Credit, Demand and Supply: A Study of Small-scale Units

Abstract

Small-scale units have to encounter the perennial problem of resource crunch. This article tries to examine the factors that come into play in addressing the credit needs of the small-scale sector entrepreneurs. The paper also makes an attempt to understand this aspect from the angle of the institutional credit suppliers and then tries to look into certain business traits. The paper finds that most often it is the interplay of the business traits and ownership patterns which act as major determinants to the demand as well as the supply of credit. The empirical work finds that the need for credit is observed to be increasing with investment requirement and the level of output, i.e., the scale of operation. It has been observed that these two factors often influence the lenders in extending credit support. The paper contents that the time has come where the lending institutions have a close look into other factors too, apart from the financial factors.