for seeking financial
assistance from banks. It is possible that NBFCs were considered the second-best
option for enterprises in the growth and sustenance stages.

42
 Average Processing Cost of Loans by MSMEs from banks, NBFCs and MFIs
(Indian rupees, thousands)

Stage of Source of No. of

the Finance Used Mean Minimu Maximu Median Responses
Enterpris m m
e
Start-up Bank 3.50 2.00 5.00 3.50 2
NBFC 0.00 0.00 0.00 0.00 1
Survival MFI 10.00 10.00 10.00 10.00 1
Growth Bank 80.03 7.17 290.00 25.83 16
NBFC 18.83 15.08 22.58 18.83 5
Sustenance Bank 42.05 3.67 150.00 22.52 20
NBFC 6.88 1.25 12.50 6.88 3
MFI 1.00 1.00 1.00 1.00 1
MFI – microfinance institution, NBFC – nonbanking financial company, MSMEs
– micro, small, and medium-sized enterprises.
Note: Exchange rate $1.0 = Rs65.63 (3 November 2015).

RESEARCH INSTRUMENT
Survey research was conducted using well-structured questionnaire. The
questionnaire is used for collecting data from the side of entrepreneurs i.e Small
and Medium Enterprises. A sample size of 50 respondent was taken in
consideration for the same from Mumbai.

43
 4.1 DATA PRESENTATION

The research data needs to be presented effectively for quick and clear
understanding. There are various type of charts and graph and pictorial devices
are an excellent means to present the data.

Column Graph

➢ Table:1 SEX

Sex Number
Female 8
Male 42
Total 50

Out of the 50 respondent, 8 of the entrepreneurs were Female while the rest of
them were male, the same has been graphically represented with the help of
table and Bar diagram.

➢ BAR GRAPH

Sex
45
40
35
30
Axis Title

25
20
15
10
5
0
Female Male

44
 ➢ TABLE : 2 AGE

Age Numbers
19Years - 25Years 12
26Years - 35Years 13
36Years - 50Years 19
More than 50Years 6
Total 50

➢ AREA GRAPH

Age
20
18
16
14
Axis Title

12
10
8
6 Age
4
2
0
19Years - 26Years - 36Years - More than
25Years 35Years 50Years 50Years
Axis Title

The above area graph represents that out of the total 50 respondents:-
1. Approx. 24% of the respondents were below the age of 25
2. Approx. 26% of the respondents were between the age of 26 to 35
3. Approx. 38% of the respondents were between the age of 36 to 50 and
4. Approx. 12% of the respondents were above the age of 50

45
 ➢ TABLE : 3 SHOP REGISTERED

Shop registered Number

No 9
Yes 41
Total 50

➢ PIE CHART

Shop registered

No
18%

No
Yes

Yes
82%

Of the 50 respondent, 82% of the shop were Registered while the rest 18% were
unregistered

46
 ➢ TABLE :4 LICENCE REQUIRED

Licence required Numbers

GST 7
Gumasta licences 18
None 8
Shop & establishment Act licences 17
Total 50

➢ BAR GRAPH

Licence required

Shop & establishment Act

licences

None
Licence required
Gumasta licences

GST

0 5 10 15 20

From the above graph it can be seen that the Licenses required by each of the enterprises were
different:-

1. 14% of the Shops were having a GST Registeration

2. 34% of the Shops were having Shop & Establishment Act Licence
3. 36% of the shop were having Gumasta License
4. 16% of the shops did not had any license.

