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          2019 | Vol 2 | Issue 1 

 

SME Lending in India: A Survey of Customers' 

Opinions 
M.Sravani , K.Karthika , M.Manasa 

Assistant Professor
1,2,3 

CMR ENEGINEER COLLEGE 
 

 

 

ABSTRACT 

As a developing country, India places a premium on economic expansion and modernization. The 

growth and development of the Indian economy owe a great deal to the efforts of small-scale 

companies. Micro, small, and medium-sized companies (MSME) in India have consistently been the 

economy's most dynamic and eye-catching contributor. Small-scale enterprises have contributed 

significantly to the country's prosperity by creating a lot of well-paying jobs and fostering balanced 

growth in the regions they serve, all at a reasonable price. In addition to these benefits, there is the 

additional upside of encouraging new business owners to launch ventures, with the drive and 

enthusiasm to see their companies thrive and make an impact on the Indian economy. Those who 

value their independence yet want to work for themselves have the option of becoming entrepreneurs. 

Micro, small, and medium-sized enterprises (MSMEs) play a critical supporting role in the nation's 

economic and social development alongside larger sector enterprises. It makes a significant 

contribution to GDP and export earnings. Obtaining financing is a necessary and challenging process 

for any size corporation since money is the lifeblood and oxygen of every business, even small-scale 

companies. The government and financial institutions have implemented many schemes in recent 

decades to facilitate the acquisition of loans and funding by MSMEs. This research makes an attempt 

in that regard, and its results provide light on the extent to which that micro, small, and medium-sized 

enterprises (MSMEs) have towards government and other financial institutions' aid. Experts have 

offered a number of literature evaluations that lend credence to the study and its conclusions. 

Together with sensible recommendations for boosting the MSMEs' contentment. 

Keywords : Mini and Small Enterprises, Tiny Businesses, Money, Growth 

 

 

 

 
INTRODUCTION 

No matter its size, shape, or form, a 

company's finances are its lifeblood. It's the 

deciding element in the company's success 

or failure. Obtaining funding is also a vital 

phase that requires the company doing the 

acquiring to pay close attention to detail. 

Getting financing is a tedious and time-

consuming procedure, especially in a 

developing country like India. 

The abundance of skilled workers, the 

diversity of India's natural resources, and the 

reliability of its large-scale monetary 

features all combine to make India one of 

the most enticing ports for commercial and 

financing chances. The growth of each 

economic system can be traced back to two 

mainstays: stable institutions and reliable 

services. They might be enticing investors 

from across the globe to pour money and 



 

 

resources into the country. By creating a 

wide array of goods and services (both 

tangible and intangible) and responding to 

and satisfying the needs of the general 

people, they are crucial to a country's 

socioeconomic development. 

There has been a significant decline in the 

Indian economy during the last several 

decades. There has been a slowdown in 

financing and utilization trade, and many 

initiatives have been launched to get the 

economy back on track and headed in the 

path of progressive development. Upward 

trend in growth was expected to continue 

until 2020. The emergence of a worldwide 

pandemic like COVID-19 has hampered 

progress, and it may have a significant 

influence on the country's exports to the 

nations hit worst by the epidemic. Private 

consumption, government spending, and 

foreign commerce would all feel the effects 

and be affected. The country's financial 

stability has been severely 

impacted more than others by the lockdowns 

imposed due to the epidemic and its 

aftermath. 

The Indian economy relies heavily on its 

small and medium-sized businesses. It has 

long-lasting effects in terms of producing 

job possibilities for a bigger population with 

less investment, guaranteeing the viability of 

a wide range of other economic sectors. 

Small businesses are notable not just for 

their investment and employment levels, but 

also for their management style, pattern, and 

the personal and direct approach they take to 

business. In addition to providing jobs and 

cheap production costs, small-scale 

enterprises in rural and underdeveloped 

regions help level the playing field 

economically. The success of India's 

burgeoning small-scale industrial sector has 

been a boon to the country's emerging 

business owners. Since independence, the 

government and different small and large 

financial institutions, banks, have 

endeavored to foster the new class of 

entrepreneurs who have played a key part in 

defining the economy of the country by 

lending a hand to small-scale companies. 

