Small and Medium Enterprises (SMEs) in obtaining credit in India: Financial Analysis
| International Journal of Economics and Management Studies |
| © 2016 by SSRG - IJEMS Journal |
| Volume 3 Issue 6 |
| Year of Publication : 2016 |
| Authors : Dr.Y.V.Rao, Abdul Basheer Ahamed Beg |
10.14445/23939125/IJEMS-V3I4P111
How to Cite?
Dr.Y.V.Rao, Abdul Basheer Ahamed Beg, "Small and Medium Enterprises (SMEs) in obtaining credit in India: Financial Analysis," SSRG International Journal of Economics and Management Studies, vol. 3, no. 6, pp. 1-7, 2016. Crossref, https://doi.org/10.14445/23939125/IJEMS-V3I4P111
Abstract:
The Challenges faced by Small and Medium Enterprises in Obtaining Credit in Andhra Pradesh., was undertaken to highlight the issues facing SMEs in Andhra Pradesh. in their quest to accessing bank credit (loans) from financial institutions (banks & non– banks) to undertake various activities; be it general business operations or carrying out expansion project all in the name of fulfilling the objectives as being job creators and helping to reduce poverty. In tackling this topic, the quantitative approach was adopted. Questionnaires were circulated to 1200 SMEs in 4 selected districts, Guntur, Prakasam, Krishna and Visakhapatnam in Andhra Pradesh., through a technique of convenience sampling. Based on the responses received through these questionnaires, the following major findings came to the fore. There are institutions such as bank and nonbank financial institutions that are willing to provide funds to SMEs but Andhra Pradesh SMEs are not able to meet the requirements of these financial institutions. Chief among these requirements is the issue of collateral, which most SMEs cannot provide. Aside this is the other issue of small equity base of these SMEs among others. Secondly, those who are able to access this credit are also faced with high interest rates and short repayment periods making it very difficult to embark on any developmental or expansion projects. Another interesting revelation with regards to the high rate of defaults in repayment of loans contracted, relates to the tight Cash flow situations of these SMEs that is mostly due to difficulties in the management of the account receivables of the respective SMEs surveyed. The study concludes with some recommendations to help free up capital or credit to the SME sector. Among the recommendations are encouraging financial institutions (banks & nonbanks) to establish factoring services, enforcement of the credit reporting act and finally provision of tax incentives for banks that lend to SMEs to encourage others to do same.
Keywords:
SME financing, financial analysis, Credit standards, Govt. Schemes, Factoring services.
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