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  • 1. Research Methods for Business Research on The role of SMEs in Pakistan Table of ContentS # Contents Page #01 Research Proposal02 Observation & Broad Problem Area 0103 Preliminary Data Collection 0304 Problem Definition 0805 Theoretical Frame Work Development Relationship Of Dependent And Independent 09 Relation Ship Of Intervening Variable With 11 The Dependent And Independent Variables Relation Ship Of Moderating Variable With 12 The Dependent And Independent Variables Variables Model 1306 Hypotheses 1407 Elements Of Research Design 1508 Relationship Of Independent Variables And Its Elements 1609 Data Collection Method 1810 Sampling 1911 Interviewing Questions 2012 Conclusion 2513 Recommendations 2614 Articles 1
  • 2. Research Methods for Business15 Appendixes16 BibliographyA CKHNOWLEDGEMENT All praise to Almighty ALLAH, the most merciful and compassionate, who enabled us to complete this Project. We express our gratitude to our kind course coordinator Mr. Faisal Azeem Malik, who kept our moral high by his suggestions and appreciation. He was available to us whenever and for whatever we consulted him. Without his precious guidance and help we could never be able to complete this task. We thankful to all interviewers who cooperate with us and provide best possible information. And at last but not the least, we would like to acknowledge the support of our family members. We would like to admit that we owe all our achievements to our truly, sincere and most loving family members who mean the most to us, and whose prayers are source of determination for us. 2
  • 3. Research Methods for Business Research ProposalManagement QuestionManagement would like to investigate, “What is the role of SMEs in Pakistan?”Reasons of selecting research design:We have made this type of research proposal because itsuits a lot to our problem. SMEs can only be determinedthrough only this type of research proposal. We haveresearch questions for which we will directly interact withloyal customers and able to identify competitor position inmarket. Data collection helps us in determining SMEs’image. We will apply statistical tools for acquiringdesired results. Professional report will be prepared.Hypothesis tells us either our research fruitful,completion its objectives or it fails.Hypothesis “Access to finance for SMEs capacity development and enchasing their contribution in economy” 3
  • 4. Research Methods for Business Research Proposal for SMEs The purpose of the study is to analyze SMEs contribution in our Economy. Specially research objectives are to,  To have thorough analysis of working of SMEs in PakistanResearch Purpose  How SMEs are attractive?  Role of SMEs in employment generation  What is the role of finance in development of SMEs? The survey will be conducted by interview, to a total of 10 -15 different small & medium enterprise owners in Wah Cantt. Secondary data is available on Web, magazines, journals and we can haveResearch Design telephonic survey also. The questions covers wide range of issues including  Image of the SMEs will clearly be peep after the research In this section we have interview questions Research which will support our research. Questions Questions can be open ended or close ended. 10 - 15 owners will select from Wah Cantt.Sample Selection This type of technique is very much successful in such type of surveys.Data Collection Data will be collected to evaluate 4
  • 5. Research Methods for Business interviews. A written report will be submitted and anProject Report oral presentation of the findings can be made in lecture hall. Project will be completed with in a period of 8 weeks from the time of submission of proposal. Project Submission date is JanuaryProject Cost & 05, 2006. The cost of the project estimated Schedule to be Rs. 3000, including the fare of buses and other activities generated due to this project. 5
  • 6. Research Methods for BusinessR esearch Objectives TO UNDERSTAND THAT WHO ARE THE SMEs? WHAT ARE THEIR BASES OF DEFINATION? WHAT IS THEIR CONTRIBUTION IN THE ECONOMY GROWTH? WHAT LEVEL OF EMPLOYMENT THEY ARE PROVIDING? WHAT ARE THEIR PROBLEMS? WHAT IS THEIR MAJOR PROBLEM? WHAT ARE THE CAUSES OF MAJOR PROBLEM? HOW WE CAN ELEMINATE THAT PROBLEM? 6
