MSME Financing Gaps – A Review of Literature for the Period 1960 To 2020

Abstract

Micro, small and medium enterprises have been an area of great interest for many researchers. As per reports, credit is a crucial input for promoting growth of the MSME Sector. The review aims to find out the role of MSMEs in development, major hindrances to MSME growth and what influences such hindrance. MSMEs have been revolutionary in development of economies, especially in developing countries. The study has further found financial constraints as a major hindrance to MSME growth. MSMEs find it difficult to obtain credit from formal sector, and banks find it difficult to give credit to the sector. However, formal lending sources are indispensable to MSME development. Reliance on informal sector is not a healthy option for the small sector. The important factors that influence lending towards MSMEs are competitiveness, legal framework, credit policies and lack of information about SME borrowers, firm characteristics and firm size. Various schemes have been introduced over time directed at MSME development which have uplifted the sector but remains ineffective in many areas. Also, very limited studies have been found on unregistered and informal MSMEs as well as government funded organizations dealing with MSME financing