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All stakeholders, including entrepreneurs, financial companies, and governmental institutions have expressed concern about just the source of financing for different sized enterprises (MSMEs). The main mission of the study was to pinpoint the numerous difficulties MSMEs encountered while trying to find financing at certain points in their life cycles. This study represents a groundbreaking effort to concentrate on such elements. This research investigates regarding the lack of finance related literacy among owners of different-sized enterprises poses a significant obstacle to finding and utilizing funding sources. A sample of 85 MSMEs was used to gather data through personal interviews with a structured questionnaire. The survey, which covered a wide range of industries including precision tools, weavers, jewelers, food stores, metal works, textiles, etc., was mostly done in the South Gujarat region. The results support prior studies' findings that formal sources like banks are greatly under-utilized in comparison to non-formal solutions of finance individual as well as group assets. According to this study, the main inadequate collateral assets and the entrepreneurs' lack of financial literacy were the biggest obstacles to the underutilization of formal sources. There have been suggestions made for business owners, financial institutions, and politicians based on the finding that the need for finance varies depending on the MSME's life-cycle stage.
Keywords: finance, MSMEs, financial institutions, financial literacy
MSMEs (micro, small, & medium-sized firms) have recently attracted more attention in India due to their strategic value to the nation's economy and development. MSMEs contribute significantly to job creation; more than 145 million people are employed by the 62.4 million MSMEs in the nation. MSMEs contribute 9.6% of the nation's GDP and manufacture more than 9,000 goods in the manufacturing sector alone. Similar to this, 32.4% of the nation's GDP came from MSMEs in the services (Ministry of Micro, Small, & Medium Enterprises, 2022).
MSMEs in India encounter a number of difficulties notwithstanding their contributions. They frequently face the challenge of keeping up with rapidly advancing technologies while also running the risk of going out of date. In order to maintain product standards and quality, they frequently struggle to establish their core competitive advantages and must deal with significant credit costs. MSMEs must address the problem of protecting their intellectual property and the lack of...