  • 7. Research Methods for BusinessO verview of SME Sector in Pakistan Pakistans economy is an economy of SME. Policies in the past have given a general perspective, direction and defining broad parameters of activity within the macroeconomic framework, but efforts have focused on the large enterprises, neglecting SME which are at the heart of our economy. Our SME suffer from a variety of weaknesses which have constrained their ability to adjust to the economic liberalization measures introduced and to take full advantage of rapidly expanding markets of the world. But SME importance and contribution in the economic activity suggests that there is a significant potential to enhance their growth through appropriate regulations and promotion. While SME are being mentioned in some of our socio- economic strategies and policy documents, measures are not sufficiently specified and prioritized for us to be able to speak of any coherent SME policy or approach. The SME Sector Development Program seeks to improve this situation by inviting all concerned stakeholders to draft Pakistans future SME policy.1. OBSERVATION & BROAD PROBLEM AREA 7
  • 8. Research Methods for BusinessThe present phase of the industrialization in which thelarge number of industries is growing and they arecontributing in the countries development more as comparedto the countries based on the agricultural economy becausethe last century is the century the countries whose economyis based on the industries leave far behind in the race ofthe development as compared to the agricultural basedeconomies.There is no single example of any single agriculturaleconomy which is in the list of developed countries. Evenwith the help of industrialization the developed countriesare trying to rule also in the agricultural sector. Becauseof the expertise in the production of the agriculturalequipment which is making them superior in the agriculturalsector production.As Pakistan is also agriculture based economy where morethan 60% population is engaged with the production ofagricultural products and agricultural sector iscontributing only 14% o 20% in the economy and if we dividethe industrial sector in different sub parts thenagriculture is the 2nd largest sector in the economycontribution and the 1st largest in employment. As for ourconcern is only with the contribution in the economy. Thispoor performance of the agricultural sector can not boostthe Pakistani economy so if we take the industrial sectorwhich is lifting up the Pakistani economy it isconcentrating upon the different sub sectors like Textile,leather, Electrical, Surgical equipment sector, sports andlot of different sectors. In the classification of theindustrial sector we can not regret the role of Small andMedium Enterprises (SMEs) in the economy because the SMEsare prevailing in every sector of the economy. 8
  • 9. Research Methods for BusinessThe development of small and medium size enterprises inPakistan means elevation of the poverty in Pakistan becausepromotion of the SMEs increases the number of job. SMEs inthe Pakistan are providing the 78% jobs to those personswho are not employed with the agricultural sector. The SMEsare contributing the 30% to the GDP of the Pakistan andit’s around the Rs.140 billion. This contribution of theSMEs in the economy development is only with out thedevelopment of the SMEs policy and still the SMEs don’thave the status of the SMEs sector.So if we want to boost the Pakistani economy then it isimportant to encourage the SMEs and also eliminate thehurdles from the growth of the SMEs. Those hurdles may befinancial, knowledge based, cooperation, and technology etc. • There are two nature of problems first currently existing and second situation requiring improvement. In our case it is the problem existing in the present scenario. • Problem currently in the SMEs sector is, they have lack of finance that’s why they don’t grow and as well export • There is need to solve the problem, because if this problem would be solved so there are other related problem would be solved2. PRELIMINARY DATA COLLECTION 9
  • 10. Research Methods for BusinessIntroductionThe development of small and medium size enterprises inPakistan means elevation of the poverty in Pakistan becausepromotion of the SMEs increases the number of job. SMEs inthe Pakistan are providing the 78% jobs to those personswho are not employed with the agricultural sector. The SMEsare contributing the 30% to the GDP of the Pakistan andit’s around the Rs.140 billion .The government of Pakistanis developing the SMEs policies which is likely to becompleted by the June 2005.Back Ground of SMEs in PakistanPakistan has the very rich fertile land and because of thefertile land it is an agricultural country. It means notthat there is no industry in Pakistan, it have differentsmall, medium and large industries. Because of the feudaland beurocratic rule systems the agricultural sectorreceives great attention of the government in the past. Theindustrial sector was completely ignored even till nowthere in no policy for the SMEs. At that time we don’t havethe exact figure of the SMEs and it estimated that at thattime more than 220,000 SMEs are working in Pakistan.DefinitionThe definition of the SMEs varies from country to country,and also from the period of one government to anothergovernment, but in different places they are definedagainst different criteria’s like number of employees,total investment, sales, and production. In Pakistan SMEsare defined against two criteria’s 1) no of employees and2) investment. A small industry is that in which 10-35 10
