Credit Obtaining Challenges Faced by Micro and Small and
Medium Enterprises SMEs
Samiuddin Shaikh
Lecturer, IBA University of Sindh, Jamshoro
Aisha Bashir Shah
Assistant Professor, University of Sindh, Jamshoro
Fawad Ashraf
Assistant Professor, The Islamiya University Bhawalpure
Abstract
Small and medium enterprises (SMEs) are considered as
powerful instrument to help in the development of a
country and improve the employment and poverty base of
the country specifically for the developing countries.
But unfortunately there are many constraints which
prevent the growth of these sectors. Among many
constraints, access to financial resources is the major
hindrance. The purpose of this study is to determine the
challenges faced by micro, small and medium enterprises
in credit obtaining such as absence of collateral, high
interest rates and poor infrastructure and also it will
identify what are sources of funding available to the
SMEs. Data was collected using questionnaires. 28
questionnaires were circulated in Bahawalpur, Pakistan
using convenience sampling technique. The major findings
of the study are.
Among major constraints lack of finance, biggest one is
the high interest rate, which erode all the profit of
the firms and gave them no advantage of having credit.
Second challenge is the absence of collateral makes SMEs
not to access the financial institutions like bank.
Finally the study recommends some suggestions to improve
the development of SMEs by urging the government to
regulate the bank policies and making collateral
requirements flexible. And to provide awareness to
entrepreneurs about ranges of financing options.
Keywords: small and medium enterprises (SMES), financial resources, growth and economic development, high interest rate, poor infrastructure and collateral.
