Capacity Building of SMEs to    Backup Large Scale      Manufacturers
SMEs in Pakistan
Economic Profile of Pakistan•   GDP                                                              US$ 62 Billion•   Populat...
Economic Profile cont.• Economic growth is stagnant• Foreign debt is almost 60% of the GDP• 31% of the population survivin...
Enterprises Based on Employment Size200 & above      0.09%                  0.1% 100 to 199                 0.23%   50 to ...
Estimated Employment Size2,014,489            2,065,208                                                               2,29...
SME Contribution to GDP and Exports• Estimated GDP Contribution is 8%.• It is underestimated due to unavailability of data...
Some Organic SME Clusters in Pakistan• Sports Goods and Surgical Instruments clusters in Sialkot• Fan, Ceramics and Sanita...
Why SMEs?                    Low Cost job CreationINDUSTRY                               INVESTMENT REQUIREMENT PER       ...
Pakistan - SME Support Network                                                             Agencies & Programs      Provin...
What is Stopping theSMEs to Lead the Thrust    of Economic   Development ?
SME Shift To Formal SectorInformal SMEsAdverse Govt. PolicyLack of Formal CreditLack of InvestmentLow Technology BaseLow Q...
Extent of Formal Economy                Share of Unregistered Firms in                    Manufacturing Sector100 & Above ...
Structure of Establishments                             Govt/Corporat   Others               Companies     ion/Local-G-   ...
SMEs Origin of ProblemsAbsence of SME        Centralization in     Inconsistent   Definition          Policy Making       ...
Impacts of Regulations on Business Entry      UK    USASingapore Thailand Pakistan    India                               ...
SMEs Opportunity                  for Equity Financing  USA• Under federal securities law, companies that seek to raise le...
SMEs Access to CreditAccording to a study conducted by SMEDA in collaborationwith ILO:      78% of SMEs do not access cre...
Prevailing Disbursement Patterns                             “A Comparison”                                               ...
Important Linkshttp://www.ultraspectra.com/newspost/lg-oled-hdtv-55-inch-screen-and-4mili-meter-thick/http://www.ultraspec...
Connect With Us        ULTRASPECTRA                    OPEN AcademyFacebook.com/Ultraspectra       Facebook.com/openacadem...
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Capacity Building of SM ES To Backup Large Scale Manufacturers

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Capacity Building of SM ES To Backup Large Scale Manufacturers

  1. 1. Capacity Building of SMEs to Backup Large Scale Manufacturers
  2. 2. SMEs in Pakistan
  3. 3. Economic Profile of Pakistan• GDP US$ 62 Billion• Population 137 Million• Per Capita Income US$ 446• Exports US$ 9.2Billion T r anspor t, Stor age & Fi nance & Insur ance M i ni ng, Constr ucti on & Uti l i ty Communi acti on 3% Di str i buti on 10% Owner shi p of Dwel l i ngs 8% 6% M anuf actur i ng 17% Ser vi ces P ubl i c A dmn. & Fi nance 50% 6% A gr i cul tur e Ser vi ces 25% Whol e Sal e & Retai l T r ade 10% 15%
  4. 4. Economic Profile cont.• Economic growth is stagnant• Foreign debt is almost 60% of the GDP• 31% of the population surviving below poverty line.• 85% of the population earning less than $2/day.• Female participation in labor force is only 13%.• 42% of male and 71% of female population is illiterate.• Public sector is squeezing rapidlySMEs appear to be the only viable option to mobilize resources
  5. 5. Enterprises Based on Employment Size200 & above 0.09% 0.1% 100 to 199 0.23% 50 to 99 2.50% 10 to 49 97% 1 to 9 0% 20% 40% 60% 80% 100% Slightly above 2 million enterprises out of which the share of MSMEs is 99%
  6. 6. Estimated Employment Size2,014,489 2,065,208 2,298,303 1,508,796 1,426,710 875,449 Trade 45,664 5,056 Services Manufactu 2,014,489 1,508,796 584,124 205,383 875,449 439,044 112,217 584,124 439,044 205,383 112,217 45,664 5,056 Trade Services Manufacturing Micro Small Medium The MSMEs generate 78% of the non-agri sector employment
  7. 7. SME Contribution to GDP and Exports• Estimated GDP Contribution is 8%.• It is underestimated due to unavailability of data on services and trade sector based on firm size.• Total contribution to GDP can be safely estimated at 20% to 25%.• 20%-25% of total GDP equals 35%-40% of the non-agri GDP.• A combination of estimates and guestimates suggest that one fourth (25%) of the total exports are from the SME sector.
