Problems of MSMEs

Small businesses also face many problems:

• Finance: they start with small capital. Banks often ask for collateral (security) that they cannot offer, so many turn to money lenders, who charge high interest. Their big customers may also delay paying their dues.
• Raw materials: they buy in small amounts, so they have low bargaining power over price and quality; and they have no storage space for buying in bulk.
• Managerial skills: often one person runs everything, and the business cannot afford to pay professional managers.
• Labour: they cannot pay as much as big firms, so skilled workers leave.
• Marketing: many depend on middlemen, who may pay them low prices and pay late.
• Quality: many cannot afford research or quality checks, so their goods may not meet set standards.
• Capacity utilisation: many work below full capacity, because of poor demand or a lack of power and materials.
• Technology: they often use old methods.
• Sickness: many units become 'sick' (run at a loss for long periods).
• Global competition: they must now compete with large firms from all over the world. Those who export also lack information about foreign markets and money to prepare goods for shipment (pre-shipment finance).