  • 11. Research Methods for Businessemployees are engaged or it have the investment fromRs.2-20 million. And a mediums industry is that which havethe 36-99 employees are engaged or investment from Rs.20-40million.SMEs contribution in the economySMEs plays vital role in the development of any country andtheir contribution can be defined in two terms. First inthe shape of socially (by generating the jobs) and theeconomically (by generating the revenue).In Pakistan SMEs are defined in two terms first in thehuman capital shape and in the investment. A small industryis that in which 10-35 employees are engaged or it have theinvestment from Rs.2-20 million. And a mediums industry isthat which have the 36-99 employees are engaged orinvestment from Rs.20-40 million.Where the agriculture and the other sector are playing thevital role in the development of the country, we can notregret the role of SMEs. After the agriculture it is thesecond largest job providing sector in the Pakistan.SMEs in the Pakistan are providing the 78% jobs to thosepersons who are not employed with the agricultural sector.The SMEs are contributing the 30% to the GDP of thePakistan and it’s around the Rs.140 billion .The governmentof Pakistan is developing the SMEs policies which is likelyto be completed by the June 2005.SMEs account for between 55 per cent and 80 per cent oftotal employment in Western Europe, Japan and USA. Theircontribution in output in Japan is 65 per cent, Germany 48per cent and USA 45 per cent. According to the economicsurvey of 1998-99, SMEs with a mere 20 per cent investment 11
  • 12. Research Methods for Businessand resource to less than 10 per cent of the total formalcredit generated 80 per cent of the countrys totalemployment.Various types of loans available are small loans forbusiness and industry, small loans for industrialists,lending for small and medium industries. If strategicplanning for development of SMEs is made successful; middleclass entrepreneurs may play an effective role in theeconomic recovery of Pakistan.In Pakistan adult literacy rate is 48 per cent and majorityof entrepreneurs operating small businesses and industryare not educated and as such they hesitate in approachingsmall and medium enterprises development authority andbanks for loans. High interest rate is the main hurdlefacing SMEs. Credit may be offered to such enterprises atsubsidized rates, the study said. The research reportproposes the setting up of a small business and cottageindustries Bank with an authorized and paid-up capital ofRs.One billion to boost the development of existing anddeveloping new small and medium enterprises.The role of Small and Micro Enterprises in job creation iswell known and even in developed countries over 60%employment is in this sector. Therefore, in order todevelop this sector expansion of infrastructure facilities,deregulation and liberalization of economy, fiscal andfinancial incentives are to be provided and promotionalactivities such as skill development, industrial estates,common facilities and marketing arrangements have to bemade. The Micro and Small Industry is considered as the"back bone" in the economic development of a country. Itplays a pivotal role in contribution towards GDP and jobcreation. 12
  • 13. Research Methods for BusinessSMEs such as their need for less capital investment perworker than is required by large enterprises. The abundanceof labor and the shortages of capital and foreign exchangewhich are characteristics of developing countries arecompatible with the SMEs labor-intensive character. Inaddition, SMEs mobilize local human and material resourcesand utilize local raw materials more effectively than largeenterprises, and address more of the consumption needs ofslow income people. Their scale of production is moreappropriate to rural areas and small townships indeveloping countries.SMEs improve forward and background linkages among socialand economic activities of the economy. They promote andenhance foreign exchange earnings, and offer wideropportunities to entrepreneurs and to low income andminority groups. They are flexible in production, have thepotential as a training ground for managerial skills, andprovide rich personal relations. Their ownerships by theresidents of a community results in community basedeconomic decisions, greater stability of employment andbetter community development. In the modern day structuraladjustment, SMEs constitutes a "labor sponge".How government can improve their performance • Legal and Policy Framework • Access to finance • Technical support • Marketing support • Bringing the research institutions closer to the SMEs • Linkage with the international network 13
