Timely and affordable credit-only panacea for SMEs sickness: Study

By admin November 23, 2012 6:52 am IST

Nearly 25 per cent of SME units have either closed their shutters or are struggling for survival due to expensive credit, non-availability of timely and adequate funds, increasing power shortages to the extent of 35 per cent and delayed payments by large companies, according to the survey conducted by the Associated Chambers of Commerce & Industry of India (Assocham).
Payment delays by corporations raise the transaction cost of small and a medium enterprise (SMEs), which eventually bring these to the verge of sickness, pointed out the Assocham survey on “Spreading sickness in SME Sector”.
The survey reveals that the most important reason for sickness in the sector is the absence of time bound programme for credit dispensation, (reported by 71 per cent of sick units), shortage of working capital (48 per cent), marketing problems (44 per cent), power shortage (21 per cent), non-availability of raw material (15 per cent), equipment problems (10 per cent), labour problems (7 per cent) and management problems (5 per cent).

The survey was undertaken in Uttar Pradesh, Haryana, Punjab, West Bengal, Rajasthan, Madhya Pradesh, Bihar, Himachal Pradesh, Jammu & Kashmir, Uttarakhand and Delhi, informed DS Rawat, Secretary General Assocham.
Around 92 per cent of the surveyed member’s said, frequent reason for sickness is bunching of ownership and management functions of these enterprises which are controlled by one or selected few people. There is lack of versatility and professionalism as well as shortage of competency to efficiently manage businesses in the new economic scenario.
Delayed payments further reduce the working capital available with a unit for productive use and, thus, hasten the move towards sickness, added majority of the respondents.
Nearly 76 per cent of the respondent said that they do not have access to institutional credit have shortage of cheap funds to operate competitively. Also in the export business, SME’s are much more susceptible to sickness with small changes in the exchange rate and their inability to cope with volatile exchange rates due to cost factor.