1. 1
INTRODUCTION
• Small and Medium Enterprises (SMEs) are one of
the largest and the most important sector of
Pakistan's economy.
• Approximately 3.2 million business enterprises in
Pakistan.
• Enterprises employing up to 99 persons constitute
over 90% of all private enterprises in the industrial
sector and employ nearly 78% of the non-
agriculture labor force.
• Contribute over 30% to the GDP
• 25% of exports of manufactured goods besides
sharing 35% in manufacturing value added.
2. 2
RECOMMENDATIONS
The FPCCI Regional Standing
Committee on SME Sector for the
year 2009-2010 has made efforts
through identifying the problems
Suggesting Workable solutions
recommendations ; Some of them
are listed the next.
3. 3
Areas like business development services
• Qualified human resources,
• Marketing and technology require
special attention to improve SMEs
competitiveness,
• Productivity and capacity for
Employment generation.
4. 4
RECOMMENDATIONS
Separate Definition For Cottage/Micro
Industries
There is a need to separate the cottage industry From SME’s.
The Government of Pakistan should Clearly define the
minimum number of employees, which small and medium size
businesses should have. In this respect, the house
recommended the minimum limit from 51 up to 250 employees.
5. 5
Financing policy of Banks for SME
• The banks should facilitate businesses through lending
money on easy terms & conditions. This aspect required
much more attention because businessmen having small
setup deserve facilitation in this respect to run their business
operations. The State Bank of Pakistan should formulate a
prudential regulation to facilitate the SME sector rather then
issuing an advice to banks for providing loans to SME sector
without clear instructions.
• There is a need to make suitable monitory & regulatory
policy for SME sector. It is suggested that Banks should
provide good financial assistance according to the business
requirements besides providing following facilitation to the
SME sector.
6. 6
Some Suggestions
• Loan application processing time should be 15 days.
• SME sector should be offered 5% interest rate with one-
year grace period.
• Loan limit up to Rs. 5 million without any
collateral/guarantee should be provided to SME sector for
the period of one year. The loans may be granted up to Rs.
3 million to those, running a business for at least three
years.
• Govt. of Pakistan and Bank of Punjab should establish a
equity fund, for which at least Rs.50 million should be
allocated.
• There is a need to create a guarantee fund for SME Sector.
• In loan sanctioning process, banks should put private
sector preventatives/stakeholders on board before making
any decision.
7. 7
Infrastructure for Industrial Estate
The Government should establish SME
industrial estate having an area not less
than 200 Kanals. It is suggested that
land for SME industrial area should be
allocated near the city area, enabling
SME sector to run their businesses
effectively and contribute their due role
in employment generation.
9. 9
SME FINANCE FOCUS POINTS
1. Commercial banks have to make concerted efforts to
explore new avenues of business, especially financing to
small & medium-sized enterprises (SMEs), which play a
critical role in employment generation and poverty
alleviation.
2. SMEs finance play an important role in the creation of
employment opportunities with relatively lower investment
levels, it would help in reduce poverty and boost economic
growth which remains one of the prime objectives of
Government of Pakistan. 3.2 million Economic
establishments in the country around 99 percent of them
employ 1-10 persons, clearly indicating that they fall under
the definition of SMEs, more specifically lower-end SMEs.
10. 10
SME FINANCE FOCUS POINTS:
3. Separate prudential regulations should be developed for
small enterprises as these small businesses have a huge
potential for growth compared with medium-sized
enterprises.
4. The focus of financial institutions should be on medium
entities. The reason for this skewed distribution is the
unorganized way of doing business of small entities. Major
issues faced by SMEs are lack of skilled labor, outdated
technology, weak governance, lack of management
hierarchy, absence of book keeping, taxation issues
coupled with limited access to formal sources of finance.
11. 11
SME FINANCE FOCUS POINTS:
5. Capacity-building of banks through launch of SME Finance
Grass Root Cluster Training Program for credit officers
based in SME Clusters in Lahore, Sialkot, Gujranwala,
Rawalpindi, Peshawar, Quetta and Karachi.
6. SMEs could help to achieve diversified economic growth,
employment generation, reduction in income inequalities
and poverty alleviation in developed and the emerging
economies like USA, Japan, Malaysia, Thailand and South
Korea.
12. 12
Challenges Faced by SME in Pakistan
1. Lack of proper infra-structure.
2. Regulatory complexities – relaxation in prudential rules and
easy access to loan.
3. Shortage of skilled manpower.
4. Quality control problems.
5. Lack of entrepreneurial expertise.
6. Shortage / irregular availability of financing facilities.
7. Shortage of equity sources.
8. Inability to meet credit criteria / credit conditions.
9. Inadequate bargaining skills / options.
10.Lengthy documentation procedure.
13. 13
Proportion
Issues Identified Percentage
Lack of finance 55%
Shortage of skilled labour 39%
Getting business site 38%
Bribes 21%
Orders/Marketing of Product 28/%
Lack of Knowledge 12%
Government interference 12%
Raw Material 10%
License for work 08%