  • 14. Research Methods for BusinessCompliancesSMEs present a strong case for government/donor incentivesand support. By contrast, large firms, especially in thetextile sector, are already well into the standards regimeand aware of the consequences of the MFA phase-out. Theexporting firms comply unequivocally with product standardsbecause non-compliance would mean a discontinuation oforders. Process standards are more of a gray area. Anexample of this is ISO 14,001 certification. Some firmshave secured such certification, even though they do notappear to be fully compliant.Literature surveyWe have conducted literature survey to narrow down ourproblem, we have followed following points • Identify relevant sources ( we have adopted full-text database) • Extract the relevant information from that articles • Writing the literature review-------------------------------We concise the above data which is taken from the sitenamed. www.smeda.org.pk3. PROBLEM DEFINATION 14
  • 15. Research Methods for Business “Access to finance for SMEs capacity development and enchasing their contribution in economy”On the basis of different interviews and varied literaturewe have come to know that the FINANCE is the major hurdlein the growth of the SMEs. The credit will enable the SMEsto acquire the new technology, improve quality of theirproducts. They will re-position them through the newfinancing facilities that will help earn more profit. AsSMEs after Agriculture, were intensive employment sector,so it would help mitigate the unemployment problem and highprofitability will make them pay more taxes. All thisexercise would benefit directly and indirectly to thehealth of the economy,” If the income of the SMEs goes up,the growth rate and employment ratio, vis-à-vis economywill also be accelerated”.4. THEORETICAL FRAME WORK DEVELOPMENT 15
  • 16. Research Methods for BusinessRelationship of Dependent and IndependentThe dependent variable is Access to finance which is thevariable of the primary interest in which variance isattempted to be explained by different independentvariables and those are • High interest rate over the credit • Less number of financial institutes • Unacceptable terms and conditions of the financial institutes • Lake of entrepreneurs knowledgeThe less the interest rates over the credit the higher theinvestment in the enterprises which leads to the generationof the employment in the country and also increase thegovernment revenue in the shape of taxes.There are also the less number of credit providinginstitutes if we take the list of banks working in Pakistanthen we have lot of banks but these banks are working onlyin the large cities like Karachi, Lahore, Faisalabad,Hyderabad, Peshawar, Quetta etc., and in the tehsil taxilaand Wah Cantt there are only few banks those are providingthe credit to the SMEs like Bank Alfalah, PICIC commercialbank, Habib bank.Some banks require the very strict terms and conditions forthe entrepreneurs like the mortgage of equal value ofproperty, a huge list of documents required and attestedfrom different authorities and also the guaranty ofdifferent persons who belong to the very high class. So ifan individual who is working on the small level and havethe bundle of skill but don’t have huge capital how he can 16
  • 17. Research Methods for Businesssurvive in the market where there are large giants areworking and a small or medium entrepreneur bring thesecurity of different upper class persons.Some entrepreneurs who are running the business in any formsome time they don’t have the knowledge how to take theloan or how to meet the banks criteria, and someentrepreneurs also afraid on taking the loan from the banksthey have their on justifications like after the banksfinancing the banks interfere in their businesses and theydon’t want the interference of the banks or any other inthere affairs. 17
  • 18. Research Methods for Business High interest rate over the credit Less number of financial institutes Access to finance Terms and conditions of the financial institutes Entrepreneur’s knowledgeRelation Ship of Intervening Variable with theDependent and Independent Variables 18
