Determinants of Bank Credit Availability for Indian Manufacturing SMEs: An Analysis Using World Bank Enterprise Survey Data

Abstract

SMEs in developing countries play a significant role in overall economic growth. However, their growth is often hindered by limited access to credit, as it plays a vital role in shaping the performance of SMEs. Therefore, the primary purpose of the study is to analyse the determinants affecting SMEs' credit availability based on the World Bank Enterprise Survey data. The study used a probit regression model on a sample of 2771 Indian manufacturing SMEs to examine the various determinants that affect credit availability. The regression result shows that out of eleven determinants, seven determinants, such as ownership structure, firm sales, innovation, collateral, interest rate, number of employees, and audited financial statement, significantly impact SMEs' credit availability from financial institutions. This study offers valuable information that may inform decision-making processes for policymakers, governments, financial institutions, business owners and researchers