A Framework for Understanding the Financial Health of MSME Entrepreneurs

This paper presents CFI’s conceptual framework for understanding MSME financial health along with a survey instrument that measures indicators for each factor in the framework.

Micro, small, and medium enterprises (MSMEs) play an important role in economies across the globe. As crucial as they are for economies, MSMEs face a number of challenges when it comes to financial health. The entrepreneurs of these businesses navigate a complex web of exogenous and endogenous obstacles, ranging from discrimination based on gender or caste to challenges acquiring and implementing business skills.

While there has been extensive research done and data collected on financial health, there is a relative lack of surveys that seek to capture a holistic understanding of MSME financial health in one document. This tool seeks to close that gap.

This combined framework and survey tool is intended for policymakers, financial service providers, and NGOs so that they can learn about their MSME constituents. These entities will be able to use this survey to segment MSMEs based on their performance and drivers of it, in turn allowing them to better target policies, products, and services. While broadly applicable to MSMEs globally, CFI took a specific interest in microenterprises — both formal and informal — in emerging markets, and the survey instrument is ideally suited for that segment.

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