12. Have you taken loan from the bank before?

No
41%

Yes
59%

The above chart breaks down the number of MSMEs depending upon their linkages with the
credit system. As observed, more than half, i.e., 59% of the MSMEs prefer to take a loan
from the banks. However, a considerable percentage of enterprises (41%) still not prefer to
connect with the banking system for financial support that too when there are several
guidelines and schemes by the government. The principal reasons for the lack of credit
linkage with banks and MSMEs are people's perception, awareness, loan requirements and
market conditions.

12(a) If NO, what is the reason for not applying for bank loan?

Internal sources of finance are better than… 42.5%

Lengthy complex and inflexible paper work 55.0%

Banks take more time to provide finance 30.0%

No funds required 80.0%

Because no bank approached for the loan 12.5%

The above 80% of the MSEs who prefer not to take a loan from the banks claims that they
have sufficient funds and do not require the same from the banking system. The other
reasons which prevent them from taking credit are lengthy, complicated and inflexible
procedure (55%). Rest of them thinks that they have better internal sources of finance
compared to external sources. It can also be seen that only some people are not willing to
take loans because of banks approachability to them, which is only 12.5%. It shows that
banks on their behalf approach as much MSMEs as they can to provide loans.
12(b). If YES, Was your loan approved by the bank?

No
12%

Yes
88%

The above pie chart delineates the percentage of applications from various MSME clients
who applied for a loan through the banking system. It can be seen that out of the total
demand received by potential MSME clients, 13% of them got it rejected. However, 87% (60
MSMEs) of them were approved. Depending upon the approval of their application further
questions were directed, to know more about the probable cause for rejecting their claim
following bankers’ behavior and attitude towards them.

For those MSME clients whose application was approved by the banks.

2. How much bank loan did you receive?

29.85%
More than the amount applied for

58.20%
The amount applied for

38.80%
Less than the amount applied for

0% 10% 20% 30% 40% 50% 60%

Amongst the MSME clients whose loan was approved, most of them received the amount
applied for, accounting for 58.20% of the total enterprises. Only a few of them (29.85%)
received more than the amount they have asked. Approximately 38.80% of the MSMEs
received less than the amount applied for possibly because of lack of the proper business
plan or other documents required by the banks.

3. How much time did the bank take to sanction the amount from the date of your
application?

29.85%
More than 3 months

26.87%
Within 3 months

43.28%
Within 1 month

0% 10% 20% 30% 40% 50%

Most of the banks that MSME approached for credit sanctioned it within a month making
43% of the total MSME whose loan was approved. However, few banks took more than
three months to authorize the credit, for which the reasons could be documentation or
formalities.

4. If there was a delay in the process what do you think was the reason?

8.96%
Other

16.42%
Inspection

Formalities 49.25%

25.37%
Documents

0% 10% 20% 30% 40% 50%

Delay in the process, if ever, was majorly due to the formalities and technicalities in
approval, making it 49.25% whereas the other reason was, of improper documentation,
which can be improved by easing out the procedure or guiding MSEs.

5. How many times you had to visit the bank to avail loan?

23.88%
More than 10 times

32.84%
5 - 10 times

43.28%
Less than 5 times

0% 10% 20% 30% 40% 50%

When asked about the visits of MSME clients to the banks, most of them were satisfied with
the bankers’ attitude, since they were able to get the loan approved by visiting banks less
than five times. Whereas 24% of the people had to visit banks more than ten times, making
it challenging for them to avail the loan from the banking system and more accessible from
the markets. Making the procedure simple or providing required knowledge to MSMEs can
fix this.

6. Rate your level of satisfaction with respect to banks

Statements Mean Variance Standard

Deviation
Behavior of the bank staff and guidance received 2.952 1.498 1.224
Promptness in receiving the loan 2.719 1.729 1.315
Formalities in getting the loan 2.929 1.775 1.332
Rate of interest 2.292 1.460 1.208
Reliable 3.234 1.643 1.282

Above shown table, is a Likert scale based question where the options range from 1(Highly
Dissatisfied) to 5(Highly Satisfied). All the statements except the fifth one have a mean value
higher than three which means that a significant chunk of people feel that the banks are
reliable. However, the fourth statement has been disagreed by most of the respondents
who suggest that the rate of interest imposed by the banks are tremendous and is hindering
the growth of MSMEs linkage with the credit system. This falls in line with the interpretation
from the conducted interviews as one of the respondents felt that most of the banks charge
higher interest rates. Few people think that promptness in receiving the loan is more
towards the dissatisfactory side, which has a negative impact on the perception of the
people, they believe that much of their time is wasted in processing their loans as it is a
lengthy and complicated procedure. These disagreements are more specific to banks and
are not familiar to the entire banking sector as a whole. They need to be dealt at the bank
level by the top management rather than policy reforms by the RBI.

7. How did you repay the loan?

1.49%
Loan from other financial institutions

10.45%
Personal Finance

88.06%
Income Generated

0% 20% 40% 60% 80% 100%

From the above table of results, it can be understood that income generated is the primary
source of finance for most MSEs to repay the credit, which is 88%. The least preferred
source of investment that is used by only 1.49% of MSMEs is, repaying the credit by taking a
loan from other financial institutions since it intensifies the load of repayment on them.

For those MSME clients, whose application was not approved by the banks.

1. Has bank given you the reason for rejecting the application?

No
44%
Yes
56%
 More than half of the people, 56 %, claimed that the banks gave them the reason for
rejection of their application whereas, 44% of the people say that they are not aware as of
why banks rejected their credit application.

1(a). If yes, please tell the reason given by bank for not approving the request:

The enterprise could not provide enough 0.00%

guarantees

Application wasn’t completed correctly 22.22%

Poor credit history 55.56%

Lack of financial statements, cash flow and other 22.22%

documents

0% 10% 20% 30% 40% 50% 60%

The above chart shows the reason provided by the banks to MSME clients for rejecting their
loan application. It can be observed that most of the MSMEs are not able to avail loan
because of their poor credit history, which is due to the delayed payment of the loan
amount. The other probable reasons that exist are of improper documentation, including
financial statements, cash flows, and incomplete application. Due to these reasons, banks
are vacillating to provide a loan to these potential MSE clients.

2. Do you agree with the reason provided?

33%
Maybe

67%
No

0
Yes

0 0.2 0.4 0.6 0.8

 The graph shows the percentage of people who are satisfied or dissatisfied with the reason
provided by the banks. It can be seen that 67% of the people were disappointed with the
reason offered by the bank and it is strange to know that not even single person was
satisfied with the explanation that banks have provided.

3. Problems in accessing the bank loan

Statements Mean Variance Standard

Deviation
Lack of sympathetic attitude on the part of Bank officials 2.571 1.619 1.272
Untimely sanctioning of loan 2.167 2.567 1.602
Cumbersome procedure 2.111 2.361 1.537
Collateral requirement 2.143 1.810 1.345

The table analyses the problem faced by the MSME clients while dealing with banks to avail
credit. A significant chunk of the people surveyed believes that the process of taking credit
from the banking system is cumbersome and takes much time, which hinders many
potential clients to proceed further with banks. This falls in line with the interpretation from
question 12(a), where more than half of the population size does not prefer to take the loan
from the banks because of the lengthy, complicated and inflexible process. The other
problems, which entrepreneurs face while taking credit from the banking system, is of
untimely sanctioning of loans. It results in holding their application and lack of financial
support form the financial institutions when it is required. On the other side, the behavior of
banks towards MSME clients is neutral. From the table, we can see that the MSME clients
are not highly satisfied or highly dissatisfied with the bankers' attitude.