  8. 8. Some Organic SME Clusters in Pakistan• Sports Goods and Surgical Instruments clusters in Sialkot• Fan, Ceramics and Sanitary Ware clusters in Gujrat and Gujranwala• Cutlery and Knife manufacturing cluster in Wazirabad• Leather tanning cluster in Kasur• Textile cluster in Faisalabad Only these clusters provide employment to around 400,000 individuals and contribute almost 1.5 billion $ in exports
  9. 9. Why SMEs? Low Cost job CreationINDUSTRY INVESTMENT REQUIREMENT PER UNIT OF JOBSugar 1.5-2.0Cement 8-10Self Employment Scheme Disbursement of Loans Dec 5, 1998 Oct 9, 1999Amount (Rs in million) 1,246 6,497Number of loans 4,867 34,070Average Loan Size 0.256 0.191
  10. 10. Pakistan - SME Support Network Agencies & Programs Provincial Agencies Financial Agencies, NGOs & Federal Agencies Training Institutions ProgramsPunjab Small IndustriesCorporation Pakistan Industrial TechnicalSindh Small Industries Small Business Finance Assistance Corporation (PITAC) SMEDACorporation Corporation (SBFC)- SME Bank - Apex policy advisory making body provides advanced training toSarhad Small Industries financial assistance on soft terms for SMEs industrial personnel in metalDevelopment Board for small/ cottage industries trade, tool engineering designs - Provide and facilitate supportDirectorate of Small and in production of tools, moulds services generate employmentIndustries, Baluchistan and fixtures opportunities - Revitalize small business through aggressive support programs Self Employment Scheme (SES) loans granted to unemployed- Establishment of industrial youth/skilled professionals for estates for small scale small businesses and small industries industries Skill Development Councils- Provision of credit for SMEs SBFC and 7 participating banks Assess training needs, facilitate- Marketing of SME produce training of workers through training providers in the public and private- Training programs for artisans sector- Setting up of Local Technology Service Centers (LTSCs)Industrial Estates Khushali Bank Punjab;14, NWFP; 9, Sindh; 15, Baluchistan; 1 First Women’s Bank Technical Education & Vocational NRSP / PRSP / AKRSP - Training Auth. Rural support programs Facilitation of technical & vocational training in Pakistan Kashf Foundation Aurat Foundation
  11. 11. What is Stopping theSMEs to Lead the Thrust of Economic Development ?
  12. 12. SME Shift To Formal SectorInformal SMEsAdverse Govt. PolicyLack of Formal CreditLack of InvestmentLow Technology BaseLow Quality Standardization
  13. 13. Extent of Formal Economy Share of Unregistered Firms in Manufacturing Sector100 & Above 27% 50 to 99 47% 10 to 49 77% 99% 1 to 9 0% 20% 40% 60% 80% 100% Source: Census of Establishment
  14. 14. Structure of Establishments Govt/Corporat Others Companies ion/Local-G- 7.58% (Public/Privat Est e ltd) 6.71% 0.50% Partnerships 2.50% Individual Proprietorship 82.72% SMEDA/ILO Study 2001 revealed that 80% of MSMEs exist as sole proprietorship.Source: Census of Establishment
  15. 15. SMEs Origin of ProblemsAbsence of SME Centralization in Inconsistent Definition Policy Making Policies Complex Regulations Numbers and Content Extremely Low Lack of Compliance Absence of RedressAwareness Levels Capacity in SMEs Discretionary Powers Negative Impact on SME Growth
  16. 16. Impacts of Regulations on Business Entry UK USASingapore Thailand Pakistan India Trade Services Manufactu 2,014,489 1,508,796 875,449 45,664 584,124 439,044 5,056 205,383 112,217 0 2 4 6 8 10 77 No of Procedures Screening 80 Business Days required to receive operational legal status 60 50 35 40 22 20 4 4 0 India Pakistan Thailand Singapore USA UK Source: World Bank The Regulation of Entry 2001
  17. 17. SMEs Opportunity for Equity Financing USA• Under federal securities law, companies that seek to raise less than USD 1 million within 12 months are excused from registration requirements• A specialized method known as SCOR (small company offering registration) can be used by entrepreneurs seeking capital of less than USD 1 million through public sale of stocks Turkey• Plans to establish new stock market for small start-ups with growth potential
  18. 18. SMEs Access to CreditAccording to a study conducted by SMEDA in collaborationwith ILO:  78% of SMEs do not access credit from any source  Out of the remaining 22%, less than half ever approached the formal lending sector  Success rate among those who approached the formal lending sector lies between 20% & 66%
  19. 19. Prevailing Disbursement Patterns “A Comparison” High High Affordability Affordability of Loans of Loans Low Low Timeliness Access Access Timeliness High to loans of loans to loans of loans Affordability of Loans High High High High Indonesia India Low Access Timeliness to loans of loans High High PakistanSource: The SMEs and the Global Market Place, ITC publication
  20. 20. Important Linkshttp://www.ultraspectra.com/newspost/lg-oled-hdtv-55-inch-screen-and-4mili-meter-thick/http://www.ultraspectra.com/newspost/intels-first-android-intel-smart-phone-by-lg/http://www.ultraspectra.com/newspost/3d-tv-china-launches-first-3d-tv-channel/http://www.ultraspectra.com/newspost/youngest-microsoft-professional-pray-for-how-are-unable-to-enjoy-new-year/
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