SME draws strong criticism

The new Small and Medium Enterprises (SME) policy, unveiled by the government on Wednesday, invited criticism that it would further marginalise small entrepreneurs and strengthen the big ones, it is learnt.
These concerns were raised by some people here at the first meeting of 'National Committee on Small and Medium Enterprises' (NSCME) who pointed out that its definition meant less promotion of SMEs and more of big companies. It sets the SME employment size of up to 250, paid up capital of up to Rs 25 million and annual sales of up to Rs 250 million.
Some government officials also referred to the definition of SME in Medium Term Development Framework (MTDF), saying that unlike new policy, its pre-conditions are 50 employees and Rs 2 million to Rs 20 million assets.
They questioned the logic of this definition, given the fact that more than 90 percent SMEs have less than 100 employees and much smaller annual sale and paid-up capital. Moreover, the existing SMEs have been facing liquidity problem as they are not being provided loans by banks.
Responding to a question Dr Shamahad Akhter said that there is no limit on credit loans, and SME credit growth has almost doubled, saying that some banks have the liquidity but the problem is lack of viable projects by the SMEs.
She dispelled the impression that the increase in discount rate had anything to do with the politics, emphasising that the decision was taken purely on economic considerations.
The SME sector is the backbone of Pakistan's economy as it contributes 30 percent to the GDP, 25 percent exports of manufactured goods besides sharing 35 percent in manufacturing value-added. It also provides 78 percent of the non-agriculture job opportunities.
The policy contains four recommendations which include adoption of a single SME definition by all the stakeholders, measures for reducing the regulatory burden on SMEs, mechanisms to increase access to finance through interventions in all three areas of financing ie demand side (SMEs), supply side (banks) and intermediaries and regulators (SBP, SMEDA etc.)