Constraints to SMEs: A Rotated Factor Analysis Approach

Abstract

Although there is little doubt that SMEs plays a vital role in development of an underdeveloped economy yet this sector is facing multifarious problems relating to raw materials, power, land, marketing, transport, technical facilities and finance etc. Due to these constraints, it is getting more difficult for them to contribute to a nation’s GDP as expected. This paper attempts to find out the major constraints faced by the SMEs in Bangladesh selected from five sub-sectors using varimax normalization method based on primary questionnaire survey and rank the factor constraints according to their level of severity. It identified seven major factors comprising of 12 variables working as impediments to SME growth and development, amongst which high lending rate, government regulatory constraint, small domestic market size, collateral requirement for financing and lack of technically skilled workers are on the top.