47
 ➢ TABLE : 5 MANAGEMENT AND CONTROL

Management and Control Numbers

Employees 21
Self 29
Total 50

➢ BAR GRAPH

Management and Control

Self

Employees

0
10
20
30
Employees Self
Management and
21 29
Control

Of all the respondents 58 % of the shops were managed and control by self while
42% were managed and controlled by employees

48
 ➢ TABLE : 6 NO. OF STAFF MEMBER

No.of Staff member No.of Staff member

More than 10 4
One 16
Two or more 30
Total 50

➢ HISTOGRAMS

More than 10 One Two or more

30

16

No.of Staff member

The number of staff for each and every company differs from each other. From the
survey which was conducted by us we came to know that there were :-
1. 32% of the company were self managed and did not had any employees
2. 60% of the company were having more than 2 and less than 10 employees

49
 3. While the remaining 8% companies had more than 10 employees.

➢ TABLE : 7 ANNUAL TURNOVER

Annual Turnover Annual Turnover

1100000 - 1500000 5
1500000 and more 1
600000 - 1000000 17
Less than 500000 27
Total 50

➢ HISTOGRAMS

30

25

20
1100000 - 1500000
15 1500000 and more
600000 - 1000000
10 Less than 500000

0
Annual Turnover

50
The annual turnover of the 50 SMEs on whom the survey was conducted is as follow:-

1. 54% of the SMEs had a turnover less than 5 Lakhs

2. 34% of the SMEs had a turnover ranging between 6 lakhs to 10 Lakhs
3. 10% of them had a turnover ranging between 11 Lakhs to 15 lakh
4. While the remaining 2% had a turnover above 15 lakhs.

➢ TABLE : 8 LOAN TAKEN

Do you have taken loan Numbers

No 16
Yes 34
Total 50

➢ HISTOGRAMS

51
 40
35
30
25
Axis Title

20
15
10
5
0
Do you have taken loan
No 16
Yes 34

It can be seen from the above diagram that 68% of the SMEs have taken loan from Bank
and 32% of the SMEs have not taken any loan.

➢ TABLE : 9 SECTOR OF BANK

If bank then from which sector Numbers

Government 4
Government;Private 3
Private 27
NA 16
Total 50

➢ BAR GRAPH

52
 If bank then from which sector
30
25
Axis Title

20
15
10
5
0
Govern Govern Private NA
ment ment;P
rivate
If bank then from which
4 3 27 16
sector

➢ TABLE : 10 SORCES OF LOAN

If yes then from which source Numbers

Bank 16
Bank;Family 4
Bank;Family;Friends;Others 4
Bank;Friends 1
Family 1
Family;Friends 5
Friends 17
Others 2
Total 50

53
 ➢ BAR GRAPH

Bank Bank;Family
Bank;Family;Friends;Others Bank;Friends
Family Family;Friends
Friends Others

17
16

5
4 4
2
1 1

If yes then from which source

➢ TABLE : 11 AMOUNT OF LOAN

The amount of loan Numbers

50000 to 100000 7
Less than 150000 8
Less than 200000 10
More than 200000 10
NA 15
54
Total 50

➢ HISTOGRAMS

16

14

12

10 50000 to 100000
Axis Title

8 Less than 150000

6 Less than 200000

More than 200000
4
NA
2

0
The amount of loan
Axis Title

55
 ➢ TABLE 12 : MATURITY OF LOAN

Maturity of loan Numbers

1Years to 2Years 7
1Years to 2Years;More than 3Years 1
2Years to 3Years 12
2Years to 3Years;More than 3Years 1
Less than 1Years 4
More than 3Years 10
Others 15
Total 50

➢ HISTOGRAMS

16 15
14 12
12 10
10
8 7
6 4
4
2 1 1
0
Maturity of loan

1Years to 2Years 1Years to 2Years;More than 3Years

2Years to 3Years 2Years to 3Years;More than 3Years
Less than 1Years More than 3Years
Others

56
 ➢ TABLE : 13 FIRST LOAN

Was this your first loan Numbers

No 11
Yes 29
NA 10
Total 50
➢ LINE GRAPH

Was this your first loan

Was this your first loan

29

11 10

No Yes NA

57
 ➢ TABLE 14 : PERSONAL INVESTMENT

Personal Investment Numbers

15000 1
20000 3
50000 2
200000 4
250000 1
250009 1
300000 2
350000 1
400000 6
500000 4
600000 1
700000 1
100000 2
NA 21
Total 50

