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The IUP Journal of Applied Economics
The Pattern of Financing Urban Unorganized Enterprises in Assam
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Existing literature states that a larger percentage of unorganized enterprises are dependent on their own fund or borrowing from informal sources to finance their business, as they have limited access to credit from Formal Financial Institutions (FFIs). This paper, based on primary data, tries to examine the pattern of financing the urban unorganized enterprises in Assam, India. The results indicate that borrowing from FFIs has larger share in the total amount of capital investment made by the sample entrepreneurs, although their own fund also has a significant share in it. However, larger percentage of working capital expenditure is made through own fund of the entrepreneur. Borrowing from Semi-Formal Financial Institutions (SFFIs) and informal sources also has an important role in financing the enterprises. A logit model is estimated for the determinants of unorganized entrepreneursí access to credit from FFIs for business expenditure. Relatively larger and registered enterprises are found to have more probability to get access to credit from FFIs.

 
 
 

Nowadays, the unorganized (informal) sector is regarded as a characteristic component of the developing and underdeveloped countries (Mukherjee, 2009). The unorganized (informal) sector has been playing an important role in developing and underdeveloped countries both in terms of employment generation and contribution to the Gross Domestic Product (GDP) (Charmes, 1999; and NCEUS, 2007). However, the enterprises in this sector have been facing various constraints such as marketing facility, lack of raw materials, lack of skill and training, lack of access to credit and other financial services, etc. Among those constraints, access to credit is the most important one as other problems are also linked to their access to credit (NCEUS, 2007). Literature states that the unorganized enterprises do not have access to credit from Formal Financial Institutions (FFIs). They are dependent on their own fund and credit from informal sources to finance their business (NCEUS, 2007; Farazi, 2014; and Bhavani and Bhanumurthy, 2015). Here, queries arise regarding the pattern of financing of the unorganized enterprises. One segment of literature states that the pattern of financing capital expenditure is different from that of financing working capital expenditure (Kurwijila and Due, 1991; and Farazi, 2014). This has motivated the researcher to investigate into the pattern of financing the urban unorganized enterprises in Assam. The rationale for limiting the study to the urban sector is derived from the fact that the issues in the urban unorganized sector have some distinct feature as compared to those in the rural sector. Limiting the study to the urban sector will enable better focus on those issues. Assam is one of the relatively underdeveloped states in India. Though Assam still lags behind the country in terms of urbanization, the census figure indicates a trend towards urbanization1 in Assam too. This has motivated the researcher to conduct a study of the urban unorganized enterprises in Assam. To the best knowledge of the researcher, no study in Assam regarding the pattern of financing urban unorganized enterprises has been done till date.

 
 
 

Applied Economics Jouranl,Formal Financial Institutions (FFIs), Analytical Framework,Brief Profile of the Sample Enterprises,Access to Credit of the Sample Enterprises .