Small and Medium Enterprises (SMEs) play an important role in the economic development as the second largest employment providers, but they suffer due to high cost of funding. This article discusses innovative strategies to finance SMEs effectively.

Small and Medium Enterprise (SME) in India is the second largest employment provider, after agriculture. In fact, it creates a one-third-of our exports and provides 40% of value addition to our manufacturing sector. In developed countries like the US and Japan this sector plays equally important role. It provides 67% and 80% employment opportunities respectively, and contributes 61% and 72% manufacturing output in those countries respectively. It would be interesting therefore, to study in what way this sector could be boosted up to provide more employment opportunities in India.

SMEs all over the world lean upon external finance for their survival and growth. This depends upon availability of fund to these units at a sustainable rate, at opportune time and adequate sum. Traditionally, SMEs have suffered due to high cost of funding, inadequacy and delayed disbursements.