Micro, small, and medium-sized enterprises 

(MSMEs) play a crucial role in the 

economies of developing countries because 

of their ability to generate new jobs. It is 

crucial that India's MSMEs contribute to the 

growth of the country's monetary system. In 

terms of raw statistics, India's small and 

medium-sized enterprises (SMEs) are 

responsible for hiring almost 10 million 

people every year, making them the 

country's second-largest employer and 

provider of non-discriminatory regional 

growth, after only agriculture. More than 

90% of all industries in India are MSMEs, 

and these businesses are responsible for 45% 

of industrial production, 40% of exports, and 

17% of GDP (Dahale et al., 2015). 

Micro, small, and medium-sized enterprises 

(MSMEs) are often regarded as the 

foundation of economic growth and a 

driving force behind independent progress 

on a global scale. The industry has shown 

noteworthy ingenuity and resilience in the 

face of recent financial downturns and 

recessions, demonstrating both speed and 

resilience. When broken down by firm size, 

product variety, and technological 

advancement, India's smallest and medium-

sized enterprises (SMEs) are very diverse. 

The industry caters to the needs of small 

businesses with limited resources, while also 

providing extensive support to people in 

rural and underdeveloped areas of the 

country. M&S Enterprises (M&Es) 

haveplayed a crucial role in the country's 

overall economic development and routinely 

shown a substantial contribution to national 

income. 

OBJECTIVES 

 
1. Assess the conceptual framework, 

advancement and development 

progression of MSMEs in India. 

2. Validate the issues encountered and 



 

 

future prospects associated with 

MSMEs in India. 

3. Evaluate the financial support 

offered by government and 

financial institutions to MSMEs in 

India. 

4. Understand the satisfaction and 

content level of MSMEs towards 

financial support offered by 

government and financial 

institutions in India. 

5. Suggest recommendations and 

ideas for further development of 

MSMEs position in term of 

financial support in India. 

REVIEW OF LITERATURE 

 
Small-scale industries are the roots 

for developing nations like India. They 

are the sources of explicit employment 

opportunities, advancement of 

entrepreneur abilities and removing 

regional imbalances. These advantages 

help the advancement and growth 

potential of developing nations. But these 

firms always suffer the hurdle of 

procuring finance. Some of them being 

high rates of interest, heavy paperwork to 

procure finance, lack of transparency for 

the MSMEs etc. The present section deals 

with the various expert opinions on the 

satisfaction levels of MSMEs for the loans 

offered by banks and financial institutions 

in India. 

Subrahmanyam (2004) featured 

the effects of globalization and local 

amendments on small-scale industries by 

stressing on the fact that how much the 

small firms had encountered on grounds 

of development of units, employment, 

profits and exports. He also recommended 

that the spotlight must be diverted towards 

technology enhancement and mending the 

financial framework so that the small-scale 

industries can be efficient contributors to 

national revenue and employment 

opportunities. 

Maumita Choudhury &Chandana 

Goswami (2019) studied the problems 

linked with corporate financing to 

MSMEs, comprehensive reviews of all the 

available literature from the period 2005 

to 2016. The results showing the 

elements contributing in the lending 

process have 

been the rivalry amongst the lending 

institutions to grow the count of 

borrowers, lending customs followed by 

the lending institutions, shortage of data 

about the small-scale entrepreneurs who 

apply for loans and the organization 

features and organization size. 

Mr. AbhijeetBiswas et al. (2018) 

endeavors to analyze the different 

elements that are responsible for the 

lending disparity in the MSMEs, the 



 

 

analysis is actually based on raw data and 

it identifies that the information imbalance 

between the lender and borrower must be 

reduces in order to bring down the lending 

disparity. 

Siddiqui (2018) Amid the initial 

budding phases of micro, small and 

medium firms require prompt and ample 

finance. MSMEs depend on different 

mediums of capital. Different credit 

raising issues encountered by the MSMEs 

were insufficient and delayed capital 

availability, defined data and financial 

support, ancillary security condition, 

limited working capital, and insistence on 

a lot of legal and paperwork for availing 

financial help from the banks and other 

financial institutions. 

Ayyagari et al. (2014) and Quartey 

et al. (2017)analyzed the impact of the 

organizational factors such as the 

organizational size and age. Hence its is 

hypothetically proved that there exists a 

positive association among the features of 

the organization and the small-scale firms 

approach to availing capital from the 

financial institutions. 

