The financing of Micro, Small, and Medium Enterprises (MSMEs) is crucial for the economic growth of any country. In many developing and developed economies, MSMEs contribute significantly to employment, innovation, and GDP growth. This paper explores how banks finance MSMEs, examines challenges faced by both MSMEs and financial institutions, and investigates the impact of such financing on the overall economy. A survey was conducted to analyze the perception of MSME owners regarding bank financing and its effectiveness. The paper concludes with recommendations for improving the MSME financing ecosystem.