A Study on the Financial Bootstrapping Techniques Utilized by MSMEs in Uttar Pradesh

Abstract

Micro, Small and Medium Enterprises (MSMEs) faces major problem in  acquisition of formal finance due to insufficient collateral, long procedural problem and many more.  To overcome with these problems, MSMEs now moving towards the financial bootstrapping with low-cost, innovating financing paths that may reduce their dependency on the external capital. This research paper is going to understand and examine the various types of bootstrapping techniques which is used by the MSMEs of Uttar Pradesh, with the determinants like policy implementation, perceived effectiveness. In this study mixed-approach has been followed with structured questionnaire collecting data from 300 registered and unregistered MSMEs at both urban and rural district of Uttar Pradesh along with 20 in-depth interviews with owners and managers of MSMEs. the study maps the prevalence of internal, external, operational and entrepreneurial bootstrapping methods. The Finding indicated that there a more reliance on internal funding and trade credit by MSMEs, use of formal credit is minimal and also there is as significant regional variation related to the size of the firm, sector and owner’s education. The study suggests that there is a need to strengthen the financing of MSMEs via tailor credit product and policies, need for financial literacy, along with availability of immediate platform that can help MSMEs in bootstrapping practices.