Key Hindrances Faced By MSME

April 1, 2017by yograj rathod0

Whatever yardstick one uses, the importance of MSMEs cannot be overlooked. Accounting for roughly half of the industrial production and exports and employing the largest number of people after agriculture, its achievements are gigantic.

What is not appreciated is that it is producing these results much below its potential. Providing a gainful employment to the country coming out in job market every year, there is no sector as promising as MSMEs sector.

Being a highly unorganized sector with fragmented nature of reach, the sector has always felt ignored in enjoying the full flow of Government policies and financing company’s empathy and understanding. Some of the key concerns are mentioned below.

Key Concerns:

  • Access to Finance:
    • There are number of financial products which are required by specific segments within the MSME sector and which are either not available or are not priced right. Because of this reason, major number of deserving segments in MSME sector goes underserved.
    • Accessing credit on easy terms has become difficult which has held back the growth of this sector and impeded overall growth and development.
  • Bank Credit/ Loans:
    • Banks show reluctance to extend credit to small enterprises because of the following reasons
      • Lack of collateral
      • High risk perception
      • Asymmetric information
      • Not all small enterprises are fortunate enough to obtain right amount of business funding at the right time.
      • All banks do not show enthusiasm in providing loans under CGTMSE scheme, though they are supposed to do so.
      • Bankers and officials lack knowledge about this sector and reject proposals on unfair means
      • Delay in sanction of loans due to unseen grounds.
  • Lack of Access to new technology:
    • Technology helps you perform more efficiently and optimally incorporate new strategies, which small enterprises are unaware or find it difficult to adapt new technologies.
    • Even if they are aware, they are not financially supportive to have access of these new technologies. So, formally they are tied off to limitations under which they have to perform that do not bring out their actual potential.
  • Poor Infrastructure:
    • Problems of storage, designing, packaging, product display
    • Low capacity of production
    • Poor accessibility to resources like raw material, power, water supply.
    • Challenge of getting skilled low cost labour
  • Competition
    • This sector requires less initial funding to start a business, so there are lot many enterprises that enter into as MSMEs, creating competition for the existing one.
    • Does not require much skill to run a micro unit, any person with small capital can be a part of MSME.
  • Lack of Management Skills and Information:
    • Most of this sector is home grown units where the entrepreneurs lack management skills and outlook effectively; manages and helps the enterprises optimally.
    • Poor management of finance, manpower as well as other resources.
    • All efforts are unnoticed in the market without proper marketing strategies.
    • Lack of information prevents many small enterprises from making their potential unable to showcase the outside world.
  • Identifying Market:
    • Identifying the buyer to sell the products is one of the biggest challenges because they do not have a credible brand name and a lot competition for them.

Though Government has taken several policy initiatives, they need to ensure proper co-ordination and implementation of such schemes. Further, the Government schemes must be monitored and effectively modified to suit the needs to the MSME industry.

MSMEs need to be completely aware of the various initiatives by the Government and correctly utilize to their benefits. One of the key constraining factors becomes awareness and therefore lack of knowledge to utilize these effectively.

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