A Study on the Sources and Challenges in Finance for Micro, Small and Medium Sized Enterprises with Special Reference to the City of Bangalore

Micro, small and medium-sized enterprise finance (MSMEs) has been a problem for all stakeholders including entrepreneurs’, financial institutions and government organizations. The key objective of the study was to identify various sources of funds used by MSMEs for their initial investment, initial working capital and for the expansion of the enterprise. The study also identifies various challenges faced by MSMEs in sourcing of finance from public and private sector. Data was collected through personal interviews using a structured questionnaire from a sample of 50 MSMEs. The survey was conducted mainly in the city of North Bangalore. The study found that micro, small and medium-sized enterprises are expected to rely on their own funds, or loans from friends and family, for money. However, these sources are often insufficient or expensive, and act as a constraint on growth. Based on the conclusion adequate and timely availability of finance is the major constraint for MSMEs due to lack of awareness about the government policies and commercial bank loan for MSMEs, recommendations have been proposed for entrepreneurs, bankers and for the ministry.