3. INTRODUCTION
The Micro, Small, and Medium Enterprises
Development Act, 2006 (MSMED Act) was passed by
the Indian Parliament.
According to the MSME act, “Any buyer who fails to
pay MSMEs within agreed-upon terms or within a
maximum of 45 days will be charged monthly
compounded interest at three times the Reserve Bank
of India’s authorized rate.”
4. According to the Micro, Small and Medium Enterprises
Development Act, 2006, MSMEs are classified into three categories:
Micro enterprise Small enterprise Medium enterprise
5. MICRO ENTERPRISE
MEANING:
An enterprise where the investment in the plant and machinery or
equipment does not exceed ₹1 crore, and turnover does not exceed ₹5 crores.
EXAMPLE:
• Street vendors
•Local bakery shops
•Independent carpentry services
•Independent shoemakers
6. SMALL ENTERPRISE
MEANING:
An enterprise where the investment in the plant and machinery
or equipment does not exceed ₹10 crores, and turnover does not
exceed ₹50 crores.
Examples:
•Candles
•Chocolate
•Stationery items
7. MEDIUM ENTERPRISE
MEANING:
An enterprise where the investment in the plant and machinery
or equipment does not exceed ₹50 crores, and turnover does not exceed
₹250 crores.
Examples:
•Manufacturers
•Wholesalers
•Recruitment service providers
8. FEATURES OF MSMEs
MSMEs provide several benefits to the development of the economy.
They provide room for employment for millions of artisans and workers.
They also promote entrepreneurship and the development of specialized skills.
Additionally, they support the development of modernized technology, infrastructure and the
development of the sector as a whole.
They help in harnessing the growth of domestic as well as international markets.
MSMEs are playing a major role in the Government's 'Make in India' initiative to give an
impetus to manufacturing in India and make India a global manufacturing hub.
9. CHALLENGES FACED BY MSMEs
The following are the challenges faced by MSMEs:
MSMEs have shown tremendous growth in India in the past few years but despite the growth,
there are many challenges faced by this sector.
Financial challenges are the foremost when it comes to the progress of the MSME sector. Most
MSME proprietors are unable to secure loans from banks due to a lack of proper collateral and a
steady stream of income.
MSMEs depend heavily on informal workers who lack the skills and expertise to boost
productivity. Hence, India's MSMEs are far behind their counterparts in other countries.
10. CHALLENGES FACED BY MSMEs
Furthermore, the absence of managerial,
entrepreneurial and marketing skills remains a big
challenge in the growth of the sector. Boosting sales and
customer acquisition require the right mix of marketing
strategies.
Additionally, due to a lack of awareness, most MSMEs
miss out on having modernized technology thus
hindering their growth.
13. LOWER STARTUP COSTS
MSMEs often have lower
infrastructure and investment expenses
than bigger companies, which makes it
simpler for entrepreneurs to launch new
firms and enter the market.
14. COLLATERAL FREE BANK
LOANS
The Indian Government has made collateral-free
financing available to all small, medium and micro
businesses.
Both new and established firms can file benefits
claims under this scheme.
The Credit Guarantee Trust Fund Scheme was
introduced by the GoI, SIDBI, and the Ministry of
Micro, Small & Medium Enterprises to ensure this
scheme (Credit Guarantee Scheme) is implemented
for all Micro and Small Enterprises.
15. MORE FLEXIBILITY AND AGILITY
MSMEs could react to market
developments more effectively and modify
their business plans since they are
generally more flexible and agile than
bigger companies.
16. POTENTIAL FOR JOB CREATION AND
ECONOMIC GROWTH
MSMEs in India is a major source of job
opportunities, particularly in rural and semi-
urban areas.
MSMEs contribute to almost 30% of India’s
GDP, significantly boosting the country’s
economy.
17. PILING OF INTEREST
oThe first issue is the amount of interest that
must be paid. The interest that must be paid on
loans accumulates rapidly.
oDespite being the interest rate lower than
other loans, the interest accumulates and costs
much money when paid.
19. DIFFICULTY SCALING UPAND
EXPANDING
MSMEs often struggle to scale up their operations
and expand their businesses, as they lack the needed
resources, infrastructure, and expertise.
This can limit their ability to compete with larger
and more established businesses.
20. LACK OF SKILLED LABOR
MSMEs often struggle to attract and retain
skilled labour, as they cannot offer the same
benefits and compensation as larger
businesses.
This limits their ability to innovate and
compete in the market.
21. LACK OF ECONOMIC EXPERTISE
Many marketers lack the financial know-how to
influence the business in the right direction, even
as they continue to develop new strategies and
plan the expansion of their present business.
Marketers without a strong understanding of
economics could not make important business
decisions about MSME financing.
22. PROCESSING FEES
The borrower’s fee for loan processing
results in additional expenses for the
entrepreneur.
There is no requirement for optional
payments like those provided through
crowdsourcing or angel investing.