Sen and Salim (2016)’s research 

handled the significance of MSMEs in 

West Bengal. Theyinspected the 

performance with reference to count of 

units, investment, andjob creation. The 

research studied the existence of 

regionaldifferences amidstdistricts of 

West Bengal in reference of MSME 

gadgets, funding, and employment. 

Theresearch winded up with few 

recommendations for industrial masses 

with the government. Business clusters 

may assure the general facilities that 

might be helpful to reduce the running 

fee, growth of competitiveness, and 

expand the skills for the sector. 

Additionally, government become had to 

decorate economic support which could 

be strongly enhancing the improvement of 

country industry. 

Joshi, (2011); Arun and Kamath 

(2015) pointed out that these are the three 

hurdles faced by MSMEs: easy entry to 

the market, finance, and loans. There is no 

structured procedure for the MSMSs, 

operating expenses are higher, the process 

of providing a loan is long and ultimately 

the loan distribution will be limited. 

Limited entry to the official medium of 

finances and no access 

to complete information is considered 

other elements. The rate of interest on the 

investment is on the higher side as well as 

for the working capital. Most of the 

MSMEs have a dearth of clarity, and 

insufficient financial and organizational 

abilities. 



 

 

Noorinasab, Seifabad, and Zarei 

(2016) Entrepreneur encounter issues such 

as ways to procure capital for start-ups 

and inadequate funds. Many entrepreneurs 

are not able to enter the external price 

range because of inadequate safety and 

credit score in the market. The manner of 

loan availing facility is time-ingesting. 

Other issues are lower income due to 

competition, financial statements aren't 

nicely maintained by means of 

entrepreneurs of MSMEs, insufficient 

ensures for raising loans, equity trouble 

in raising capital, and dependence on 

money creditors for loans that might be 

excessive price. 
METHODOLOGY 

 
Research Design 

 

Present study is concerned with 

the MSME entrepreneurs in Tamilnadu, 

State. The study describes the 

entrepreneurs’ awareness and satisfaction 

towards banking services and to analyze 

their opinion. Research design is a plan of 

action that guides the entire research in 

our Study Descriptive e Research Design 

has been adopted. 

Sampling Design and Method 

 
The researcher has taken 784 as sample 

units of the present report and the data 

were amalgamated together from the 

proprietors of these units. Initially, the 

researcher obtained the list of total 

MSMEs in Tamilnadu from District 

industries Centre (DIC). Probability 

sampling was applied to select the sample. 

Simple random sampling has been used 

for the gathering 

DATA ANALYSIS AND 

INTERPRETATION 

Kaiser Normalization and Bartlett Test 

 
Factors affecting Glass ceiling are 

narrated with the help of Exploratory 

Factor Analysis (EFA) for further in-

depth analysis. 

Before applying the factor analysis, the 

data validity of factor analysis is tested 

with the help of Kaiser-Meyer-Ohlin 

(KMO) measure of sampling adequacy 

and Bartlett’s test of sphericity. The 

minimum acceptable KMO measure is 

more than 0.5, whereas, the level of 

significance in Chi-square test is at 5 per 

cent level. 

Kaiser Normalisation and Bartlett’s Test 

 
Kaiser-Meyer-Olkin Measure of Sampling Adequacy 0.732 

 
Bartlett’s Test of Sphericity 

Approximate Chi-Square 133.35 

Degrees of Freedom 13 



 

 

Significance 0.000 

Source: Primary Data 

 
Results of Kaiser-Meyer-Olkin 

Measure of Sampling Adequacy shows 

the measure value of 0.732, the KMO 

value is more than 0.05. It indicates that 

all the respondents completely 

understands the questionnaire and 

perfectly responded to the scales 

associated. Bartlett’s Test of Bartlett’s 

Test of Sphericity is more chi-square 

value and the significance the analysis and 

the value is less than 0.5. 



