Growth of Indian Economy through Innovative SME Financing Schemes ? A Way Out

Abstract

Small and Medium Enterprises (SMEs) are critical to the nation's economy. They contribute approximately 40 per cent of India's domestic production, almost 50 per cent of total exports and 45 per cent of industrial employment. More importantly, they are the second largest employers of manpower, after agriculture. SMEs in India operate mostly in the unorganised sector and are the source of livelihood for millions of people. The social contribution made by SMEs is even more significant than its economic contribution. Within the SME sector, the small sector serves as a seed-bed for nurturing entrepreneurial talent and originating units to eventually grow into medium and large enterprises. Despite their economic significance, SMEs face a number of bottlenecks that prevent them from achieving their full potential. One of the major problem being faced by SME is inadequate finance. Without adequate bank finance, SMEs cannot acquire or absorb new technologies nor can they expand to compete in global markets or even strike business linkages with larger firms. Improved and easy access to finance may lead to improved technology orientation in SME development. The present paper focuses on the economic importance of Small and Medium – Scale Enterprises. The paper highlights the importance of financing in Small and Medium – Sized Enterprises. It also talks about all those reasons that forbid the financial institutions in lending the credit. In brief the paper clears out the meaning of SME Financing SME Financing Gap. The paper has dealt in detail various innovative techniques of financing SMEs in India and the issues related with it. Finally, the paper ended with the conclusion that the innovation is the key to success and therefore banks as well as SMEs should adopt the innovative credit facilities for its growth and development.