Learn It In A Easy Way The Reasons Why Startups FailAccording to the Ministry of Micro, Small and Medium Enterprises, SMEs contribute around 9 per cent to India’s GDP; accounting for as much as 30 per cent of India’s total exports and 45 per cent of the country’s manufacturing output. The SME sector employs over 100 million people who are engaged in activities across industries.

Unfortunately, SMEs still lag from becoming true global contributors and a major reason behind it is lack of adequate finance. Besides, lack of infrastructure, increased costs, reduced profitability, elongated working capital cycles, unavailability of skilled talent and bureaucratic hurdles plague them.

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Financing to SME is a subject of great importance and policy makers across the globe, pay special importance to it. Credit in banking is considered to be the core business with high risk and return for its sustainability. So, today we will highlight the major pain-points faced by SMEs while accessing finance and some reliable solutions to deal with it.

Factors affecting SME finance

Lack of Collaterals & Infrastructure Poor Financials Lack of Experience Lengthy and Complex documentation

Ways of enhancing SME Finance Through a Banker’s Perspective

To realize the expectations of end-users of credit, management of banks should review skill development and role transformation module of training for field staff. The necessary help, if required may be taken from management institutes in banking industry such as IIBF, NIBM, IIBM, IBPS or consultancy firm of national repute to work out programme design for attitude transformation of humanware.

Awareness was found lacking about government programmes being implemented through banks for development of SME sector. So campaigns should be run to raise awareness for both bankers and SMEs to avail full benefits of these programmes.

Banks require streamlining MIS for reliability and consistency in data for analysis.

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Similarly, appraising the loan application, timely disposal and bringing transparency in processing system of loan application by providing online tracking to applicants (SME) are other ways to enhance the process.

Loan for Technology upgradation

Technology backwardnesss and lack of innovation have been causes of failure of SMEs. Often, SMEs do not have enough funds for technology upgradation. Banks should therefore consider loan for capex investment in technology upgradation and innovation of SMEs; otherwise it may lead to diversion of funds from working capital subsidy or interest subvention.

Conclusion

Making development for SMEs at their own effort is a difficult task. It needs regulatory as well as financial support of banking as well as non-banking institutions. For banks, a major lesson could be learnt from FinTech Firms on the operational efficiency for processing loans to SMEs.

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