Financial Challenges Faced by Entrepreneurs in Accessing Finance for MSME Development

Abstract

Access to adequate and affordable finance is essential for the growth and sustainability of Micro, Small and Medium Enterprises (MSMEs), yet entrepreneurs frequently encounter financial barriers that restrict their ability to obtain suitable funding. This study examines the financial challenges faced by MSME entrepreneurs in accessing finance for MSME development in Chennai. The study adopted a quantitative research design and collected data from 145 MSME entrepreneurs using a structured questionnaire. The study examined three major constructs: Financial Challenges, Access to Finance and MSME Development. Pearson correlation, regression analysis and Partial Least Squares Structural Equation Modelling (PLS-SEM) were employed to examine the proposed relationships. The findings indicate that financial challenges significantly influence entrepreneurs' access to finance and have an adverse relationship with MSME development, while improved access to finance contributes positively to MSME development. Further, the findings establish that Access to Finance plays a mediating role between Financial Challenges and MSME Development. The study concludes that reducing financing barriers and improving the availability, affordability, adequacy and timeliness of financial resources are important for strengthening MSME development. The findings provide useful implications for entrepreneurs, financial institutions and policymakers seeking to improve the accessibility and effectiveness of MSME financing in Chennai.