  • 19. Research Methods for Business It is interesting to know that there lake of confidence of the owners of small and medium enterprises over the financial institutions. If the financial institutes build their confidence over the entrepreneurs then can take risk of high rate of interest, even if the institute is far from the enterprise, if the terms and conditions are little bit strict, and even the entrepreneurs have the less education and the banking structure knowledge. All the above mentions elements can be eliminate by the good corporate culture in the banking structure. High interest rate over the credit Less number of financial institutes e en f fi k o c Access to finance on c d C La Terms and conditions of the financial institutes Intervening Variable Entrepreneur’s knowledgeRelation Ship of Moderating Variable with the Dependentand Independent VariablesIt is interesting to know that if the government and thefinancial institutions want that small and medium sector growthen it is important to build up the image of the financial 19
  • 20. Research Methods for Businessinstitutes in the mind of the entrepreneurs. And this image canbe increased by creating the awareness by using the differentmodes of communication like TV program discussions, print mediaawareness, seminars in which entrepreneurs, representatives ofthe financial institutes, journalists and student should beinvited. High interest rate over the credit Less number of financial institutes Access to finance Terms and conditions of the financial institutes e g ar tin s s ne Aw rea C Entrepreneur’s knowledge Moderating Variable VARIABLES MODEL 20
  • 21. Research Methods for Business High interest rate over the credit Intervening Variable Less number of financial institutes e en f fi k o c Access to finance on c d C La Terms and conditions of the financial institutes e g ar tin s s ne Aw rea C Entrepreneur’s knowledge Moderating Variable-------------------------------------------------------All the above diagram is design according to the book ofresearch but data implemented by our own efforts andthinking.5. HYPOTHESES 21
  • 22. Research Methods for Business • If the enough financial resources to SMEs then they can grow. • If the SMEs are given the adequate resources, their productivity can be improved.(if then statement) • The greater the access to finance, higher the SMEs productivity.(directional hypotheses)6. ELEMENTS OF RESEARCH DESIGN 22
  • 23. Research Methods for Business 1. Dependent variable • Access to finance 2. Independent variables • High interest rate over the credit  Government ask the financial institutions to provide the credit to SMEs with low interest rates  Government make some other arrangements • Less number of financial institutes  Government asks banks to start more branches  Government issue more licenses to open new financial institutions • Unacceptable terms and conditions of the financial institutes  Make less strict terms and conditions for SMEs • Lake of entrepreneurs knowledge  Government make some some special arrangements regarding the market knowledge  Government makes some arrangements regarding SMEs skills improvement.RELATIONSHIP OF INDEPENDENT VARIABLES AND ITS ELEMENTSCriteria 23
  • 24. Research Methods for Business Dimension Element # 01 Element # 02 Relationship High interest rate over the credit Credit with low mark up Some other steps by the government Number of Financial InstitutionsFinancial Institutions start more branches Government Issue New Licenses Entrepreneur’s Knowledge Market knowledge Skill development Terms and Conditions of the Financial Institutes Make SMEs friendly policies 24
  • 25. Research Methods for BusinessRELATIONSHIP OF INDEPENDENT VARIABLES AND ITS ELEMENTS SMEs & Finance High interest rate Number of financial Entrepreneur’s Terms and Conditions of the over the credit institutions knowledge Financial InstitutesCredit with low mark Some other steps by Make SMEs friendly policies the govt up Financial institutions start more Government Issue new branches licenses Market knowledge Skill development 25
