Role of SMEDA in Developing

SME’s in Pakistan

Submitted to:
Sir Imran Ali
Submitted by:
Ali Zahid MBE-SP08-003
Kashif Aslam MBE-SP08-028

COMSATS Institutes of Information

Technology M.A.Jinnah Campus Lahore.
Department of Management Sciences.
Introduction
Developing a group of diverse and competitive small and medium
enterprises (SMEs) is a central theme towards achieving sustainable economic
growth. SMEs are crucial to the economic growth process and play an
important role in the country’s overall production network. Some advanced
economies have succeeded because SMEs form a fundamental part of the
economy, comprising over 98% of total establishments and contributing to
over 65% of employment as well as over 50% of the gross domestic product.
Although the numbers might be lower in Pakistan, SMEs have the potential to
contribute substantially to the economy and can provide a strong foundation
for the growth of new industries as well as strengthening existing ones, for
Pakistan’s future development.

Definition of SMEs

1. SMEDA Definition
Small & Medium Enterprises are defined as follows, as approved
in SME Policy 2007.

Enterprise Category Employment Size Paid Up Capital Annual Sales (c)

(a) (b)
Small & Medium Enterprise Up to 250 Up to Rs. 25 Million Up to Rs. 250
(SME) Million

2. State Bank of Pakistan

According to State Bank of Pakistan, SMEs are organizations which
Fulfills one of the following criteria:
 A trade / services concern with total assets at cost excluding land and
buildings up to Rs 50 million.
 A manufacturing concern with total assets at cost excluding land and
building up to Rs 100 million.
 Any concern (trade, services or manufacturing) with net sales not
exceeding Rs 300 million as per latest financial statements.
Importance of SMEs
The ideology behind the promotion of SMEs comes from the perceived
failure of large enterprises in creating adequate productive jobs to absorb a
significant share of the rapidly growing labor force in many developing
countries. This perception inspired emphasis on the development of small
industries by stressing benefits such as income generation, dispersal of
economic activities to small towns and rural areas, and mobilization of
entrepreneurial talents.
Following are some points which will reveal the importance of SMEs.
 SMEs are more labor-intensive than large enterprises.
 SMEs are as efficient as LEs or more efficient than large enterprises.
 SMEs are more equitable in distributing the income they generate than
large enterprises.
 SMEs are more likely to play a higher role in rural development than
large enterprises.
 The significance of SMEs is associated primarily with their role in
stimulating economic growth.
 SMEs create employment opportunities as they are labor-intensive.
 SMEs enhance regional development.
 Create more equitable income distribution.
 SMEs play a complementary role in relation to larger firms--as suppliers
and distributors.
 SMEs serve as a training ground for developing the skills of workers and
entrepreneurs.
 The presence of SMEs curbs the monopoly power of larger firms.
 A country can reduce its vulnerability to financial crises by strengthening
its SMEs.
 SME’s are the backbone of a national economy, particularly in
developing countries.
 SME provide the platform for small & medium entrepreneurs to work as
an arm taking of economic and social indicators of a country.
Objectives of SMEs
Following are some broad objectives of SMEs.
 Economic Growth
 Economic Development
 Poverty Reduction
 Employment
 Social and economic sustainability

Characteristics of SMEs
Following are some common characteristics of SMEs.
 Owner is the manager & few employees
 Owned & operated independently
 Relatively small investment, production, sales, dealings etc.
 Inadequate efficiency of business operations.
 No relationship with other firms or parties for Investment, Management,
finance, tax

Statistical facts regarding SMEs

1. ACCORDING TO THE ECONOMIC CENSUS OF PAKISTAN

Sales below Rs.0.5M 84%

Sales below Rs.1.0M 93%
SMEs less than 5 Year old 19%
Survive beyond 25 years 4%
Business enterprises nation-wide 3.2M
SMEs 2.96M
Household Units 0.18M
2. Province wise Distribution of SMEs

Name of Area SME Units

Pakistan 2.96 Million
Punjab 65%
Sindh 18%
Khyber Pakhtunkhwa 14%
Baluchistan 3%

3. Distribution of SMEs According to the No. of Employees

Total SMEs units 2.96 million (100%)

SMEs employing 1-5 Persons 2.85 million (96.6%)
SMEs employing 6-10 Persons 79,000 (2.67%)
SMEs employing 11-50 Persons 26,000(0.87%)
SMEs employing over 50 Persons 1617(0.054%)

4. Economic Contribution of SMEs

Employment 78%
GDP 40%
Value Addition 35%
Exports 25%
 5. SMEs Share in Sub-Sector

Sub-sectors Percentage Share of SMEs

Cotton Weaving 13%
Other Textiles 6%
Metal Products 7%
Carpets 4%
Art Silk 5%
Grain Milling 16%
Jewelry 4%
Wood & Furniture 10%
Others 35%

Barriers to SMEs Growth

SMEs are facing various barriers in the way of their growth and
development. Following are some main barriers SMEs are facing these days.
 Govt. & SME Interaction
 Taxation
 Finance
 Labor Legislation
 Human Resource Development
 Technology
 Market & Industry Information
 Lack of Infrastructure
 Environmental issues & compliance
 Social compliance issues
 Intellectual Property Rights
Small and Medium enterprise development Authority
(SMEDA)
Premier institution of the Govt. of Pakistan under Ministry of Industries
and Production, SMEDA was established in October 1998 to take on the
challenge of developing Small & Medium Enterprises (SMEs) in Pakistan. With
a futuristic approach and professional management structure it has focus on
providing an enabling environment and business development services to
small and medium enterprises. SMEDA is not only an SME policy-advisory body
for the government of Pakistan but also facilitates other stakeholders in
addressing their SME development agendas.

