Problems of Micro, Small and Medium Enterprises

Borrowers, Government initiatives to support their

growth and Steps taken by SUDICO Bank to
mitigate it

Introduction to Micro, Small and Medium

Enterprises (MSMEs)
MSME sector in India is the key driver of the
nation's economic growth with a contribution of over
40% of the country's industrial output and about 35%
of direct exports and another 15 % of indirect exports.
In
terms
of
employment,
it is a very crucial sector being the second largest
sector after agriculture.
In recent years the MSME sector has consistently
registered
higher
growth
rate compared to
other industrial sector.

 The growth recorded by SSI in India is 2%

more than any other sector; it accounts for
40% of the countrys GDP, 35% of Direct
exports, 15% of Indirect Exports (through
Merchant Exporters, Trading Houses & Export
Houses) and employs more than 20 million
people. The SSIs needs just Rs. 60,00070,000
to generate employment for one man, while for
the same a whopping 5-6 lakhs is required for
other sectors.

 MSME sector faces a number of problems1. Absence of adequate and timely banking
finance
2. Limited knowledge and non-availability of
suitable technology
3. Low production capacity
4. Ineffective marketing and identification of new
markets
5. Constraints on modernization and expansions
6. Non availability of highly skilled labor at
affordable cost
7. Lack of interaction with government agencies.

MSME Classification
Particulars

Manufacturing Sector

Service Sector

ORIGINAL INVESTMENT IN

ORIGINAL INVESTMENT IN

PLANT & MACHINERY

EQUIPMENTS

MICRO ENTERPRISES

UP TO RS.25.00 LACS

UP TO RS. 10.00 LACS.

SMALL ENTERPRISES

FROM RS.25.00 LACS TO

FROM RS.10.00 LACS TO

RS.500.00 LACS

RS.200.00 LACS.

MEDIUM ENTERPRISES

FROM RS.500.00 LACS TO FROM RS.200.00 LACS TO

RS.1000.00 LACS

RS.500.00 LACS.

MSMEs have been established in almost allmajor sectors in the Indian industry

Chemical & Pharmaceuticals

Electrical, Electronics
Bio-engineering
Engineering
Food Processing
Electro-medical equipment
Textiles and Garments
Sports goods
Plastics products
Meat Products
Computer software
Leather and Leather goods etc.

PESTEL ANALYSIS
1. POLITICAL AND LEGAL FACTORS
2. ECONOMICAL FACTORS
3. SOCIAL FACTORS
4. TECHNOLOGICAL FACTORS

 Current trends
Major Players
Major Offerings

Introduction to Company
Company Profile
Organization Structure
Divisions/ Departments

SWOT ANALYSIS
1. STRENGTH
2. WEAKNESS
3. OPPORTUNITIES
4. THREATS

Review of Literature

1. BRAHMANANDAM, G, N., RAI, H.L.,

DAKSHINA MURTHY, D, (MAY 1981)
Financing Small Scale Sector. The Role of Indian
Banking today and tomorrowthe above article was prepared on the role of banks in
financing the SMEs in the year 1981. At those times
the Indian banking was not all interested in financing
the SMEs, because of their credit worthiness. Later
due to changes in the industrial policy of India, the
commercial banks come forward made immense help
to the growth of SMEs. This article was written
before the economic reforms taken place.

 Here is a gap for more analysis about the role

of the banks in the post economic reforms. My
study on this topic totally focused on the credit
facilities available to the SMEs in the wake of
MSME act 2006. Due to the presence of the
gap about the present to day activities are
different to those of 1980s.

2. CHOPRA, K.C ( Auguest 2006)

Financing for the Decentralized sector small and

medium industries
The above article prepared on the thesis, reveals the
financing for the SMEs in the decentralized sector.
This article helped me in selecting the path for my
study on credit facilities for SMEs. The article vividly
discussed about the possible ways to finance the
SMEs in the decentralized sector like agricultural
based and artisan based SMEs. Really there is a gap
between the centralized and decentralized sectors in
getting the finance from the banks.

 The banks are very much lenient in providing

loan facilities to the centralized sector.
Through this study, he made an attempt to
study the intricacies faced by the decentralized
sector SMEs, well known for its agricultural
based industries.

