A Study on Financial and Working-Capital Constraints among MSMEs in Gujarat

Abstract

Financial constraint appears to be an isolated, single condition. But difficulty in access to capital and disruption within the operating cycle of businesses are completely different experiences, especially for MSMEs. This study focused on empirical dimensions and perceived intensity of financial constraints among Micro, Small, and Medium Enterprise (MSME) entrepreneurs. In this study, it was examined how financial constraint experiences differ among MSMEs. It was a descriptive, single cross-sectional research design. 350 MSME entrepreneurs were surveyed in Ahmedabad, Surat, and Rajkot cities in Gujarat. A convenience sampling method was used for this study. Seven literature-backed statements were analyzed through principal axis factoring with direct oblimin rotation. Two correlated dimensions emerged, namely capital and credit availability constraints, having four items and α = .898, and a provisional working capital cycle index having two items and α = .672. Inter-item r was found to be .508. Delay in bill realization was the most strongly endorsed constraint, with a mean of 3.91 and 82.0 percent agreement. Enterprise characteristics accounted for minor variation in capital and credit availability, whereas they were considerable in the working capital cycle. Manufacturers and new enterprises showed high adjusted working capital cycle scores. Findings indicated that perceived financial constraints are not uniform. Credit access and operating cycle interventions are crucial for the support and growth of MSMEs.