Page 26 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
Stiglitz & Weiss (1981) stated that the exclusion of
MSMEs from credit markets in the region is chiey due to
three sets of factors. First, their inherent lack of
transparency, suitable collateral and track record
exacerbate information asymmetries, resulting in acute
credit rationing. Biswas, A. (2014) Banks face several
problems at their end while granting loans to the MSME
sector. As most of MSMEs work in the unorganized
sector, so they do not maintain any proper accounts or
balance sheets. Without the presence of proper balance
sheets, Banks nd it really difcult to lend credit to
MSMEs. Banks do not have that much of trust on newly
setup enterprises or the start-ups. They consider MSME
projects risky and are scared of NPAs while granting
credit to start ups. So, Banks generally lend only the
prescribed amount to this sector as mentioned under
priority sector lending obligations.
Srinivas K T, (2013) has studied the performance of
micro, small and medium enterprises and their
contribution in India’s economic growth and concluded
that MSMEs play a vital role in the inclusive growth of
Indian economy. Ofonagoro (1983) in the study found
that the inated rate of failure of small-scale enterprises
in developing countries like Bangladesh, has
predominantly been detected to poor management and
accounting practices implemented by these enterprises
McChlery et al., (2005) concluded in the study that In
spite of the considerable number of studies conducted in
accounting over the last few decades, there has been
little effort on investigating the accounting systems
maintained by SMEs and their effectiveness.
Lalin and Sabir (2010) found in their study that the
regulations are the principal operator and the main
reasons due to which SMEs prepare nancial statements
and the nancial statement users of SMEs exhibit that