Micro, Small and Medium Enterprise Finance in India : A Research Study on Needs, Gaps and Way Forward
This study aims to provide an assessment of the Micro, Small and Medium Enterprise sector (MSME) finance in India. The chapters in the study highlight the key characteristics of the MSME sector, and assess the demand for, and the flow of finance in...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
International Finance Corporation, New Delhi
2017
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| Online Access: | http://documents.worldbank.org/curated/en/833391492755845785/Micro-small-and-medium-enterprise-finance-in-India-a-research-study-on-needs-gaps-and-way-forward http://hdl.handle.net/10986/26553 |
| Summary: | This study aims to provide an assessment
of the Micro, Small and Medium Enterprise sector (MSME)
finance in India. The chapters in the study highlight the
key characteristics of the MSME sector, and assess the
demand for, and the flow of finance into the sector. The
study also evaluates the consequent gap in the financing
needs of MSMEs. Finally, it explores potential interventions
to address the lack of access to formal finance for MSMEs.
The Micro, Small and Medium Enterprise sector is crucial to
India’s economy. There are 29.8 million enterprises in
various industries, employing 69 million people. The sector
includes 2.2 million women-led enterprises (~7.4 percent)
and ~15.4 million rural enterprises (51.8 percent). In all,
the MSME sector accounts for 45 percent of Indian industrial
output and 40 percent of exports. Although 94 percent of
MSMEs are unregistered, the contribution of the sector to
India’s GDP has been growing consistently at 11.5 percent a
year, which is higher than the overall GDP growth of 8
percent. Poor infrastructure and inadequate market linkages
are key factors that have constrained growth of the sector.
The lack of adequate and timely access to finance has been
the biggest challenge. The financing needs of the sector
depend on the size of operation, industry, customer segment,
and stage of development. Financial institutions have
limited their exposure to the sector due to a higher risk
perception and limited access of MSMEs to immovable collateral. |
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