  • 26. Research Methods for BusinessDATA COLLECTION METHODWe have collected both primary and secondary data for ourresearch. Secondary data collected for refining & narrowdowning our problem and primary data collected for ourresearch problem to know whether finance is a hurdle ingrowth of SMEs.InterviewingWe have adopted interviewing mode for our research becausewe believe by interviewing we can better able to unfold theproblem rather questionnaire. Our interviews werestructured. We have list of questions on which we havemeasured many SMEs and find the result same. In interview aperson can answer more openly and explain the problems,which have happened in our research.SMEs owners give us detailed answers about problem andaccepted that finance is the major problem, SMEs are notflourishing in Pakistan.The Questioning TechniqueThe questioning techniques adopted are • Funneling (we start discussion with unstructured question then we came to structured questions) • Face to face and telephonic interviews (face to face interviews were more fruitful for us as compared to telephonic interviews because in face to face we can better able to identify the problem by questioning and gesture & postures) • Taking Notes (notes were taken over the interviews, to remember the main and sub points of the interview) 26
  • 27. Research Methods for BusinessSAMPLINGIn our case we selected the sample area of Wah Cantt forour research we have adopted, • Area SamplingIn probability sampling, area sampling was the best case inour case. It a cluster sample in a specific area. Advantageof it was it is cost-effective, define broad area ofproblem.DATA ANALYSIS PROCESS Data Analysis Interpretation of results Discussion Getting data Research ready for analysis Goodness Question of data Answered? Editing data Hypotheses Categorizing data Reliability testing Writing literature validity review______________________________________________________.Pattern design taken from research book (Umma S.) 27
  • 28. Research Methods for BusinessINTERVIEWING QUESTIONSQuestion # 1Is the Financial resources are backbone of SMEs?In majority of the interviews the professionals said thatwith out the adequate financial resources no industry couldgrow. Credit is constrained for SMEs, being limited tocertain forms of secured credit, along with family andinformal credit. Formal credit comes on very difficultterms for SMEs, since the use of security in creditagreements is highly inefficient, and non-real estatesecurity is largely in effective. For SMEs, neitherunsecured commercial credit or debentures equity capital inthe form of publicly- traded shares and private placements,nor NGO micro-credit is a viable option. Banks and non-bankfinancial institutions (NBFIs) such as finance and leasingcompanies require real estate security for loans (land andbuildings) the exceptions being very large firms, firmswith longstanding client relations with the banks, or firmsbenefiting from either political favor or a closerelationship with a bank director. SMEs almost universallystart their operations using own funds or family finance.Typically, these firms face a significant operating capitalconstraint in the early years of operation, and oftenbecome “sick” or lose their investment. Expansion credit isalso severely constrained.They also said that as the financial resources have theprimary importance for establishing a business but with outsome resources like market knowledge, intellectualproperty, and industry knowledge now small industry cangrow. 28
  • 29. Research Methods for BusinessQuestion # 2How government makes the easy access to the finance forthe SMEs?SME sector has a huge potential estimated at Rs. 1.50trillion but only 20-25 percent of it has been tapped forproviding finances. So far 18,000 enterprises have beentapped for providing loans through programmed andstructured lending based on the new guidelines issued bythe State Bank of Pakistan.The major change for financing the SME business has shiftedfrom the collateral to cash flow as the previous basis hadresulted in infected portfolio of Rs. 350 billion. So theentire old concept has now changed to program lendingtechnology introduced through SME prudential regulations.Banks are taking initiatives to shift emphasis from purelycollateral based lending to cash flow based while loaningwill be institutionalized.The new strategy for SME loans as per definition of theSBP, stresses for number of employees, total assets.All interviewees ware agreed that at that time only thebanks are the source to provide the loan especially thelocal bank and SMEs specialized banks like SME bank.Khushaly bank, microfinance bank specialized in providingthe loan the small entrepreneurs and government shouldencourage these banks to open more branches in other citiesand these banks should fast their lending system fromcollateral based lending to cash flow based lending. 29