 

 

Factors influencing the bank services 

 

Factors 1 2 

Easy approval of business plan .645 .510 

Suggestion towards the loan amount .684 .770 

Guidelines towards loan process .515 .807 

Positive words regarding business success .769 .405 

Bank charges and services .700 .664 

Time taken for loan sanction .838 .447 

Collateral free loan .714 .433 

 

Interest free loan .733 .767 

Document charges .797 .654 

References towards high beneficial 

scheme 
.412 .665 

High repayment period .693 .025 

Minimal loan procedure .400 .016 

Source: Primary Data 

Factors influencing the entrepreneur towards the bank services 

 

 

 

 
Attributes 

Factor loadings 

Factor 

1 

Factor 

2 

Communality 

F1 Easy approval of business plan .645  .838 



 

 

F2 Suggestion towards the loan amoun .684  .714 

F3 Guidelines towards loan process .515  .733 

F4 Positive words regarding business 

success 
.769 

 
.838 

F5 Bank charges and services .700  .664 

F6 Time taken for loan sanction .838  .447 

F7 Collateral free loan .714  .519 

F9 Interest free loan .733  .619 

F10 Document charges .797  0.514 

F11 References towards high beneficial 

scheme 
.412 

 
0.761 

F12 High repayment period  .693 0.698 

F8 Minimal loan procedure  .400 .016 

Source: Primary Data 

All the values of the factor analysis were 

represents their importance on the 

analysis. Time taken for loan sanction got 

the high level of importance than other 

factors. Most of the factors were 

correlated with Guidelines towards loan 

process and Minimal loan procedure 

FINDINGS OF THE STUDY 

 The researcher has used 10 factors 

to identify the entrepreneur’s 

satisfaction. The factors were Easy 

approval of business plan, 

Suggestion towards the loan 

amount, Guidelines towards loan 

process, Positive words regarding 

business success, Bank charges 

and services, Time taken for loan 

sanction, Collateral free loan, 

Interest free loan, Document 

charges , References towards high 

beneficial scheme, High 

repayment period and minimal 

loan procedure 

 Results of Kaiser-Meyer-Olkin 

Measure of Sampling Adequacy 

shows the measure value of 0.732, 

the KMO value is more than 0.05 



 

 

 Most of the factors were correlated 

with Guidelines towards loan 

process and Minimal loan 

procedure 

SUGGESTIONS 

 
1. The bank staff must change their 

attitude towards MSMEs while 

granting loans to small- scale firms. 

2. Measures must be taken by the 

government towards implementing 

the rate of interest amicable for 

small-scale firms. 

3. The length of paperwork must be 

reduced to avail the loans for MSMEs 

in India. 

4. The MSMEs must be given a easy 

access to capital. 

5. The bank should change the 

mindset of top management to 

extend finance to the MSME sector 

and educate credit officers with 

suitable publications to address 

MSMEGroups. 

CONCLUSION 

 
The research on MSME entrepreneur’s 

level of satisfaction at banking offerings 

famous that customers are satisfied in the 

direction of promptness of offerings, 

typical efficiency of the financial 

institution and Friendliness and courtesy 

of the managers. Some regions the 

pleasure stage could be very poor. 

Suitable recommendations are also 

provided to increase the satisfaction and 

utilization level in the ones regions. 

Hence, the findings and recommendations 

provided by using the studies will assist to 

make bigger the pleasure stage of 

customers. As nicely as to get better the 

great of the product and services supplied 

through the bankers. 

REFERENCES 

 
1. M Choudhury& C 

Goswami(2019), “MSME 

financing gaps –review of 

literature for the period 2005 

to2016”, Journal of Small 

Business and Entrepreneurship 

Development, Vol. 7, No. 2, PP 50-

60,ISSN: 2333-637, E ISSN 2333-

6382. 

2. A Biswas, Dr. S Srivastava& 

Prof R Kumar(2018), “A study of 

the factors influencing the financegap 

for the MSME sector”, 

International Journal of 

Management Studies ISSN print 

2249- 0302 

ISSN, Online 2231-2528. 

3. Siddiqui, S., Malik, K. S., & Shah, 

S. Z. A. (2018). Impact of interest 

rate volatility on non- 

performing loans in Pakistan. 

International Research Journal of 

Finance and Economics, 84. 



 

 

4. Ayyagari, M., Demirguc-Kunt, A., 

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developingcountries? Small 

Business Economics, 43(1), 75-99. 

5. Quartey, P., Turkson, E., Abor, J. 

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Africa: What are the constraints to 

SME financing within ECOWAS? 

Review of development finance, 

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6. Sen, K., & Salim, S. (2016). 

Micro, Small and Medium 

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7. Joshi, D.P. (2011), Financial 

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