CHALLENGES IN RAISING CREDIT: A STUDY OF MSMES IN PUNJAB REGION

MSMEs in India have emerged as a dynamic sector of economy over years as it plays a crucial role in providing large employment opportunities and industrialization of rural areas. This sector is a major contributor of country's socio-economic development. Despite of this sector's inherent capabilities, MSMEs in India are facing number of problems and raising credit has become their major problem. This study examines various sources of finance that can be used by MSMEs and the obstacles faced by MSMEs in raising finance from such sources. For the purpose of this study, sample of 100 respondents from major cities of Punjab (Amritsar, Jalandhar, Ludhiana, Patiala and Mohali) was interviewed with the help of structured questionnaire. While descriptive analysis was used to identify the common sources for raising capital, factor analysis was used to reduce as well as to identify the major obstacles faced by MSMEs in raising credit. The study indicated bank as most commonly used source of finance over other sources and bureaucratic loan procedure, poor past records and performance of the firm, behavior of bank employees and high cost of financing as the major obstacles faced by MSMEs in raising finance.