The government is likely to announce a policy in June to convert the Small and Medium Enterprises (SMEs) from a simple labour-intensive to advance technology-oriented industries. Parliamentary secretary for ministry of industries, production and special initiatives Syed Javed Ali Shah Gilani stated this while speaking at a seminar on "Why are Pakistan's SMEs Bank-Shy", organised by Pakistan Enterprise Development Facility (PEDF) in collaboration with the National Productivity Organisation (NPO) here on Thursday.
SMEs play a vital role in poverty reduction and unemployment, he said and added SMEs faced tough challenges like globalisation and WTO that had enlarged field of competition for SMEs.
Ayesha Baig, consultant/ team leader, NPO said a research study on the role and problems faced by SMEs were underway and its result would be made public soon.
She said recent changes in the regulatory environment and policy of commercial banks should have made it easier for SMEs to access formal financing, adding but it did not happen and had increased the need of a detailed study to find out other obstacle hindering SMEs access to financing.
There was a great need of growing SMEs sector in a way to respond to both domestic and international economic challenges, particularly the coming into force of the WTO.
In this context, PEDF, NPO, ministry of industries, production and special initiative have been appointed by the Pakistan Financial Service Sector Reform Programme (PFSSRP) of the European Commission to undertake a research study on "Why are Pakistan's SMEs Bank-Shy".
In 2000, she said when Small Business Finance Corporation (SBFC), the present SME Bank, was restructured to become the premier SME lending institution, it was the government's initiative to develop the SME sector by promoting changes both at the policy as well as at the operational level.
At this stage, the SBFC considered a number of reasons for SMEs inaccessibility to formal sources of credit, limitations were both on part of banks as well as SMEs, she added.
Other speakers said SMEs were having certain apprehensions like fear of documentation, failure to segregate business funds from personal funds and limited knowledge of financing options.
Representatives of different banks said banks had some limitations, as they need reliable information regarding borrowers, high transactional costs and turn around and inadequate instruments of managing risk.
SMEs were considered the engine of economic growth in both developed and developing countries, speakers said and added the government was now looking towards the SMEs sector as a potential growth driver for the economy.
According to World Bank gallop survey, top issue faced by nearly 55 percent of the SMEs was lack of finances, an official of SMEs bank said.
He went on to say SMEs play an important role in economic development by providing employment to over 80 percent of the industrial labour force. SMEs constitute 90 percent of all enterprises and contribute more than 40 percent to GDP, he added.
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