PROBLEMS OF SMALL AND MEDIUM ENTREPRENEUR

1] PROBLEM OF FINANCE:
Scarcity of finance and credit is the main obstacle in the
development of small scale unit. The artisans and craftsmen have
little capital. They take credit from money lenders who charge a
very high exploitative rate of interest. Due to their weak credit
worthiness and poor economic base , they find it difficult to take
loans from the commercial banks also it is partly due to scarcity of
capital in the country as a whole.

2] Problem of raw material:

SSIs are facing the problem of short supply of raw materials. They
cannot the service of middlemen to get raw materials due to their
weak financial position. In some areas there is absolute scarcity or
raw material it has a poor quality and high cost, for instance the
handloom industry depends on the condition that the weavers will
sell the cloth only to them when it is ready.

3] Inadequate infrastructure:
In a survey of 1063 small unit, Keshsar das and morris found
that 716 units faced significant infrastructure problem.SSIs are
being constrained by inadequate physical facilities like
electricity,water,roads,transportation,communications,bank
and other basic service particularly in backward areas

4]Outdated technology:
Most of the small units depend upon old techniques of production, they
use outdated machinery and equipments, many are using second-hand
tools and machines.

5] Problem of under utilized capacity:

Many studies have made it clear that there is gross under-utilization
of installed capacity in small scale industries. After looking at findings
of various surveys, it can be inferred that on an average 50 to 40 % of
capacity is not utilized in small scale industries.

6]problem of power and water:

Related to under-utlisation of capacity of power and water problems
faced by small scale units, power supply is not always available in rural
areas besides small entrepreneurs cannot afford to go in for power
alternatives. Water supply is also not regular in villages. This affects their
productivity adversely

7:unskilled labour:
Labour has an active part in small scale units. But,workers lack
training in facilities in small scale sectors.most of the worker are
unskilled,inefficient,un trained, and having low level of
education.hence, they fail to cope up with the challenges of
modern production system

8] unsuitable location:
Selection of proper location of workshop and plant is also a major
problem before the SSIs. The choice of location depends on various
factor like availablity of infrastructural facililty., cost of location,
availability of skilled labour, markets and raw material.

9] problem of marketing:
One of the problems faced by SSIs is in the field of marketing . These
units do not have any marketing organization. They lack transport,
storage and warehousing facilities. They do not have sale organization,
they do not make use of advertising and publicity method.

10]Poor project planning:

due to the low level of education and experience small entrepreneurs
often depends upon consultants and hired experts for project
formulation. They do not fully understand the project details. Thus, poor
planning of project increase the cost and expenses.

Prospect's of SMEs:
The small-scale sector has assumed a different characteristic in the
post-liberatiration period as compared to the earlier planned period.
There are now two aspects to the small-scale sector. One that is modern
efficiency oriented and largely export led. The other that is traditional,
represented by tiny and cottage enterprises with reasonable
employment potential.
So far the responses of the small scale sector to the policy initiatives
have been positive and encouraging. Reforms have brought better
profitability, better capacity utilization and cost competitiveness. The
sector has shown remarkable capability to adjust to the reform
programms with reasonable degree of flexibility. It has also performed
better than the large-scale sector in terms of rate of growth. Some of
the fast emerging areas in the sector include modern ago-based units
and units providing services to business.
However, the good performance of the small scale sector has been
possible due to the contribution of certain modern, hi-tech industries
only, while other traditional industries in the sector continue to
experience problems of sickness, out datedness and low productivity.