Role of microfinance in funding small and medium enterprises for improving the lives of the poor in Rural India

Finance for micro, small, and medium-sized enterprises has been a concern for all stakeholders including entrepreneurs, financial institutions, NGOs and government organizations. Small and medium enterprises (SMEs) have long been one of the more chief sources of employment and livelihood in most developing countries, including India. On the other hand, microfinance is crucial, when it comes to escalation of business growth by way of generating steady working capital. The key objective of the study is to encourage the funding of micro finance for small and medium sized enterprises for the economic growth in rural India. Improving the productivity of these grass root small-medium entrepreneurs can be a potent method for improving the lives of the vast majority of the poor population. Thus, growth of small and medium enterprises is the twin goals of increasing global and domestic food security, and directing new sources of income to the poorest sections of society. One key tool in improving small, medium entrepreneurs could be the speedily rising capacity of microfinance, which refers to the provision of financial services to poor and low-income people. This studyattempts to focus on these aspects. Data was collected through personal interviews from a sample of 50 MSMEs. The survey was conducted mainly in the district of Uttar Dinajpur in the state West Bengal covering a wide spectrum of sectors like shopkeepers, fruit sellers, tailors, jewelers, grocery shop, food retailers, metal works and book shops. The results reinforce the findings of other studies that utilization of formal sources like banks is significantly very small compared with informal sources like personal and family wealth. The study found that the main challenges faced in underutilization of formal sources were inadequacy of collateral assets and lack of financial awareness of entrepreneurs. Based on the conclusion that requirement of finance is rising for development of small and medium size enterprises in the rural India for the economic development of rural population and their growth.