MSME Finance: An Empirical Study On Policy Reforms, Cash Flow Based Lending, And Digital Solutions

Abstract

Micro, Small, and Medium Enterprises (MSMEs) play a critical role in economic growth, employment generation, and industrial development in India. Despite their significance, MSMEs in Jaipur district continue to experience a persistent financial gap due to limited access to affordable and timely credit. High collateral requirements, lengthy loan processes, and low awareness of government schemes exacerbate this challenge, restricting business expansion and sustainability. The study employed a descriptive research design, combining both primary and secondary data. Primary data were collected through structured questionnaires and interviews conducted with 379 randomly selected MSMEs across Jaipur district. Secondary data were sourced from government reports, academic journals, and published literature on MSME financing. Statistical tools, including descriptive analysis and cross-tabulations, were used to interpret the data and derive meaningful insights. The findings revealed that although 96.7% of MSMEs were registered under the UDYAM framework, financing issues persisted. Most enterprises accessed credit only after 1–3 years of operation, with banks being the primary but restrictive lenders. Over 74% of respondents identified low-cost and timely finance as the most critical challenge. Awareness of government financing schemes remained low, while the majority supported cash-flow-based lending as an effective alternative to collateral-based credit evaluations. High interest rates were also perceived as a major financial burden. The study concludes that bridging the financing gap requires policy reforms, adoption of cash-flow-based lending, improved financial literacy, and greater digital financial inclusion. Implementing these measures can strengthen MSME resilience and promote sustainable growth.