www.theinternationaljournal.org > RJCBS: Volume: 04, Number: 08, June-2015 Page 7 “Microfinance Bank, A panacea for SME’s sickness” A Case of Gulbarga District, Karnataka Mallikarjun Bali, Assistant Professor, at BLDEA’s VP Dr. P G Halakatti college of Engg & Tech., Bijapur and research scholar of VTU, Belagavi & Dr. Pralhad P. Rathod Associate Professor, Department of PG Studies in Business Administration, Visvesvaraya Technological University, Belagavi. Abstract This study investigated the impact of microfinance on SMEs growth in Gulbarga District, Karnataka. The population of the study consists of the SMEs in Gulbarga. However, the study was restricted to Gulbarga metropolis. Purposive sampling technique was used to select the participating SMEs. Simple random sampling technique was used to select a total of 25 SME operators that constituted our sample size. Pearson correlation coefficient and multiple regression analysis were used to analyze the data. The outcome from this study showed that financial services obtained from Microfinance Banks (MFBs) have positive significant impact on SMEs growth in Gulbarga. The results also revealed that duration of loan has positive impact on SMEs growth but not statistically significant. The results also showed that high interest rate, collateral security and frequency of loan repayment can cripple the expansion of SMEs in Gulbarga. The paper recommended that MFBs should lighten the condition for borrowing and increase the duration of their customers’ loan and also spread the repayment over a long period of time. Key words: Microfinance bank, SMEs, Growth, Gulbarga Introduction Small and medium enterprises (SMEs) have been the backbone of the Indian economy. SME sector employs close to 40% of India’s workface and contributing 45% to India’s manufacturing output, SEMs play a critical role in generating millions of job, especially at the low skill level. The country’s 1.3 million SMEs account for 40% of India’s total exports. At 48 million, India has the second largest number of SMEs in the world. China leads with 50 million. Contribution of small and medium enterprises to the country’s gross domestic product (GDP) is expected to increase to 22% by 2020, from the present 17%. Despite its commendable contribution to the nation’s economy SME sector does not get the required support from the concerned Government Department, Banks, Financial Institutions and corporate, which is a handicap in becoming more competitive in the national and international markets. SMEs face a number of problems, absence of adequate and timely banking finance, limited capital and knowledge, non-availability of suitable technology, low production capacity, ineffective marketing strategy, identification of new markets, constraints on modernization and expansion, non-availability of highly skilled labour at affordable cost, follow up with various government agencies to resolve problems etc. From small efforts of starting informal self-help groups (SHG) to access the much-needed savings and credit services in the early 1980s, the microfinance sector has grown significantly today. The fact that national bodies like Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) are devoting significant time, energy and financial resources on microfinance is an indication of the reckoning of the sector. The strength of the microfinance organizations (MFOs) in India is in the diversity of approaches and forms that have evolved over a period of time. While India has its home-grown model of SHGs, and mutually aided