 Below is an article of mine that won the Inter University Article Contest in 2005. The article is published in Pakistan & Gulf Economist Sep 19 – 25 2005. I am sharing it with you for your interest.
Pakistan has emerged as the second rapidly growing economy in Asia after China in 2004 – 2005, as claimed by government and well accepted by international raters and financial institutions. According to Economic Survey 2004-05 this increase in real GDP is the courtesy of robust performance of large scale manufacturing and services sector. Even though the large scale manufacturing registered 15.4% growth but small and medium enterprises (SMEs) is the core issue in the country’s progress and especially for the prosperity of masses that are surviving with low scale income due to which Pakistan ranks 135th out of 174 countries on Human Development Index.
When we think about SMEs, we consider it as one person manufacturing enterprise but according to SMEDA Small Enterprises should possess ten to thirty five employees with two to twenty million rupees capital intact in equity. Medium Enterprises should possess thirty six to ninety nine employees with twenty to forty million capital intact in equity. Here we have to see the role SMEs have in the progress and well being of masses in Pakistan.
The assessment of the role of SMEs in Pakistan is of vital importance. Sometimes we have shinny figures and data regarding economy like GDP growth or per capita income but these can be misleading because the earners of these massive growth are not masses but the capitalists in the country. SME produces the income stream for masses located in the countryside and the capitalists associated with this activity that is generally medium or small as the name suggests.
In Pakistan SME sector is not only the minor sharer till yet, reality is that Pakistan’s whole economy is highly dependable on the pace and productivity of SMEs. Out of Pakistan’s 3.2 million enterprises 95% are those who possess 99 employees in private industrial sector and employ about 78% of non agriculture labor force. SME contributes 25% export of manufacturing goods and 30% of GDP is the outcome of business efforts of SMEs.
The vital question is not “what SMEs have produced?” But, what they are capable to produce? The simple answer is if they produce on their full potential and capacity Pakistan would be way ahead on economic racetrack of the world. They can produce billion of dollars worth items that is why SMEDA is quite right in stating its mission as “Turning potential into profits”. Turning potential into profits gives us a truer and fair picture of the role of SMEs in Pakistan. Now we will see what potential we have and the threats associated with it and how we can turn potential into profits by overcoming existing threats.
Firstly we have to talk about the main potential we have to boost the progress and efficiency of SMEs. The real potential of SME growth in the country is the deprived people of this country who are quite keen to raise their standard of living. It simply means the future of SMEs is associated with the temptations of highly talented but deprived masses of Pakistan and their will to turn their dark days in to glittering ones. But the real problem associated with their will and dreams is finance and technical assistance. Financing concerns have two issues; first is availability of finance and second is the rate plus the terms on which the finance is available.
Financing SMEs in heavy liquidity period for banks is not a burden but an opportunity because bank can utilize their liquidity by advancing finances to SMEs. By advancing to SMEs they can have two advantages. First when they advance to many small and medium enterprises as compare to large ones, their lending amount will be distributed to a number of clients that will increase the probability of recovery. Secondly, the contribution in national economic growth via utilizing their liquidity that is excess due to great activity in economy in the period after 1999 and especially after 2001 that will further expand the activity in banking sector in near future.
Exploring a specific niche product is another way to boost SMEs sector. Niche is a unique product that we can produce at low cost with an absolute advantage. In Pakistan we are producing Niche from Wazirabad by producing the international quality surgical instruments and Saialkot is there for sport goods. SMEDA and other concerns like EPB have to come up to explore more niches that are sure available in this country of highly skillful workforce. In this regard Prime Minister’s program of ONE VILLAGE ONE PRODUCT is of high importance. Even we could not achieve economy of scale through this niche but available glittering demand in international market can offset the cost burden and causes the inflow of foreign exchange.
The movement of masses from rural to urban areas is another hot slot of the time. While developing a well integrated SME sector in the country, it is the clear cut advantage that we can stop this mobilization that certainly is creating the urban problems and increasing the urban development overheads and cost of maintaining big cities like Karachi. Even it will be a factual probability that through SMEs we can convert our villages into new towns and sources of revenue and progress.