  • 30. Research Methods for BusinessQuestion # 3SME have lack of access to financial markets?Although Pakistan has established significant marketinfrastructure for financial services, the existinginstitutions do not provide easy financing access for SME,Most SME poorly document and disclose their businessactivities, and are unable to provide the collateralrequired for asset based lending and investments. Thereluctance to lend to poorly documented enterprise isunderstandable especially in the context of the prevailingpoor credit culture.Also many SME, especially family owned businesses, find itdifficult to grow beyond a certain point constrained by alack of financial and management resources and reluctanceto build partnerships to generate innovation, and to investin networks to improve market intelligence.The solution of this problem should be tackled on twolevels. First: Financial institutions need to developstandardized services, focusing on the cash-flow earningcapacity of their clients. These products should besupported by credit enhancements such as guarantees andcollateral. Second: SME must develop simple but sound andwell documented plans for their operations to clarify andmonitor their direction, and to improve access to financialservices. This leads me to the forth issue.Except the bankers all the persons said that there is lessnumber of banks those are providing the loan to smallbusinesses. In their views that less number of banks meansthat there is very lengthy list of the financial 30
  • 31. Research Methods for Businessinstitutions working in Pakistan but only a limited numberof banks are providing the loan to the small businesses.Question # 4Do you think that present way of encouraging the smallbusinesses is good?If we consider the agenda of the Pervaiz MusharafGovernment, which is based on the six, pillars the thirdpillar of the present government of Pakistan is the SMEsector development, which shows the commitment of thegovernment with the economy development. SMES are adistinct pillar of the economy that needs to be given dueattention. It requires specific policy and regulatory spaceto turn SME into an effective tool for driving the economyand increasingly contribute to economic growth andemployment.The Government of Pakistan has developed a number ofstrategies for socio-economic development.• Poverty Reduction Strategy Paper (PRSP)• Micro Finance Sector Development Program• SME Sector Development Program• Education Sector Reforms 2001-05• Reform of financial sector• Reforms in Tax Administration Presently the government is encouraging the banks toprovide the loan to SMEs like Habib bank, national bank,etc., and one NGO which is agha khan foundation isestablished a bank which is microfinance bank. So it isalso important for the government to encourage the otherNGOs start to some thing for the betterment and growth ofthe small businesses which is the actual problem of ourcountry because this is the only and easy way for the 31
  • 32. Research Methods for Businesspoverty elevation because the SMEs provides the job for thejob less persons.Question # 5Do you think that banks role is good in the SMEsgrowth?Banks do not play a significant role in financing smallentrepreneurs only 14% of small entrepreneurs reported anybank borrowing. Most Small Entrepreneurs are reluctant toeven contact banks. Among those who ever contacted a bank,said they faced serious problems, which were the following • Bribery • Completion of Papers • Security Guarantees______________________________________________________.Answer of the questions taken from different facultymembers and employees of the companies (Detail Inbibliography) 32
  • 33. Research Methods for BusinessCONCLUSIONWe concluded that development of SMEs in Pakistan throughgovernment bank, Islamic banks and private sector banksthere is a need for the SMEs development in the areas ofSMEs training, skills development, machinery installationin the form of government grants. Based on the definitionof the SMEs in Pakistan the priority sector may alsodetermine for providing financial support and prioritysector for SMEs should be the following • Agro based and agro related industries like food processing, poultry, dairy, nursery, horticulture and flowery culture etc. • Hand looms, power looms weaving industry, different type of handy crafts, leather and leather goods, surgical equipment industry, electrical industry. • In case of lending from the financial institutions following should be consider  In case of Islamic banks financing the appropriate Islamic mode of finances to be determined (Musharaka, Mudaraba etc.)  The determining of the appropriate rare of profit and services charges i.e. cost of lending and borrowing from the commercial banks, Islamic banks, and ultimate beneficiary entrepreneurs. 33