➢ COLUMN GRAPH

700000

600000

500000

400000 Personal Investment

Personal Investment
300000

200000

100000

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14

58
 ➢ TABLE : 15

Do you think you might need another loan Numbers

Maybe 12
No 12
Yes 26
Total 50

➢ COLUMN GRAPH

Do you think you might need another loan

30

25
26

20

15 Do you think you might need

another loan
10 12 12

0
Maybe No Yes

All the sample respondent were asked whether they might need an additional new
loan or not, to which 52% of the respondent told us that they needed a new Loan, 24% of
the respondent were not sure whether they would be opting for a new loan and rest of the
24% didn’t needed a loan

59
 ➢ TABLE :16

If yes, then it will be for Numbers

Growth 34
Repayment of previous loan 1
NA 15
Total 50

➢ PIE GRAPH

Numbers

NA
30%

Growth
Repayment of
68%
previous loan
2%

After we enquire whether the respondent would require a new loan we asked the
respondent what would they need the new loan for. To which we were said that 68%

60
needed a new loan for growth purpose, 30% did not needed a loan and the rest 2% needed
a loan to pay off their previous loan.

5.2 DATA ANALYSIS

TYPES OF ANALYSIS AND STATISTICAL TOOLS

The tools used for analysis of primary data consist of descriptive statistics like
Arithmetic mean, Standard Deviation, and Variances. The techniques used include
Factor analysis, Correlation Analysis, Regression, Chi Square, t-Test and ANOVA .

Factor Analysis

Factor analysis is a multivariate technique used to find out something more

fundamental among a set of observed variables in the research studies. It seeks to
resolve a large set of measured variable in terms of relatively few categories known
as Factors. This technique allows the researchers to group variables into factors. In
this study, the variables which enhance the satisfaction and thereby reduce the
finance gap are grouped in to five factors using factor analysis. There are several
methods of Factor Analysis. The study uses the Principal Component Method of
Factor Analysis by using Kaiser‟s Criterion.

Correlation Analysis

Correlation Analysis studies the joint variation of two or more variables for
determining the amount of correlation between two or more variables. In this study

61
Correlation Analysis Technique is used to study the relationship between the factors
identified through Factor Analysis and satisfaction of SME respondents towards
lending services. SME‟s satisfaction towards bank lending services is dependent
variable and factors identified are independent variables.

Regression Analysis

Regression is the determination of statistical relationship between two or more

variables. This technique determines the cause and effect relationship between
variables. Assessment of impact of factors on the satisfaction is made using
Regression Analysis. The SMEs availed bank support in terms of accessing finance
is considered for analysis, Dependent variable is Satisfaction and Independent
variable is key factor among the SME towards bank lending services.

ANOVA

Analysis of variance is the technique used when more than two categories of samples
are involved or multiple sample cases are involved. It is essentially a procedure for
testing the difference among different types of data for homogeneity. In this study,
one way ANOVA technique is used to make the comparison of Micro, Small and
Medium Enterprises on various banking factors.

t- Test

t- Test is used for judging the significance of a sample mean or for judging the
significance of difference between the means of two samples. In this study, t- Test is
used to assess the perception of Commercial Banks towards lending to SME sector
and perception of self –supported and bank supported SME‟s towards bank lending
services.

Chi-Square Test

Chi- Square Test is a non-parametric test which measures the difference between

62
what is observed and what is expected according to an assumed hypothesis. It is used
in the context of sampling analysis for comparing a variance to a theoretical variance.
In this study Chi-square is used to assess the self-reported performance of Bank
supported and self-supported SMEs.

RELIABILITY TEST

In order to test the consistency of the instrument which is used to collect the data,
Cronbach Alpha is used. Each factor from the Factor Analysis attained more than .7,
which indicates the total variance explained by true score is 70% that is quite good.

