Financial Problems of Small and Medium Industries
Financial problem may not necessarily be a universal cause standing in the way of growth of small and Midium industries, SME. However in, in the case of Bangladesh, it has been a major hindrance in the growth and development of this sector of industries. The problems, in general, are of the following type:
- The small-scale and cottage industries do not have sufficient knowledge of institutional credit and thus often fail to utilize the existing institutional facilities.
- Their assets position does not help them to get institutional credits or bank loan.
- As most of the small-scale and cottage industries are proprietary or partnership firms they can not raise capital from the financial market by floating shares, stock or debentures.
- They mostly depend on non-institutional sources of credit, provided by cooperative societies or some individuals, which are inadequate and costly.
- They mostly require small amounts of credit which are very difficult for the existing financial institutions to handle.
Individually the volume of credit required by these small and medium industries are so small that the present financial institutions are unable to entertain them. "doing business on bigger scale, as they generally are accustomed to , with large scale industries, to deal with smaller clients proves uneconomical and hence small borrowers do not find favor with such banks.
No comments yet.