This presentation emphasizes the importance of SMEs for revival of Pakistan Economy and NBFCs especially the Venture Capital as the source of funding for SMEs. I made this presentation in the Business Professionals Conference organized by ICMA Pakistan on December 13, 2014 at PC Rawalpindi. This presentation also provides a glimpse of the power of the Venture Capital in promoting new ideas, concepts and products. Also the vitality of Intellectual Property Rights have been clearly highlighted. This presentation opens more doors for thinking and provides solution to the problems of various issues faced by the SMEs in Pakistan Economy.

1. NBFCs and
Revival of Pakistan Economy

2. Sayyid
Mansoob
Hasan
FCMA
Owner/Principal
MANSOOB & CO.
Cost & Management Accountants
Management Consultants
SINCE 1995

3. REDWOOD
The Tallest
Tree Specie
in the World

4. These trees
can easily reach
heights of
300 feet
(91 meters).
Highest tree
measured to a
length of
379.7 feet

5. A typical
Redwood Tree
lives for
500 to 700
years, although
some have
been
documented at
more than
2,000 years old.

6. In the beginning it is insignificant

7. This is the Seed of a Redwood Tree

8. Which grows over 300 feet tall

10. Brief History of Google Inc.
• 1995 – Thought process
• 1996 – Work on a search engine BlackRub
• 1997 – Google.com is registered
• 1998 August – Google is incorporated with US$ 100,000/-
• 1998 – Newsletter launched
• 1998 December – First employee is appointed
• 1999 June – US$ 25 million capital raised
• 2004 August – Successful IPO of Google

11. The IPO of
Google Inc.
19,605,052 shares of
Class A common stock
Of value US$ 0.01 (one Cent)
Offered at US$ 85.00
The sale raised US$ 1.67 billion
giving Google a market
capitalization of US$ 23 billion
and made the founders
billionaires

12. Google Inc.
Now
2013 US$
Total Assets 110.92 billion
Total Revenues 55.52 billion
Net Income 12.92 billion
EPS – Basic 20.5
EPS – Diluted 19.7

14. JK Rowling
• Failed marriage
• A struggling single mother
• Diagnosed with clinical
depression and
contemplated suicide
• Was living on state
benefits when completed
the first novel of Harry
Potter

15. The Idea of Harry Potter
• 1990 – Conceived at a railway
station while waiting
• 1995 – First manuscript
presented to 12 publishes
• All rejected
• 1997 – Initial print run of the
first book 1,000 copies
• 1997 –Won first Award
“Neslte Smarties Book Prize”
• 2008 fourth book – sold
372,775 copies sold in one day
in UK, and 3 million copies in
48 hours in the USA
• Final installment sold 11
million copies in just 24 hours
in the USA

16. Books
• 7 Books
• Translated in 73 languages
• Around 450 million copies
sold by July 2013
Films
• 8 Films
• Worth US$ 21 Billion to
Warner Brothers
Brand Value
• US$ 15 Billion

17. Some Giant (Global) Corporations

18. Two things that made them giants

19. Intellectual
Property
Rights

20. Venture Capital

21. In the USA
11% of private sector jobs come from
venture capital backed companies
and
venture capital backed revenue
accounts for 21% of GDP
Source: National Venture Capital Association USA

25. 2009-10 2010-11 2011-12 2012-13
Currency to US$ 83.8017 85.5017 89.2359 96.7272
Imports 31,209 35,872 40,461 40,226
Exports 19,673 25,356 24,696 24,795
Trade balance (11,536) (10,516) (15,765) (15,431)
Remittances 8,906 11,201 13,187 13,922
BOP-Current account (3,946) 214 (4,658) (2,496)

26. Business Structures 2013
Companies registered with SECP 64,067
Listed companies (KSE) 580
Partnerships ?
Proprietorships ?
Corporate NGOs 400+
Other NGOs 125,000
Chambers 59
Business associations 114

27. KSE Listings
Companies 580
Scrip 647
Quoted on Dec 9, 2014 No’s %age
Below par 222 34%
Between 10-20 100 15%
Between 20-50 101 16%
Between 50-100 91 14%
Between 100-500 101 16%
Above 500 32 5%
647 100%

28. Challenges to Pakistan Economy
• Peace and security
• Law and order
• Capital flight (both Black & White)
• Economic growth (activities)
• Public flotation/Industrialization
• Lack of small and medium financing
institutions
• Job creation
• Devaluation of currency
• Ever rising imports
• Trade and current account deficit
• Undocumented economy
• Availability of reliable data

30. • SME is about 90% of
Pakistan Economy
• Employs 80% of non-agricultural
labor
• 40% share in GDP
• About 99% of
approximately 3 million
SMEs are classified as
Microenterprises by IFC
Source: SMEDA Website, Business Recorder: SME in Focus

31. Micro Enterprise Sector
• Employs on an average 4-5 persons with a
ratio of 70:30 skilled and unskilled
• Average annual purchases Rs. 386,000/-
• On an average, gave rise to Rs.833,000/-
per annum as value-addition
• The most labor-intensive businesses
compared to small, medium and large
enterprises
• Value-addition of Rs. 2.19 for every rupee
spent on raw-material purchases
compared to other businesses (Rs. 1.52,
Rs. 1.80 and Rs. 1.82 for small, medium
and large enterprises, respectively)
Source: HEC Pakistan Research Repository

32. Major
Sources of
Funds for
SMEs
• Private equity
• Private loans
• Public equity through listing at
the stock exchanges
• Commercial banks
• Microfinance banks
• NBFCs & Modarabas

33. Some major
challenges
faced by
SMEs
• Lack of financing (SME exposure
9.3% of total advances)
• Intellectual property rights
• Complicated and complex
implementation of Commercial
Laws
• Lack of access to market

34. Hurdles in
funding to
SMEs
• Destruction of NBFC sector by
Universal Banking allowed to
commercial banks by State Bank of
Pakistan
• Harsh requirements of SECP to
incorporate NBFCs
• Listing requirements of KSE set at a
minimum of PKR 200 million
• Hesitation and slow lending by
commercial banks
• Collateral based financing
• Venture capital financing unavailable

35. • Promotion of NBFCs especially Venture
Capital and Modarabas
• Establishment of Stock Exchange for
Small Companies like American Stock
Exchange of USA and AIM of London
Stock Exchange
• Simplification and speeding up of
registration process of Intellectual
Property Rights
• Strengthening of Commercial Laws
• Establishment of specialized
Commercial Courts to speed up
settlement of commercial cases in
every district