Few could deny noticing ‘Nagori’ milk shops scattered across big and small cities of this country; the billboards of most of these shops saying ‘hamari koi branch nahi’ (we don’t have any branch). The same is true for ‘nimko’ shops across Karachi and many other similar businesses; most of them boasting on their wall: ‘hamari koi branch nahi’.
Considering that a significant number of these ‘nagoris’ – ‘nagori’ being a proxy for food and beverage retail businesses - are very successful with fast turnover and decent margins, one wonders why is that they write ‘we don’t have a branch’.
Is it because they really don’t have a branch; if that is the case then why is that so. Do they not want to expand and grow, contrary to conventional economic wisdom of profit maximization? Surely, there are a host of players who chose never to grow their business despite being a roaring success - – such as the original old man of Liaquatabad Karachi who still sells ‘badaiyon kay pairhay’ (a local sweet dish) in limited supply. Admittedly though, while there are many businessmen who do not chose to grow beyond the shop or business that their grandfather opened, there are many others who grow but succumb to splinters by the time their third generation takes the control.
Or is it because these ‘nagoris’ are concerned about what is in the economic literature called intellectual property rights. Perhaps they are concerned that if they expand their business, someone might simply copy their name and sell inferior quality products. Which is perhaps why some SMEs like Metromilan Agarbatti (incense sticks maker) used to run advertisements that cried ‘naqalon se hoshyar’ (beware of copycats).
The answer to these questions does not exist out there. Somehow despite all the focus on SMEs, few know what SMEs really want. It might help in the way of intellectual property rights if the idea is advocated on the basis of local problems, instead of being imposed as a donor driven agenda or something that only affects big foreign players.
The central bank of Pakistan has recently rolled out an SME policy where they have identified a few SME sectors, as well as food and vegetable processing for value chain financing. It is going to provide SMEs cheap loans at a maximum of 6 percent, where the central bank will provide subsidized capital to banks at 2 percent and the maximum they can charge is 4 percent.
In a recent interview with BR Research, the governor State Bank of Pakistan Tariq Bajwa also said that the SBP is not only going to ensure availability of finances at affordable rates; it is also exploring ways to educate both the banker and the entrepreneur, and also providing non-financial advisory services to the customer. (See Brief Recording section Feb 23, 2018).
That is all hunky dory, credits for which. But this column submits that the central bank should also commission studies aimed at understanding Pakistan’s ‘nagori’ problem, in addition to making case studies of third generation SMEs - both the successful ones and those that fell apart during generational transition. (See also SME finance: getting the basics right - & SME clinics published Jan 16 & 17, 2018)
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