[webpage ispartof=”MSME” maincontentofpage=”Challenges faced by small enterprises” primaryimageofpage=”” relatedlink=”” headline=”Challenges of MSME – Laghu Udyog Bharati” keywords=”Challenges of msme” publisher=”Laghu Udyog Bharati, India” sourceorganization=”Laghu Udyog Bharati, India” name=”Challenges of MSME”][/webpage]
Following are some challenges of MSME:
Mentoring & Advocacy
Even today, most small business in India are set up by first generation entrepreneurs. They often have a product or service idea, some money, a zest to hard work but limited knowledge about markets, Government or bank procedures, cash flows or how to manage labour. This is where mentoring a hand holding support becomes crucial. At times, this comes from an individual such as friend, relative, an NGO or a parent unit. This is episodic and unable to meet the vast requirement which the country has. This is sought to be institutionalized through extension/outreach efforts of central and state Governments. Trained manpower is made available for this task, right down the district levels, to act as the friend, philosopher and guide. These resource persons guide in setting up a evit, making it commercially viable, interacting with financial institutions and understanding markets, as well as the impact of globalisation with advancements in it. There is a strong more towards linking SMEs with bigger commodity or supply chain and providing acceptable quality and delivery schedules. The Central Government’s agency for the task, the Small Industry Development Organisation, has accordingly moved away from its pre-reform regulatory to a direct promotional role of hand holding, advocacy and facilitation. This encompasses the legislative support put in place, fiscal incentives and protection from unequal competition.
- Establishment of ISO 9000 certified, specialized SSI bank branches in districts/clusters.
- Directive for working capital finance @ 20% of annual normative turnover.
- Waiver of collateral requirements upto Rs. 0.5 million.
- Setting up of a credit Guarantee Trust to cover loans upto Rs. 2.5 million.
- Composite loans from a single agency upto Rs. 2.5 million.
- A national equity fund for equity to SSI units at 5 percent service charge.
For small units information about technology options is often through word of mouth or from a visit to an advanced unit. With the advent of internet, new vistas are opening up through electronic journey catalogue downloads and advanced search facilities. The technology bureau for small enterprise promoted with the assistance of the UN offers access to databases and information on technology. Technology intervention in clusters offers near by units an opportunity for a look and feel of advanced technology entrepreneurs are also assisted to participate in overseas trade fairs to update tem with latest worldwide. Tool rooms, testing centres, production-cum-process centres and workshops also assist in this task.
Barriers to import technology, technology transfer issues, vendor capability, after sales support, import procedures impede procurement. In India, the Asia Pacific Centre to Transfer of Technology promotes match making between buyer and seller and facilities procurement through escort services. Encouragement to import of capital goods has also helped.
Small enterprises look to external sources of funding for upgrading technology as withdrawing money from business entails its own costs. In India, a technology upgradation and modernization fund and a hire purchase scheme attempts to meet this requirement. These are however, funds at normal lending costs. A new scheme called the credit linked capital subsidy scheme, for reducing the cost of funds, has now been put into place.
Strategy Interventions for Revitalisation and Growth
- Easing access to general credit
- Introduction of options of limited partnership and factoring
- Subsiding cost of finance for upgrading technology
- Industry specific technology upgradation programmes
- Fund for developing and accessing overseas markets for export
- Expanding reach of infrastructure programmes
- Ushering in a regime of self certification in lien of inspections for various regulations