According to the Ministry of Micro, Small and Medium Enterprises, SMEs contribute around 9 per cent to India’s GDP; accounting for as much as 30 per cent of India’s total exports and 45 per cent of the country’s manufacturing output. The SME sector employs over 100 million people who are engaged in activities across industries. Unfortunately, SMEs still lag from becoming true global contributors and a major reason behind it is lack of adequate finance. Besides, lack of infrastructure, increased costs, reduced profitability, elongated working capital cycles, unavailability of skilled talent and bureaucratic hurdles plague them.

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Learn It In A Easy Way The
Reasons Why Startups Fail
According to the Ministry of Micro, Small and Medium Enterprises,
SMEs contribute around 9 per cent to India’s GDP; accounting for
as much as 30 per cent of India’s total exports and 45 per cent of
the country’s manufacturing output. The SME sector employs
over 100 million people who are engaged in activities across
industries.
Unfortunately, SMEs still lag from becoming true global
contributors and a major reason behind it is lack of adequate
finance. Besides, lack of infrastructure, increased costs, reduced
profitability, elongated working capital cycles, unavailability of
skilled talent and bureaucratic hurdles plague them.

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Financing to SME is a subject of great importance and policy
makers across the globe, pay special importance to it. Credit in
banking is considered to be the core business with high risk and
return for its sustainability. So, today we will highlight the major
pain-points faced by SMEs while accessing finance and some
reliable solutions to deal with it.
Factors affecting SME finance
 Lack of Collaterals & Infrastructure
 Poor Financials
 Lack of Experience
 Lengthy and Complex documentation
Ways of enhancing SME Finance Through a Banker’s
Perspective
 To realize the expectations of end-users of credit,
management of banks should review skill development
and role transformation module of training for field staff.
The necessary help, if required may be taken from
management institutes in banking industry such as IIBF,
NIBM, IIBM, IBPS or consultancy firm of national repute to
work out programme design for attitude transformation of
humanware.
 Awareness was found lacking about government
programmes being implemented through banks for
development of SME sector. So campaigns should be run
to raise awareness for both bankers and SMEs to avail full
benefits of these programmes.
 Banks require streamlining MIS for reliability and
consistency in data for analysis.

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 Similarly, appraising the loan application, timely disposal
and bringing transparency in processing system of loan
application by providing online tracking to applicants
(SME) are other ways to enhance the process.
Loan for Technology upgradation
Technology backwardnesss and lack of innovation have been
causes of failure of SMEs. Often, SMEs do not have enough funds
for technology upgradation. Banks should therefore consider loan
for capex investment in technology upgradation and innovation of
SMEs; otherwise it may lead to diversion of funds from working
capital subsidy or interest subvention.
Conclusion
Making development for SMEs at their own effort is a difficult
task. It needs regulatory as well as financial support of banking
as well as non-banking institutions. For banks, a major lesson
could be learnt from FinTech Firms on the operational efficiency
for processing loans to SMEs.