The Small Industries Development Bank of India: A retrospective on SME financing

Jayne Bisman, Neelam Goela

Research output: Contribution to journalArticle

Abstract

An extensive body of literature, internationally, is concerned with exploring the role of small and medium enterprises (SMEs) in generating employment and contributing to regional economic growth. In India, one of the peak bodies charged with supporting the development and financing of the SME sector is the Small Industries Development Bank of India (SIDBI). Both the policies of the Indian government and the mandate of SIDBI call for the financing of regional development initiatives and assistance to so-called 'backward' areas in efforts to correct existing regional economic imbalances and promote more equitable levels of development on an intra-national basis. This paper presents the results of a study of financing provided by SIDBI during the watershed period from 1996 to 2003, including an evaluation of the bank's responsiveness to SMEs in regional areas. On a longitudinal basis we examined the quantum of state-wise assistance provided by SIDBI to assess the distribution of finance to support SMEs, on a comparative basis, across the more developed and less developed states of India. The results revealed statistically significant differences in SIDBI financing on a state-wise basis, to the detriment of the less developed regions. We explore a range of possible explanations for the apparent inability of SIDBI to correct regional imbalances in the financing of Indian SMEs.
Original languageEnglish
Pages (from-to)803-820
Number of pages18
JournalIndian Journal of Economics and Business
Volume9
Issue number4
Publication statusPublished - 2010

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