Bridging the Credit Gap: Branch Managers’ Perspectives on MSME Financing

Abstract

Access to finance has been acknowledged as a critical component for MSMEs' success in building productive capacity, competing, creating jobs, and contributing to poverty alleviation in developing nations. MSMEs can't acquire or absorb new technology, expand to compete in global markets, or even form commercial partnerships if they don't have access to capital. Lending institutions should fortify their capacity to offer financial services to MSMEs by executing commercial mechanisms that reduce costs and lessen risk. Only in this way will financial institutions see MSME lending as more profitable and be encouraged to build lending programs specifically for MSMEs. Several factors in the financial services industry are also prompting banks to pay more attention to MSME markets. The most important source of institutional credit for small businesses is commercial banks.