The Importance of SMEs in Developing Countries

November 9, 2021

By Team Kinara

< 1 mins read

MSME Loans

Small and medium-sized enterprises (SMEs) play a significant role in most economies, particularly in developing countries. Small and medium-sized enterprises (SMEs) account for a vast majority of businesses worldwide and are critical contributors to job creation and global economic development. They account for roughly 90% of businesses and more than 50% of global employment.

According to a study, 600 million new jobs will be required by 2030 to accommodate the world's growing workforce, making SME development a top priority for many countries across the globe. Small and medium-sized enterprises (SMEs) generate a majority of formal jobs in emerging markets, accounting for seven out of ten jobs. However, access to finance is a major impediment to SME growth; it is the second most frequently cited impediment to SME growth in emerging markets and developing countries.

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First, let us begin with – What is SME?

As a country with a highly valued and expanding demographic dividend, India is typically distinguished by the rapid increase of numerous SMEs. Section 7 of the Micro, Small, and Medium Enterprises Development Act of 2006 defines small and medium enterprises. They are classified as such based on the amount of money invested in these industries. The investment threshold in the small enterprises' sector is between Rs. 1 crore and Rs. 10 crores, while the turnover threshold is between Rs. 5 crores and Rs. 50 crores. The investment threshold ranges between Rs. 10 crores and Rs. 50 crores for medium enterprises, while the turnover threshold ranges between Rs. 50 crores and Rs. 100 crores. These industries are found in both the manufacturing and services sectors because they are a significant component of the economy's secondary, tertiary, and quaternary sectors.

SMEs play a critical role in poverty, inequality, and job creation, especially in rural areas. They are a major source of employment, particularly for women, low-skilled workers, and young people. SMEs thus contribute to creating jobs, creating wealth, and alleviating poverty.

Challenges Faced by SMEs

Now that you know what SME is, let's dig into the challenges faced by them. In comparison to large firms, SMEs are less likely to be able to obtain bank loans; instead, they rely on internal funds or cash from friends and family to launch and expand their businesses. Approximately half of all SMEs do not have access to formal credit. When micro and informal enterprises are included, the financing gap grows even larger.

At Kinara Capital, we believe in the impact of small businesses and provide collateral-free business loans to bridge that gap. All you have to do in order to apply for a loan is enter a few details and upload your documents on our secure online portal. We'll handle everything else!

Tips to Expand SMEs

Grow Your Team

Having a diverse range of skilled employees with varying levels of experience, background, beliefs, and specialities brings new perspectives to the table that would not be present otherwise. By taking a business loan from Kinara Capital, you can easily increase your hiring and recruit talented people.

Better Equipment

You also have the option to avail of an asset purchase loan with Kinara Capital. Equipment plays a major role in production and can largely affect your growth. Better the equipment, the more profit out of it.

Continue to Look for Bigger Opportunities

Your company will alternate between periods of growth and periods of stagnation. The key is to keep looking for new opportunities for growth and not be afraid to be creative and test them. However, keep goals and measurable results in mind to avoid turning potential growth into a major blunder.

Why Choose Kinara Capital?

We are committed to promoting financial inclusion for small business owners by offering collateral-free MSME loans. Our customers report a 20-25% increase in income after availing of a business loan. They have also created and maintained jobs, as well as strengthened local economies. So, don't hesitate to take financial aid. Choose Kinara Capital, and it's all the way up from there!