Challenges faced by SMEs

Human resources are the most crucial ones in deciding the success of a business. While you may have fo…

While we think that it is the large business houses that dominate the business in India, the small and medium enterprises also have a significant stake in the business graph of the country. SMEs contribute 45 % of the country’s manufacturing capacity and contributes to about 9% to India’s GDP. More than 95% enterprises in the country come from the SME sector. While the figures are impressive, the growing sector faces its own set of challenges. We list a few below:

Misinformation on how to raise money:
Traditional businessmen think that going to banks is the only option to raise money to meet business requirements and it is imbibed in their mind that the cost of credit is very high. They feel discouraged because of the cumbersome process and the lengthy time taken to process the loan. To top it, often the loan applications are rejected attributing numerous factors. Also, there are very limited government schemes that provide financial support to these enterprises.

There is misinformation about finding financial resources as while the banks might be very cautious in lending to small businessmen, NBFCs like CGCL have filled that gap. 

Urgent need to upgrade technology
The technologies and machinery used by Indian SMEs for manufacturing are mostly very old and traditional which take more man power and time in manufacturing products. By modernising the equipment and upgrading the technologies, not only the cost of manufacturing reduces but it also proves to be cost efficient leading to growth in the sector.

Lack of Infrastructure
Infrastructure plays a very important role in the functioning of SMEs. However, the SME sector in India is plagued by poor transportation facilities, irregular power and water cuts etc. Focus on infrastructure can boost SME growth.

Less attention to innovation
Most SMEs are traditionally driven, and the same processes are passed on to generations. Ditto with the products. Very little or no innovation goes into the range of products that the enterprise offers. Innovating in the product range and creating something different than the competition or imported products can give an edge to the business. 

Little or no investment in training of staff:
Skillsets required to adapt to newer technologies change constantly. To get maximum output from every level of the staff right from the operator of the machine to the packaging staff etc, necessary training should be imparted. Training is not limited to just the labourers, but even is needed for the entrepreneur himself. He needs to get trained himself in various technological advancements that can help him in expanding his business.