63
5.1 CONCLUSION

The external Business environment has always had a huge impact upon the health
of SMEs. Although there are many more SMEs then there were 20 years ago, These
organization now more than ever, require a support and help as a pursue and develop
their activities.

This case study illustrates how working with other departments, customs and excise
has focused its attention upon meeting the needs of SMEs in a way that enables
business to operate in a more certain environment so that each organization can have
far more control over its own future.

5.2 SUGGESTIONS

The suggestions that emanate from the findings of the survey and the responses
elicited from the respondents through elaborate discussions are presented hereunder:
1. The Government should take steps to educate the entrepreneurs with regard
to various schemes, incentives and other subsidies and all the Government
support should reach the entrepreneur on time and when required.
2. Most of the entrepreneurs should be made aware that there exists a separate
Stock Exchange for SMEs and various branches should be opened through
out the country.
3. Cloud computing should be encouraged to have accessibility of products
interlinked with each other.
4. The infrastructural facilities in the industrial estates should be improved in
order to inspire the entrepreneurs to strive for better productivity and
performance.
5. The Indian manufacturing capabilities should be developed to a level where
Indian products are competitive across global markets in terms of price,
quality, technology, delivery of services.
6. Indian firms should be enabled to access the latest technology across the
64
 globe.

Indigenous research and development of innovative methods need to be

encouraged.
7. The Government and financial institutions should introduce measure for
restructure/rehabilitation of potentially viable sick MSME units.
8. The industry, research institutions and academicians should be facilitated
and encouraged to work in collaboration in order to improve industry
capabilities.The linkage between the MSMEs and the educational
institutions should further improve.
9. The Banks should be encouraged to open more branches concentrating
exclusively on MSMEs to facilitate the entrepreneurs. These branches
should uniformly spread over in order to provide easy accessibility to
entrepreneurs who are spread over the entire city.
10. The Government should examine and explore the possibility of
encouraging Co- operative Societies/Banks to cater to the financial needs
of MSMEs.
11. The single window clearance cell should be made to function at a faster rate
and more effectively.
12. The MSMED Redressal Forum should be made more popular through
advertisements in the news papers, journals, magazines etc. Further, the
MSMED Redressal Forum should be strengthened further by promulgating
necessary laws/rules to govern such Forums.
13. Insolvency procedures can be adopted to conclude the insolvency
proceedings at a faster rate so that the insolvent entrepreneur need not bear
losses any further.
14. To improve standard of living through manufacturing growth, workers
should be enabled to move from lower value added to higher value added
jobs.
15. MSMEs and cottage industries should be encouraged to grow and become
competitive by giving education which will focus on fostering a culture that
encourages innovation in manufacturing so that the people are trained for
alternate avenues of employment.
65
16. The Government should assist in developing an exclusive marketing network
for better marketing of the products which will further result in increase in
sales.
17. India should develop into a strong player in the global market. To achieve this,
trade barriers should be further reduced progressively.
18. The FDI should be encouraged actively through creating business climate and
attracting NRIs for industrial investment.
19. The Central Government along with State Governments and industrial bodies
has to take a lead to identify SSI clusters, promote cooperation between
business and local authorities for cluster development, and formulate policies
that attract investment to these clusters.
20. India needs priority in development of MSMEs. Various strategies for the
development of infrastructure such as power, roads, highways, railways, ports,
transportation etc. For this, India needs priority in foreign/ private participation
that permits the formation of joint ventures for strengthening and the growth of
national network and state highways, power generation, communications and
economic zones.
21. Considering the urgency of taking an early lead in attaining technological
competitiveness of MSMEs, both in the domestic and industrial markets, it is
important to stimulate and usher in a technological revolution among MSMSs.
22. The ultimate aim of State Technology Mission should be to enable the MSMEs
to assimilate new technologies through appropriate utilization and
modification and also to strengthen indigenous technological infrastructure
including R & D institutions and enterprise linkages, industrial engineering
design, consultancy services etc.
23. It can be very useful if MSMEs deals with identification of new products and
technologies and proper transfer of the same advice and information on product
innovation, design, better management practices, financial resources,
marketing research, process automation and last but not the least tying up with
MNCs and large Indian companies as ancillaries for outsourcing their
requirement from MSMEs along with technology packages.

