Scope for alternative avenues to promote financial access to MSMEs in developing nation evidence from India

Abstract

PurposeThe purpose of this study is to highlight the key challenges and opportunities that lie with some of the alternative avenues/tools to promote financial access to MSME in India.Design/methodology/approachInitially, the study discusses the scope of various alternative avenues/tools for MSME financing along with traditional bank SME credits, highlighting some of the factors that will boost the high performance and growth of MSME in future.FindingsThere is a dominance of domestic banks in the MSME financing over cross-border banks in India. The study finds several opportunities lie in the MSME financing for the banks and other alternative avenues/tools: friendly government policies and improving the legal system make the business environment suitable for MSME financing business. There are several obstacles like discrete presence of clients, high operating cost and low profitability, lack of proper risk management and low literacy rate that make MSME financing difficult for the SME finance business. Active government initiatives and other supporting factors will act as the game changer and promoter for the banks and other alternative avenues/tools for MSME financing.Originality/valueThe paper is original and brings out some valuable findings that will help the SME business clients to choose alternative access to finance.