ISSUES & CHALLENGES IN MSME

ISSUES AND CHALLENGES IN MSME

Despite the pivotal role and strategic importance in the context of industrial development and economic growth of the country, the MSME sector experiences several constraints and challenges. Several key issues remain to be addressed properly and measures yet to be taken in the interest of sustainable industrial development. The Committee on financial architecture of MSME sector in their Report submitted in the February, 2015 have identified some key issues16. These include; i)Equity as a source of financing is underutilized and the prevalence of investment by venture capital and angel investors is low, ii) MSMEs face the problem of delayed payments from their buyers which adversely impacts their working capital as well as their next cycle of production, iii) MSMEs lack adequate information about various schemes and benefits available by the government, iv) Financial institutions/Banks face challenges in credit risk assessment of MSMEs, v) The utilization of the available credit guarantee and insurance schemes by banks has been low. Some of the major challenges confronted by these enterprises include; lack of adequate credit and capital, poor and inadequate infrastructural facilities, inadequate access and marketing linkages, technological obsolescence and inadequate application of new technology, lack of skilled human resources, dilatory and cumbersome regulatory practices for clearance and poor adaptability to emerging international trends. This calls for the need for strategic intervention to improve coordination and linkages between various stake-holders including the Government ,industries and other agencies/associations working in this field. i. Lack of Adequate Capital and Credit : One of the greatest challenges which constrain the growth of MSMEs in our country relates to inadequate capital and credit facilities. Easy and timely access to credit is crucial factor to development and growth of enterprises. The Report of the Working Group on Rehabilitation of sick MSMEs by the Reserve Bank of India has identified this situation as a crucial reason for industrial sickness of this sector. Complex collaterals instead by the banks, cumbersome sanction procedures and delay in disbursement and high rate of interest on term loans

ISSUES & CHALLENGES IN MSME

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