66
24. There has to be change in the mind set of individual entrepreneurs to recognize
the changing reality and to move as far as possible to change and adopt. This
can be catalyzed by efforts by industry associations. The associations and other
forms of intermediate local government structure on par with the needs of local
industry play a pivotal role in aiding government to develop a cluster approach.
It is necessary that the industry associations help in establishing both backward
and forward linkages for sustenance and development of small industries.
25. According to the recommendations from the various circulars and committee
reports of RBI from time to time to minimize the financial problem, the
authorities can minimize the time taken for sanctioning loans and ensure the
collateral free loans at the time of requirement.
26. For improving productivity, imparting of knowledge to the employees in
MSMEs is also suggested. Further, the artisans are to be trained to develop their
skills and also equip themselves to design according to the tastes and
preferences of the consumers in different markets such as rural and urban,
national and international.
27. In order to motivate the first generation entrepreneurs and to encourage
industrialisation, more number of barefoot management institutions should be
started so that more employment can be created, as there will be more job
providers than job seekers.
28. The Government should increase the mandatory provision for the PSUs and
other Government departments and institutions to make their purchase from the
MSMSE sector,
29. Timely and adequate infrastructure facilities like land and building, technical
consultancy, quality control, international quality standards should be provided
and maintained by the government agencies.
30. The small units can adopt a group approach to ensure efficient management
with a view to reduce the cost of production, better utilization of available
resources, labour resources etc.

67
 BIBLIOGRAPHY

1. Google

2. Wikipedia

3. Ministry of Statistics

4. Reserve Bank of India

5. IDFC Report on SME’s (June 2018)

68
ANNEXURE

Questionnaire:-

An analytical study on financial problems and growth constraint of SME w.r.t Mumbai city.

1. Name of the entrepreneur:

________________________

2. Sex:
A. Female
B. Male
C. Others

3. What is your age?

A. 19Years - 25Years
B. 26Years - 35Years
C. 36Years - 50Years
D. More than 50Year

4. Name of the business:

__________________________

5. Nature of business:

__________________________

6. Location of business:

__________________________

7. Shop registered:
A. Yes
B. No

8. License required:
A. Shop & establishment Act licences
B. Gumasta licences
C. Sales & Income tax returns
D. None

69
9. No of staff members:
A. One
B. Two or more
C. More than 10

10. Management and control:

A. Self
B. Employees

11. Annual turnover:

A. Less than 500000
B. 600000 - 1000000
C. 1100000 - 1500000
D. 1500000 and more

12. Do you have taken any loan for your business:

A. Yes
B. No

13. If bank, then from which sector:

A. Government
B. Private

14. If Yes than, from which source's:

A. Bank
B. Family
C. Friends
D. Other

15. The amount of loan:

A. 50000 to 100000
B. Less than 150000
C. Less than 200000
D. More than 200000

16. Maturity of the loan:

A. Less than 1Years
B. 1Years to 2Years
C. 2Years to 3Years
D. More than 3Years

17. How much time did it took for you to procure a loan

70
 A. Less than a month:
B. 1 to 2 month
C. 2 to 3 month
D. More than 3 month

18. Was this your first loan.:

A. Yes
B. No

19. If not than where did you got your first loan from?

__________________________

20. How much was it for?

__________________________

21. How much is your personal investment in it?

__________________________

22. Do you think you might need another loan?

A. Yes
B. No
C. Maybe

23. If Yes than, will be it for

A. Growth
B. Repayment

71