Invoice Bazaar Blog

What are some of the barriers that can impede the growth of MSMEs?

By Invoice Bazaar | October 16, 2021

Micro, small and medium enterprises (MSMEs), by their very nature, face unique challenges when they are striving to scale and grow. At the root, paucity of access to finance may be the major constraint to all their endeavors. So, compliance issues like taxation, registration, and other legal requirements, or the inability to hire qualified and competent staff, or implement essential marketing measures, can all transform into significant challenges obstructing the growth prospects of MSMEs. 

Hence, government policies that vary from country to country or from state to state can be either enablers or barriers to growth as they regulate access to finance and its availability. Another thing related to compliance that shows up quite frequently as a barrier to the development of MSMEs is the attitude of the bureaucracy or red tape. It cannot be quickly resolved by government policies alone when corrupt or lazy bureaucrats are keen to foil their implementation at the grassroots.

Meanwhile, a perennial issue that holds back the growth of MSMEs is the lack of access to the right human resources. This could be because of financial, locational, compliance-related, or some similar constraints. Generally, the best employees may be reluctant to join MSMEs as they prefer big firms and high-profile brands. This problem cannot be overcome with money, though it helps to some extent. However, much depends on the networking abilities and personalities of the promoters of the firms.

Location and social and physical infrastructure in the surroundings or vicinity of the firm can be enablers or barriers to growth depending upon the exact nature of the business venture. For example, a producer of digital goods and solutions may not feel constrained by marketing logistics or production location. Still, power cuts, poor internet connectivity, unavailability of computer hardware and technical resources locally, or inability to recruit the right employees will affect its growth adversely. On the other hand, the abovementioned issues may not affect an MSME dealing in physical commodities and situated in the same location.