Exploring The Benefits of Bank Financing for MSMEs:Evidence from Assam

This paper analyses the perceived benefits of various financial loans provided by financial institutions to Micro Small and Medium Enterprises (MSMEs). Financial institutions offer a wide range of loans and services to meet the financial needs of MSME’s which includes startup loans, long term loans, working capital loans, overdraft facilities etc. This article examines whether these services have benefited business performance. Based on a sample of 300 MSMEs registered in the Goalpara and Kokrajhar districts of Assam and supported by secondary data from RBI and SLBC reports, the study applies descriptive analysis, Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), and Structural Equation Modelling (SEM). Findings show that bank financing has had a positive impact on business growth acceleration and on improving business sustainability. Bank financing also improves financial reporting quality by enabling compliance with Indian Accounting Standards. However, Post Covid crisis, bank financing shows no such evidence of job creation, although it has contributed to improved financial reporting quality due to digital integration such as the UDYAM portal and GST filings. It highlights financial awareness gaps, as well as challenges with outreach and institutional credit distribution in rural areas. These finding hold significance in formulating effective policies and strategies to support the MSME sector.