November 1, 2019: Engr. Daroo Khan Achakzai, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) urged the Government to increases the SMEs financing in Pakistan which may contribute significantly in the economic and social development, employment generation and poverty alleviation of country.
He added that it is worrisome that 95 per cent of enterprises are SMEs in Pakistan while only 7.5 per cent credit financing of private sectors are given to SMEs sector and most of the credit is given to the corporate sector. Most of the SMEs got financing for working capital instead of new activities.
He stated that the financing to SMEs sector showed a declining trend during the last six months and stood at Rs. 465 billion in June 2019 compared to Rs. 514 billion in December 2018 despite the fact that it contributes to the GDP of Pakistan over 40 per cent, exports earning by 25 per cent and employs 80 per cent of the non-agriculture labour force.
While quoting the examples of other countries he added that SMEs are dominating in China, Taiwan, Singapore, Hong Kong and Korea in these countries and contributed more than 80 per cent in their development. These countries achieved the status of industrially advanced countries or newly industrial nations just on the basis of development of the SMEs sector, he added. Pakistan should learn from the experience of these countries and formulate SMEs driven policies, he stated.
Engr. Daroo Khan Achakzai further elaborated that in Pakistan the banks are generally reluctant to give loans to SMEs sector due to high risk, low profitability and transaction cost and 95 per cent SMEs loans are given on collateral basis and commercial banks lack effective credit models to finance SMEs.
He indicated that without financing and other facilities it is difficult for SMEs to modernize innovate and expand themselves. Keeping in view of the potential of SMEs, he suggested to increase the financing for SMEs and urged the government for significant measures for the development of SMEs sector and training on the issues related to cost-competitiveness, quality competitiveness, marketing, networking, product diversification, starting a business, business plan, legal issues, financial management, time management etc.