Issues in SMEs

Introduction
The small and medium enterprises (SMEs) have
been recognized as engines of equitable economic
growth and development. They constitute a
majority of total enterprises in most of the
economies and account for a major share of
industrial production. Small and medium
enterprises (SMEs), particularly in developing
countries, are the backbone of the nation's
economy.

Main Challenges
Challenges are as follow:
i.

Absence of adequate and timely banking finance

ii.

Non-availability of suitable technology

iii.

Ineffective marketing due to limited resources

iv.

And non availability of skilled manpower

Issues related to production in SMES

Small size
Location
Raw material procurement
Transportation and connectivity
Machinery and equipments
Government policies and regulations.
Lack of skilled human resource.
Financing of the production.
Marketing
Technology
Environmental issues.

Small size
Economy of scale is not obtained.

Poor supply chain management.

Cost of doing business is increased.
Low production capacity.

Location :
The choice of location is one the key problems for
entrepreneur to decide and produce.
i. Land availability and cost.
ii. Availability of water, power.
iii. Availability of skilled labour .
iv. Consumption pattern of population.
v. Climate of the place.

Raw material procurement :

In some cases raw material availability is extremely

difficult.
Imbalance between demand and supply of raw
material
Great price variance persists.
Existence of bogus units.
Delay in controlled raw material delivery.

Transportation and connectivity :

High cost of fuel.

Bands and strikes called by transporters.
Bad conditions of the roads.

Exploitation by the goons in the form of un-

authorized toll taxes

Machines and equipments :

Use of traditional machines causes Low productivity.

Maintenance cost .
High cost of modern machines and equipments.

Govt. policies and regulations :

Labour laws of the state.

Laws of land acquisition.
Import limit for certain raw materials.
Pollution regulation.
Political interference.

Lack Of skilled Human Resource

The shortage of appropriately skilled labour across

many SMEs is emerging as a significant and complex

challenge to enterprise growth and production
process and simultaneously, training the labour also
poses as a imperative challenge.
Inefficient Handling Of Human Resources
Excessive Manpower
Lack Of trained Skill Labour
Poor Labour Productivity

Finance

Financial inadequacy is also reported to be one of the

most important challenge to production issues in
SMEs. The most important financial challenges are
as follow:

Start up seed capital is inadequate

High risks in raising capital from the non-banking

sector at high rate of interest

Poor capacity to re-pay installments in time

 Inadequate working capital available

Inadequate fixed capital investment
Not in a position to offer the guarantee

required by the banking sectors

Looked with suspicion by the provider of

finance

Marketing

Marketing is another important issue in the

production issue of SMEs:
i. Lack of standardization
ii. Poor designing
iii. Poor quality
iv. Lack quality control
v. Lack of knowledge of marketing
vi. Financial weakness

 Technology :

One of the major handicaps of the small and medium

scale sectors in production has been the absence of the
latest technology which can alone can ensure quality
and high rate of productivity. The SMEs, therefore,
should keep abreast of development in technology, the
hindrances can be enumerated as:

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i.

Lack of Information Technology skill.

ii.

In adequate knowledge of computer operated

machinery.

iii. Lack of quality assurance testing equipments.

Environmental Issues
Like the large firms, the SMEs also contribute to

environmental degradation because of absence of

control on the use of production methods.
At the ground level the SMEs and the large firms are
equally ignorant and careless about their role in
environmental degradation.
It is essentially due to poor institutional capacity and
little emphasis on environment in fiscal policy and
insufficient allocation of funds for environmental
protection of forestry, biodiversity, water and
sanitation.

Administrative Hurdles

Over Centralisation
Lack Of Professionalism
Poor Management Information System

Excessive Expenditure On R&D