Access to Finance: Challenges Faced by Micro, Small, and Medium Enterprises in India

Abstract

Access to finance plays a major role in the entrepreneurship development and economic growth of any country. It encourages new entrepreneurial initiatives. Timely access to finance sustains the survival and growth of micro, small, and medium enterprises (MSMEs). The purpose of this paper is to explore the challenges of access to finance faced by the MSMEs and to analyze their impact on their business performance. The survey was conducted in 400 MSMEs from various industrial clusters across India. The samples were selected using the quota sampling technique. The conceptual framework was developed and tested using the structural equation model (SEM). Results show that firm attributes, sources of finance, and the life cycle of an MSME have a significant positive impact on its access to finance, whereas financial obstacles have a negative impact that prevents the growth of MSME and affects the economic growth of the nation.