Stock markets in the country are in deprivation of number of newly listed companies; I think it is for the sake of well being of stock markets and SMEs that SMEs should be authorized to get listed in shape of a venture of 3 to 5 SMEs on stocks on relatively smaller amount of capital that is how the SMEs could muster the very capital and while becoming a part of corporate culture that can give way for them to have good management. In early stages the board of SME companies (as they would not be able to pay handsome amount to experts) should consist of experts of Federal, Provincial governments and specialized financial institutions and the small and medium enterprises. Small and medium entrepreneurs should possess the majority shares and the shares of these stakeholders have to be to the extent of their support and inline to compensate nominal through the profitability of the companies.
SMEs will be the main source of poverty reduction in Pakistan that will create the value and innovation for the country in the days to come. The thing that really needs serious attention is to remove the unnecessary bureaucratic procedures. It is essential to make it possible that the opportunities for small entrepreneurs should not be wasted through excess processing of finance applications or other official terms. Assistance to SMEs is not enough; the government and specialized financial and technical institutions should stand as partners of small and medium entrepreneurs, this is the only way that the financial institution can recover their funds with yield. Government could achieve its goal for poverty reduction, economic progress and above all the value creation process by promoting the culture of SMEs. This is the only way that can make sure the poor masses of Pakistan shall not live poor anymore.
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fatima Says: |
An excellent article! I am writing a thesis on barriers to SMEs growth in Pakistan. If you have any more information related to SMEs sector in Pakistan, please do share. I would highly appreciate your cooperation.
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21 - April - 2010 04:54:03 PM
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mujahid raza Says: |
its funtastic yar.
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04 - December - 2010 03:51:02 PM
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Obaid Says: |
Very Good Article with Load of Knowledge
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26 - October - 2010 08:00:49 AM
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Riaz Khan Says: |
Today, by chance I have come across your website. I've also read through some articles and particularly fancy this one. I would sum it up that no country can be developed without promoting and establishing SMEs and it undoubtedly accounts jobs for hundreds of people across the country. As living and studied overseas I am truly in believe that Pakistan has a great potential for small businesses in small towns and villages and this sector can cater a reasonable means to earn their livelihood and improve standard of life. I am in opinion that some one from remote area should step in to make a mark.
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26 - April - 2010 05:02:37 AM
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aftab akram malik Says: |
Its really a gud article
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28 - September - 2010 05:04:04 PM
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muneer buledi Says: |
2 Size Distribution of Pak SMEs Notwithstanding the infrequent surveys of SME sector in Pakistan, the number of such units, especially small, is probably much larger than is officially reported. The surveys normally cover those firms that are registered and a large number of very small firms go unrecorded because they seek to remain hidden or the enumerators are not fully motivated to include them in the data. Most of small firms in Pakistan are very small, with limited employment potential and little chance of growth; their primary concern is survival. In general, the firms with relatively more workers are smaller in number and those with smaller number of workers are in majority. Moreover, most of the firms are owner-managed, supported by family workers. The hired workers are few and found mostly in growing firms. According to the latest Economic Census of Pakistan (2005), there were 2.96 million units in the country, of which 2.8 million (93.9%) were Establishments and 0.18 million (6.1%) were Household Units (including all activities of producing goods and services for sale or barter in the market). Further, Punjab had the largest share of 65.26% in the total establishments in 2005, followed by Sindh (17.82%), NWFP (14.21%), and Balochistan (2.09%) [GoP 2005]. Of the total 2.96 million Establishment and Household units, about 53% were in the major industry group of Wholesale and Retail Trade and Hotels / Restaurants, followed by Community, Social and Personal Services (22.3%). Manufacturing is the third largest group with 19.72% share of the total Establishments. [Table] Table. Number of Establishments by Major Industry Divisions: 2005 Source: Economic Census of Pakistan, 2005, FBS, Statistics Division, Islamabad Among the Household units, the highest share is that of manufacturing sector (66.5%), followed by Community, Social and Personal Services (20.5%), Agriculture, Poultry Farming, Fishing etc. (8.7%), and Wholesale and Retail Trade, etc. (about 4.00%). Manufacturing firms’ data show that, of the total 5, 83,329 units in the census, 117176 were Households units (20.0%) and 466153 (80.0%) in the category of Establishments. The majority of the total manufacturing establishments (43.2%) were in Textile Wearing, Apparel and Leather industries, followed by Food, Beverages and Tobacco (20.9%), Wood and Wood Products (10.8%), Fabricated Metal Products, Machinery and Equipment (10.0%), Other Manufacturing Industries and Handicrafts (8.9%) and the remaining sectors had 11.1 % share. It is also interesting to note that in the largest industrial group of Textile Wearing, Apparel and leather, 31.5% were Households and 68.5% Establishments. The other important group of activities within the Household sector was Non-metallic Mineral Products (28.0%). Another distinct feature identified by the Census is that about 85.0% of the Household Manufacturing Establishments were located in the rural areas. [Table] Table. Number of Manufacturing Establishments by Status And Area: 2005 (Pakistan) Source: Economic Census of Pakistan, 2005, FBS, Statistics Division, Islamabad Further, the Textile, Apparel and Leather segment had the largest share (54.0%) among the rural area Household units. Other Manufacturing Industries and Handicrafts in the rural area Households had a share of 18.0%. In the urban areas, the largest share of the Household Establishments was that of Textile, Apparel and Leather Industries (78.7%), followed by Other Manufacturing and Handicrafts (9.3%), Wood Products including Furniture Manufacturing (3.3% and the remaining industries (8.6%). Overall, in the urban areas the share of Manufacturing Establishments (other than Households) was the largest (93.8%). Within this category, the share of Textile, Apparel and Leather was 43.0%, Fabricated Metal Products 15.8%,
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05 - May - 2010 06:28:02 PM
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Sidra Says: |
its gud ....infact excellent ...it will help me in my project ....linkage of HRD and SME sector in pakistan
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05 - May - 2010 06:32:40 PM
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sadia Says: |
its perfect article about the SME's and im using this article in thesis report.
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29 - June - 2010 06:42:12 PM
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Mustaghis Says: |
Fatima A research on the "SME development in Pakistan: Analysing the constrins to growth: has been conducted by the Asian Development Bank in 2005. The researchers of this paper are LUMS's professors. You can be benefitted by this research but be careful it should not be duplication of your efforts. Mustaghis
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18 - July - 2010 09:17:33 PM
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Zahra Haider Says: |
Just wanting to know does anyone know the exact number of SME's in Karachi
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17 - January - 2011 05:09:24 PM
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Asim Mehmood Says: |
Good material for thesis,
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13 - February - 2011 01:05:39 PM
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usman Says: |
yar excellent work..... it could be very helpful for me and my group as we were doing research on barriers to growth of SMEs but its too late now because we have submitted our project :( @fatima check out gcu.edu.pk i think so there u can find out a study done by Dr. Khalid Aftab on the same topic that may b helpful for u..........
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08 - March - 2011 07:39:17 PM
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sameen Says: |
can anyone just give me some successful examples of SMEs in Pakistan?
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31 - March - 2011 08:08:52 PM
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momin Says: |
nice article it's really help me allot for completing my project.
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01 - April - 2011 04:18:02 PM
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Mubashir Says: |
Nice Article..
I m also doing my thesis on SME..
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23 - June - 2011 08:49:25 AM
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Muhammad Bilal khan Says: |
is there any statistics about the %age of small business unregistered in Pakistan.please if you know anything about its source inform me through my e-mail i will be thankful.
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26 - August - 2011 09:49:55 AM
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Mahboob Yazdani Says: |
SMEs are the backbone of any economy whether it is developing or developed. That's a very massive step by a personality whose efforts make its possible for implemtation. It needs more expansion in rural area also well. Innovative ideas are very essential whether in Indusrial sector and also helpful agriculture sector also. So good team leaders are required to do this one . Govt should promote SME degree in each university as well. I think its a very technical degree for skill enhancemnet and capacity building.
