This descriptive study explores how banks’ lending norms affects performance of micro & small enterprises and identifies some of the factors that have constrained finance to the micro and small firms, both on the supply and demand sides. The article is based on the sample of 32 micro and small enterprises and interviews with representatives of commercial and cooperative banks operating in Tripura. On the basis of distribution of variables the study applies both parametric and non-parametric test along with the descriptive analysis. The study purported to analyze and compare the activities of two groups of micro and small enterprises distinguished by their accessibility to finance: one group consists of firms that received commercial banks loans and the other group consists of firms without such loans. The empirical outcomes indicate that those firms that received bank loans performed better than those without loans, and that the loan approval factors are same across categories of bank and also the distribution of loan approval issues are same across types of banks, except collaterals. The study reveals that firms were reluctant to obtain loans from the banks because of high interest rates and stringent lending policies. The banks were also constrained due to the poor credit worthiness of the firms. The institutional mechanism need to formulate policies that will compel banks to lessen their rigid regulations which discourage borrowings and inspire entrepreneurial education for the entrepreneurs on financial recordings and business management.
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