3. JAILAL SAAW (April 2005)

Growth of small scale industries in India
JOURNAL OF INDUSTRY AND TRADEThe growth of small and medium industries in
India was discussed in the above article. The
expected growth was not there because of lot
of root causes to sickness and under
development in the SME sector. This article
discussed about the slow growth rate of SMEs,
due to several problems.

4. JAYA PRAKASH REDDY, R.,

BRAHANANDAM G.N ( JANUARY1987)
Small Scale Sector: problems and prospectsThe above article deals with the various
problems like marketing, raw material, labour,
technical and financial problems. The focus on
the finance related issue is very limited. They
gave more importance to the procurement of
raw material and marketing and labour
problems in SME segment. But not discussed
about the credit facilities for the SMEs.

5. KAURA, M.V., SHARMA G.L (MARCH 1999)

Financing Small Industries institution should
Change Their Attitudes, Procedures JOURNAL
OF INDUSTRY AND TRADE,- The above article
discussed very vividly the attitudes of the financial
institutions where belong to Central Government or
State Government or the Governmental Agencies
promoted for these propose. In the wake of the
MSME act 2006 passed in the interest of the small
scale sector by the Government of India, the attitude
of the financial institutions towards SME sector was
totally changing The employees of above said
financial institutions are very much helpful and
friendly with the promoters of the SMEs

6. NAMBIAR P.C.D., FINANCING FOR PRIORITY

SECTORS S.B.I MONYHLY REVIEW DEC 16,
2007The article on the above topic paved the way for the
thinking strategy for the financing the small scale and
medium scale industries by the bank offers. The
Government of India through its industrial policy
clearly stated that the commercial banks should give
priority treatment to the SMEs. The nature of the
banking officials also discussed in the article. But that
is not sufficient to promote the SME sector because the
sector was totally neglected for the last several decades
due to invasion of the MNCs. By enacting the MSME
act, 2006 the government of India clearly indicated the
signal to the banking people to provide the credit
facilities to the SMEs. This article is very much helpful
in preparing the script for my thesis.

7.

RAMACHANDRA, K.S., REVIVING

SICK UNITS, FINANCIAL EXPRESS
ACT 9, 2001
The above article discussed the reviving the
sick SSIs in various aspects, like providing
technology, management training, skilled
labor, export promotion and giving finance.
The root cause for all the above problems is
the financial problem. The financial institution
should provide sufficient amount at the easy
disbursal system to promote the SSIs.

8. SAHNEY, M. (DECEMBER 2005)

BANKS ASKED TO STEM INDUSTRIAL
SICKNESS INDUSTRIAL INDIA VOL 36 Through this the author tries to express the need for
banks intervention in the promotion of the SSIs. The
officials of the banks in India are belong to middle
class families and unaware of the industrial
promotion and its need. Mere advice to the bankers is
not helpful. So for that reason SRIMATY INDIRA
GANDI nationalized all private banks for the
development of agricultural sector in 1971. The
MSME act 2006 instigates the banks to provide the
credit facilities without any hesitation to the SSIs.

9.

SOUNDARRAJA, FINANCING SMALL

SCALE INDUSTRIES, A REPORT, RESERVE
BANK OF INDIA BULLETIN 1980
The reserve bank as a central bank and bankers
bank and the prime lending bank to the
government should take initiatives to promote the
SSI sector. The author is very interested in
financing the small and medium scale industries
in India, because it is providing more employment
than any other sector. It arrests the migration to
the cities from the villages in search of better jobs
and better facilities. This topic has given me the
encouragement to think in this way for the
betterment of village and cottage industry
development.

Research Methodology
Need of the study
The researches that were conducted in past by the
various professionals are in foreign context and not in
Indian context. Study relating to MSMEs, their
problems and source of financing has been done but
regarding the MSME financing schemes of Cooperative
sector banks has not been much done. This gap has
been identified and it has led to the present research to
be undertaken. So, the need was felt to cover the areas
neglected. Thus, here a study on problems faced by
MSME to avail finance from Cooperative banks.

 Problem statement
To study the problem faced by Micro, Small
and Medium Enterprises (MSMEs) to avail
finance from SUDICO Bank.

