Financial Risk Management, Funding Options and SMEs in India

Abstract

SMEs have a key role of building a creative and progressive nation. The industrial engines of Japan, China, US, Germany and Taiwan are also driven by the SME sector. Finance/credit is the most critical component in any business process. Any industrial sector cannot work to its full capacity without adequate flow of funds. The SME sector is working with low capacity utilization, which, however, has now improved from 33.34 percent to around 52 percent. Still there remains a vast scope for enhancing the capacity utilization of SMEs, which will ultimately help in economic growth and employment generation.

Due to the globalization and the inherent risks, SMEs may become part of globally spread complex integration strategy of Transnational Corporation to beat competition and survive. It may then hope for optimal utilization of its production capacities too. This business buoyancy increases their risks and funding arrangements become complex. This paper makes an effort to study the critical dimensions of risk and critical success factors that spur more funding.

Keywords: SMEs, Risk Management

JEL Classification: G21, G29