Sme umt-ver1[1].0

Sme umt-ver1[1].0

• 1.
  1 INTRODUCTION • Small andMedium 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 RegionalStanding 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 businessdevelopment 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 ForCottage/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 ofBanks 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 • Loanapplication 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 IndustrialEstate 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.
• 8.
  8 Skill Development Center/Cluster Technologyparks may be established near the SME industrial estates so that the small industry may be benefited with the facility.
• 9.
  9 SME FINANCE FOCUSPOINTS 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 FOCUSPOINTS: 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 FOCUSPOINTS: 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 bySME 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 Lackof 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%