 Research Objective To study the Micro, Small and Medium Enterprises Sector
(MSMEs), its contribution to GDP, in employment
generation and strategic importance for growth of economy.
The study about credit facilIties provided to MSMEs and
problem faced by them to get loans and advances from
bank.
To understand the credit assessment criteria of loans and
advances to MSMEs and reasons for rejection of loans and
advances.
To study factors create obstacles in growth of MSMEs.
To analyze governments support in obtaining credit
facilities.
RBI Guideline and Committees.
To study growing importance of credit ratings in MSME
Financing.

 Research Design Type of design

The research design adopted for this study is
Descriptive research. A descriptive research
study tries to discover answers the questions
who, what, when and sometimes, how. The
researcher attempts to describe or define a
subject often by creating a profile of group of
problems, peoples or events.

 Data Collection Primary data collection

Approach: Primary data collection will be done by
communication approach.
Communication method: Survey via personal
interview.
A structured interview method is intended to be used by
recording respondents answers on a questionnaire form
having pre-specified response format.
Instrument: Questionnaires
Secondary data collection:
Secondary data is intended to be collected through
websites, newspapers and journals.

 Sampling plan
Target Population
Micro, Small and Medium Enterprises from Surat
city and which have availed finance from
SUDICO bank.
Employees of SUDICO bank from Development
& Recovery Department.
Sample size: 200 respondents (borrowers)
3 employees (from Development & Recovery
Dept.)
Sampling area: Surat and nearby surroundings
(vapi, valsad, navsari, bilimora)

 Sampling Method:
Non probability - Convenience Sampling Method.
In non probability sampling, members are selected from the
population in some nonrandom manner. Population elements
are selected on the basis of their availability (e.g., because they
volunteered) or because of the researcher's personal judgment
that they are representative.
Among the various non probability sampling methods the
chosen method is Convenience sampling.
Convenience sampling is used in research when the researcher
is interested in getting an inexpensive approximation of the
truth. As the name implies, the sample is selected because they
are convenient. This non probability method is often used
during preliminary research efforts to get a gross estimate of
the results, without incurring the cost or time required to select
a random sample.

Tools of Data Analysis and Presentation:

To analyze the data obtained with the help of
questionnaire, following tools were used:
Tools of Analysis: Chi Square Test
Summated Score
Weighted Average Score

As this research deals with nominal and ordinal

type of data, nonparametric measures of
association (Chi- square test and contingency
coefficient) are appropriate choice for this study.

 Limitation of Study The study is limited to time period.

Banks have some confidential reports which cant
be handover to outsider, so in depth research is not
possible.
There is lot of MSMEs unregistered, due to this
full details arent available for evaluating the
importance and problems of MSMEs.
There are lots of difficulties in getting the data of
MSMEs
This research study is limited to Surat city only so
it doesnt represent the whole universe of MSMEs.

Bibliography
Books1. Kishore, Ravi. Strategic Financial Management, New
Delhi: Taxmanan, 2011, page no 73-74
2. Bhaskar,B. and Saruvanan,I. SME Entrepreneurs
challenges & opportunities,Mumbai,2010
3. Khan,Y.M. and Jain,P.K. Financial Management, New
Delhi : Tata McGraw Hill Publishing Co. Ltd

 Journals1. Kaura, M.V. and Sharma, G.L. (1999). Financing Small

Industries Institution Should Change Their Attitudes,
Procedures. Journal of Industry and Trade, 34(3).
2.

3.

Mercieca, S. and Scheack, C. (2009). Bank Market

Structure, Competition And SME Financing Relationships
In European Regions. Journal of Financial Services
Research, 36(2-3), 137-155.

FIN92-93/RR 07 Finance and Development of Small

Scale Industries in the North-East region- A Survey &
Role of Banks- S V Kuvalekar, V S Kaveri
4
Popli, G.S. and Rao, D.N. (2009). An Empirical Study Of
Smes In Electronics Industry In India: Retrospect &
Prospects In Post WTO Era. Global Business Review, 3(2)

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Reports (Hard Copy refered) 103rd Annual Report of The Surat District Cooperative Bank
NABARD Regional Training Annual Report
(2010) on Financing MSMEs