Abstract
Small and Medium Enterprises are the driving force for the promotion of an economy. Due to its
significance, all the countries either, developed or developing, are concentrating on the
development of SME‟s. It is admitted fact that encouraging entrepreneurship is a key to improve
competitiveness, boost trade volume, fostering economic activities and creation of job
opportunities. Small enterprises are considered as main driver for innovation, poverty reduction,
employment generation and social integration. Moreover, Access to finance is necessary to create
an economic environment that enables SMEs to grow and prosper. The purpose of the study was
to evaluate the extent of SME financing by commercial banks, micro financial institutions and
credit unions in India. And it was hypothesized that there is a positive relationship between
Institutional finance and SME growth. The study adopted a positivist (quantitative paradigm)
with a cross sectional design. The findings in respect of the main purpose of the study indicated
that a financial institution makes significant contribution to the growth and development of
SMEs. Most of the findings proves that the SME owner‟s perception towards lending still remain
as an issue. This study finds it as one of major reason for the lack of credit demand. So this study
also aims to shed some light on the importance of entrepreneurial training, mutual loan guarantee
schemes and also the effective implementation and monitoring of government measures in SME
lending. Author keywords: SME, Finance