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27 - August - 2011 06:52:40 PM
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Moses Says: |
"Stock markets in the country are in deprivation of number of newly listed companies; I think it is for the sake of well being of stock markets and SMEs that SMEs should be authorized to get listed in shape of a venture of 3 to 5 SMEs on stocks on relatively smaller amount of capital that is how the SMEs could muster the very capital and while becoming a part of corporate culture that can give way for them to have good management. "
nice!!
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20 - September - 2011 12:34:03 AM
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safa riaz Says: |
fantastic.... me also doing assignment work on pakistan SMEs....
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29 - October - 2011 03:44:38 PM
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Fazli Wadood Says: |
It is very intresting and knowlegable article specially for research students like me. so thanx a lot
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02 - November - 2011 04:24:28 PM
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jiya Says: |
its really very nice and perfect article.
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13 - November - 2011 05:37:28 AM
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neelma Says: |
more informative artical it is. iam doing research on barriers to growth of SMEs in pakistan it help me in my research work.
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18 - November - 2011 05:43:11 PM
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Faisal Says: |
Nicely written article. I am starting my research on the same topic. Can anyone help me with the latest work done by anybody. Please contact me at fbbadar@hotmail.com
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24 - November - 2011 08:09:11 AM
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zarin shaikh Says: |
brilliant wrk.very knowledgable article.thnx for sharing.
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10 - January - 2012 11:18:31 AM
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s.azra batool Says: |
well done and congrats on writing such a comprehensive essay .do you have some more work out on SMEs?
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02 - February - 2012 11:02:02 AM
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Humayun Beg Mirrza Says: |
a good helping material. i writting my research thesis on Impact of Information Technology on the growth of SMEs in Pakistan. can any body having good information about it, share with me.
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19 - February - 2012 07:35:14 AM
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Amir Raza Says: |
its a very good artical
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29 - February - 2012 07:10:10 PM
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Syed Muhammad Azeem Says: |
What A Beautiful Article.....!!!
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01 - March - 2012 06:13:01 AM
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Muhammad Tahir Says: |
I need help.... I am conducting research on Role of SME's on economic growth and poverty alleviation. I need statistics of small business employment means how many people working in Pakistan sme's. Can any one help me please??
I need past several years statistics also.
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07 - March - 2012 07:23:13 AM
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Muhammad Tahir Says: |
It's an awesome article, nice work dude
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07 - March - 2012 07:24:18 AM
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ali raza Says: |
its realy very good and consist on facts and figures...awesome article
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18 - March - 2012 06:52:40 AM
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aptunique Says: |
1.can any body tell me, what is the difference between any shop ( working two or 3 persons), and Small enterprise, ?
2, how many SMEs and LEs are there in Pakistan?
3. how much is the digital divide between SMEs and LEs , kindly share ur information ,
LEs, stands for Large Enterprises.
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27 - March - 2012 10:02:09 AM
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Asim Says: |
Very nice article. I'm working on a research on SMEs for my university. Thanks for sharing this.
Regards!
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10 - April - 2012 08:16:45 PM
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Humaira Says: |
Awesome article... will help me in my assignment... that is on SMEs role in developing countries..
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12 - April - 2012 11:32:39 AM
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saima Says: |
v nice artical ..i am working on the role of sme .it ll help me in my project
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12 - April - 2012 03:32:25 PM
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RASHIDA SADDIQUE Says: |
slam. i m rashida.your artical provide valuable informations on SMEs .i am working on small scale industries in AJK.if you have any information about the questionair development ror this please share.thanks
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25 - April - 2012 05:21:14 AM
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Abid Burney Says: |
nice and valuable article,, SMEs subject or degree like MBA should promoted in our universities
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06 - May - 2012 01:25:48 PM
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waheed aafridi Says: |
very nice...... will help me in my BBA 5th tem paper.
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13 - May - 2012 09:15:39 AM
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