  • 34. Research Methods for Business RECOMENDATIONS 1. For BanksMost financial institutions have not put in place for theeffective assessment for the credit of SMEs, further moreinadequate transparency of their financial status andmanagement, SMEs often are unable to provide financialinstitutions with sufficient information access thebusiness performance. So in this scenario the SMEs shouldfollowA. Lending StrategyThe banks those are providing the financing facilities tothe SMEs should provide the short ,medium and long termloan facility including the leasing, leanding and risksharing and other all possible schemes.B. Lending Modes 1) The minimum loan providing period should be 4-5 years 2) The grace period should be 01 year 3) In case of any loss recovery should be in installments 4) Lending should be on competitive basis. 2. For Government (Establishment of Funding Schemes) 34
  • 35. Research Methods for Business The key recommendations for the government are that to establish the funds for enhancing the competitiveness of SMEs in Pakistan. A. Equipment Installation lending Funding SchemeGovernment start a guarantee equipment installationfunding scheme from which government create a guaranteefund for SMEs and SMEs secure a lending chance from thefinancial institutions on behalf of the government to takeat least 50% loan with the government.B. SMEs Development FundGovernment develops the SMEs development fund to subsidizethe projects carried by social and welfare organizations,research institutions to enhance the SMEs compositeness.C. SMEs training FundGovernment create a fund for the SMEs training fordeveloping the skills of the SMEs like the salarymanagement of the employees, material management, qualitymanagement etc.-------------------------------We wrote the above recommendations with the help of ourH.O.D Mr.Mushtaq 35
  • 36. Research Methods for BusinessBibliographyBooksResearch methods for businessBy, Uma SekaranNewspapersThe Daily DAWNThe NEWSThe NationThe Pakistan ObserverWorkshops, Seminars & ExhibitionsSMEs & Synergism Conference at Marriot IslamabadDAWS Exhibition “All About Life Style”Internetwww.smeda.org.pkwww.adb.orgwww.dailytimes.com.pkwww.pdg.org.pkwww.pakistanlink.comwww.worldbank.orgwww.sdpi.orgwww.paktribute.comwww.smebank.orgwww.pakboi.gov.pkwww.un.org.pkwww.nation.com.pkwww.comsats.org.pkwww2.uta.eduwww.pakobserver.netwww.smefund.tid.gov.hkwww.islamibankbd.comwww.ilo.orgwww.pakistaneconomist.comwww.nust.edu.pk RESONS FOR THE RESEARCH DESIGN: 36
  • 37. Research Methods for Business There are number of variables which effect the development of SMEs in severalways. These are; I. Government Polices and Regulation II. SMEDA’s roleIII. Technological advancementIV. Investment V. Access to FinanceVI. High Interest rate over the creditVII. Less number of Financial InstitutesVIII. Unacceptable terms and conditions of the Financial InstitutionIX. Lake of Entrepreneurs knowledgeGovernment Polices and Regulation: SMEs development depends upon the role of government, because in Pakistan thebureaucratic environment is over here and the policies which are made by governmentare not supportive for SMEs development.Technological advancement: Technology plays very important role in the development of SMEs, because inlarge businesses the technology is not introduced very rapidly because of risk factor, butif we will see Small Business it is introduced very rapidly so it plays very important roleas it increase the productivity, decreases the cost, increases the efficiency. So,government should try to make some institution for the development training ofemployees about technology.Access to Finance: Another big factor which influences the performance of SMEs in Pakistan is theproblem of Finances. The reason is interest rate is very high. So for he facilitation offinance government have to take some steps for the development of SMEs. Some of themare in the form of SMEs bank, SMEDA which is providing different types of financeform the Small and Medium Enterprises.High Interest rate over the credit: 37
  • 38. Research Methods for Business • Government ask the Financial Institutions to provide the credit to SMEs with low interest rates. • Government make some other arrangementsLess number of Financial Institutes: • Government asks banks to start more branches • Government issues more licenses to open new Financial InstitutionsUnacceptable terms & conditions of Financial Institution: • Make less strict terms and conditions for SMEs.Lake of Entrepreneurs knowledge: • Government make some special arrangements regarding the market knowledge • Government makes some arrangements regarding SMEs skills improvement 38