ROLE OF SBP IN SME

DEVELOPMENT AND POVERTY

REDUCTION
 INTRODUCTION

• Small & medium Enterprises are

the back bone of Industrial
Development.
• The SMEs are contributing the
30% to the GDP of the Pakistan
and it’s around the Rs.140
billion.
• They provides the largest share
of employment after agriculture
• They have emerged as a dynamic
and vibrant sector of economy.
• It helps in the growth of a
country

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 A Small Enterprise (SE) is a business entity which meets both the following parameters:

Number of Employees Annual Sales Turnover

*Up to 20 Up to RS. 75 million

Medium Enterprise (ME) is a business entity, ideally not a public limited company which meets
both the following parameters:

*Number of Employees Annual Sales Turn-Over

21-250 (Manufacturing & Service MEs) Above RS 75 million and up to RS 400 million
21- 50 (Trading MEs) (All types of Medium Enterprises)

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 • Small and medium-sized enterprises (SMEs) are a very
heterogeneous group of businesses usually operating:
– in the service,
– trade,
– agri-business,
– and manufacturing sectors.

• They include a wide variety of firms such as:

– village handicraft makers,
– small machine shops,
– and computer software firms that possess a wide
range of sophistication and skills.

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 Importance of SMEs
• SMEs are the Engine of Growth
• SMEs are Essential for a Competitive and
Efficient Market
• SMEs are Critical for Poverty Reduction
• SMEs Play a Particularly Important Role in
Developing Countries

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 SME Sector in Pakistan

3.2 million business units in Pakistan

Over 99% business units employ less than 99 persons.
Generate 78% of non-agri sector employment
Direct Contribution to GDP over 30%
Generate 25% of Manufacturing Export Earnings
Contribute 35% in Manufacturing Value addition

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 ROLE PLAYED BY GOVT. OF PAKISTAN
INCORPORATION OF SMEDA

Small and Medium Enterprises Development Authority - SMEDA

SMEDA was established in October 1998 to take on the challenge of

developing Small & Medium Enterprises (SMEs) in Pakistan. With a
futuristic approach and professional management structure it has focus on
providing an enabling environment and business development services to
small and medium enterprises. SMEDA is not only an SME policy-
advisory body for the government of Pakistan but also facilitates other
stakeholders in addressing their SME development agendas.

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 OBJECTIVES OF SMEDA
• Formulate Policy to encourage the growth of SMEs in the
country and to advise the Government on fiscal and monetary
issues related to SMEs.
• Facilitation of Business Development Services to SMEs.
• Facilitate the development and strengthening of SME
representative bodies associations/chambers.
• Set up and manage a service provider’s database including
machinery and supplier for SMEs.

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 Role of SBP in poverty reduction
 Credit guarantee scheme
 Incorporation of microfinance
 Focus group of microfinance
 Separate sector of micro and SME

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POLICY IMPLICATIONS
 Government and other financial institutions should come forward and provide special
loan facilities to the SMEs in obtaining modern technology.
 Time by time training facilities should be arranged by the government, SMEDA and
other NGOs to increase the efficiency of labor force.
 Special schemes should be introduced to encourage the women entrepreneur of SMEs
to come forwards and set up new small scale enterprises.
 Affordable transportation facility should be provides to SMEs for the smooth supply of
goods.
 To retain existing labor force with this sector, government should introduce
entrepreneurial career development to reduce uncertainty in SMEs Career.
 Introduce the proper legal framework should be introduce by SMEDA for the
enforcement of law in SMEs Sector.
 All entrepreneurs should mainly focus on quality not the quantity

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 Issues/challenges faced by SMEs
 Owner illiterate
 Not documented
 Uncertainty
 Lack of awareness
 Financial constraints
 High labor cost
 Lack of inability to adapt new technology
 Lack of skilled human resources
Management
 Lack of managerial education
 Poor marketing information/ management

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 SUGGESTIONS
1. State bank of Pakistan should focus on increasing efficient credit utilization among SME
borrowers.
2. The reluctance of SMEs to borrow from formal channels should be dealt with by conducting
awareness sessions with collaboration with small trade and industry chambers.
3. SMEs need to be made aware of utilizing formal banking channels and their ancillary benefits in
taxation.
4. SBP should encourage banks to create separate helpdesks for SME borrowers and educate them
regarding documentation of business, which would lead to documentation of economy and will
bring multiple benefits.
5. State Bank should encourage SMEs acquire long term credit while ensuring equity participation,
hence committing the borrower to stay in the market for longer and stay in business.

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