The oft repeated phrase used to describe the small and medium enterprise (SME) sector of Pakistan is “the engine of growth for the country”. The fuel required to give this engine traction then would clearly be capacity building of these SMEs. SMEs represent approximately a whopping 90 percent of all enterprises in Pakistan with a massive contribution of 40 percent to the GDP. Another statistic puts 80 percent of the non-agricultural labour force as being employed by the informal sector.
SMEs require not only an enabling business environment by the government but also support in capacity building involving technical knowledge, innovation, marketing and human resource management. These SMEs, if provided the right guidance and necessary expertise on conducting their day to day operations, could become internationally competitive enterprises.
A working group for capacity building of SMEs was held at the State Bank of Pakistan earlier this week under the National Finance Inclusion Strategy (NFIS). The working group included officials from SMEDA, SECP, and SBP as well as some leading banks involved in SME facilitation and lending.
The development of SMEs has been placed as a top priority under NFIS which is a welcome move for the sector. According to the World Bank, Pakistan’s aim is to achieve universal financial access, with NFIS target of expanding formal financial access to at least 50percent of adults, including women and youth, and increasing the percentage of SME loans in bank lending to 15 percent by 2020.
According to Zulfikar Thaver who is president of the Union of Small and Medium Enterprises (UNISAME) as well as the chairperson of the working group, capacity building of SMEs is the need of the hour as sector is the backbone of the economy. Significant recommendations provided to the working group by Mr. Thaver included SMEs having their own chamber of commerce and also their own export promotion bureau for marketing support under modern systems of online marketing through SME galleries.
An issue raised during the working group was educating SMEs about the latest technologies in production, management, marketing, accounting & inventory control. In order to effectively educate SME’s about these aspects, there needs to be targeted strategy that relies on both direct and indirect interaction with SME owners as well as staff. A model for this purpose can be adopted from western economies that have dedicated technical institutes to impart training and capacity building to small business owners. For Pakistan, the programs should be tailored according to the language needs of each province for maximum dissemination.
It would be beneficial if all the institutions tasked with development and promotion of SMEs work in tandem with each other. As the definition issues have almost been wrapped up with SMEDA recently (covered in ‘SMEs – the defining conundrum’, published on May 11, 2016), the next logical step would be to focus on a co-ordinated effort to deliver rapid capacity building to SMEs.
First published: May 26, 2016.