SMEDA Vision
Growth of globally competitive SME sector through a conducive and
facilitating environment and support services as an engine of growth and
sustainability to national economy.

Mission Statement
To function as the promoter & facilitator of SME sector in Pakistan by
creating a conducive and facilitating environment as well as providing and
facilitating service delivery to SMEs for enhancing their capacities and
competitiveness.

SMEDA Objectives
1. Formulate Policy to encourage the growth of SMEs in the country and to
advise the Government on fiscal and monetary issues related to SMEs.
2. Facilitation of Business Development Services to SMEs.
3. Facilitate the development and strengthening of SME representative
body’s associations/chambers.
4. Set up and manage a service provider’s database including machinery
and supplier for SMEs.
5. Conducting sector studies and analysis for sector development
strategies.
 6. Facilitation of SMEs in securing financing.
7. Strengthening of SMEs by conducting and facilitating seminars,
workshops and training programs.
8. Donor assistances for SME development of SMEs through programs and
projects.
9. Assist SMEs in getting international certifications (such as UL, CE, DIN,
JIS, ASME, KS, etc.) for their products and processes.
10.Identification of service opportunities on the basis of supply/demand
gap.

SMEDA Services
SMEDA is currently offering following services to promote regulate and
enhance SMEs in Pakistan.
 Consultant Services
 Training Services
 Business Plan Division
 Financial Services
 Information Resource Centre (IRC)
 Intellectual Property for Business Success
 Legal Services
 Policy and planning

1. Training services
SMEDA organizes training programs, seminars, workshops and
conferences of short duration in major cities across the country for raising
awareness and capacity building of SMEs. These need based training programs
are affordable, appropriate and innovative. These programs are aimed at
improving knowledge, skills and competencies in the technical, marketing,
financial, compliance, policy, regulatory, legal, and commercial and other
important functions. These programs help to improve major performance
indicators such as productivity, quality, competitiveness and sustainability etc.
The results include improvement in export potential, investment promotion,
business transparency, human resource development, managerial capacity
building etc. These programs help decreasing the level of SME mortality and
increasing efficiency.

2. Business Plan Division

Business Plan development services is one of the key services
provided to enable existing as well as potential investors to make well
researched and informed investment decisions.

3. Financial services
Financial Services Group (FSG) is one of the support units of
SMEDA. As the name suggests, FSG is responsible for all financial consulting
and advisory services that SMEs may require. As for all the support functions,
FSG caters to both internal sector teams as well as any external walk-in SMEs.
In addition to such consulting services, FSG also acts as coordinator of
government schemes, which involve financial institutions.

4. Information Resource Centre (IRC)

SMEDA Information Resource Centre (IRC) has been established to
cater to the information needs of SMEs and stakeholders from both the public
and private sectors. IRC maintains a collection of more than 3400 books and
CD-ROMs/DVDs besides subscribing leading newspapers and more than 20
journals of international repute on diverse business sections and related fields.
A number of full text online journals are also available for SMEs and
researchers on different fields of knowledge. IRC collection consists of
databases, directories, reports, yearbooks, annual reports, and loose-leaf
material that are available for easy retrieval through latest library management
tools. Hard format of training programs conducted by SMEDA are also available
in IRC. SMEDA IRC collection is increasing by an aggregate 10 % every year.

5. Policy and planning

Policy & Planning Division of SMEDA has dual focus internal &
external. It plays a key role in devising and coordinating policies, action plans
and strategies for SMEDA operations. On the other hand it has a mandate to
carry out research, communicate with stakeholders and advocate policies with
different tiers of the government with an ultimate objective of creating a
conductive business environment for SMEs in Pakistan. P&P is the hub of policy
and regulatory research that provides SME specific policy input to all tiers of
government, government agencies and institutions, SME associations,
industrial clusters and individual entrepreneurs.

6. Intellectual Property for Business Success

Intellectual Properties (IPs) are intellectual assets that are
intangible such as knowledge, creativity and inventiveness. Intellectual
property in its essence is that information which has economic value when put
into use in the marketplace. The rationale of protection also rests on the
premise that both forms of assets (tangible & intangible) have potential of
wealth creation. IPs generally falls into two categories; industrial property and
copyrights. The rights of inventions, industrial designs, trademarks, integrated
circuits and geographical indication are protected under industrial property
while the copyrights include literary work such as novels, poems, plays, films
and also artistic works etc.

7. Legal services
We add value to the business of Small and Medium Entrepreneurs
(SMEs) through facilitation in:
 Resolving legal problems through service providers.
 Creating awareness of legal rights & responsibilities by disseminating
information on existing regulatory/contractual requirements through
sample contract templates, business guides and seminars.
 Enhancing capacities for improved compliance of laws, rules and
regulations through training programs.
 Legal opinions to your business queries, and
 Interaction with regulatory authorities and service providers for
removing legal impediments.

8. Consultant services
SMEDA also provide various consultancy services.
SMEDA Business Development
SMEDA is currently facilitating SMEs with the followings services.

1. Pre-feasibility Studies
Pre-feasibility studies are well researched yet generic due
diligence reports that facilitate potential entrepreneurs in project identification
for investment.
The main objective of the pre-feasibility studies prepared by SMEDA is to
provide information about investment opportunities to the small & medium
enterprises (SME’s). A typical pre-feasibility study provides:
1. Comprehensive information for investment opportunity in a business.
2. Specific information regarding different business areas like, marketing,
technical, industrial information etc. for the existing entrepreneurs to improve
their exiting setup.
3. Project investment information and financial projections to support viability
of the business.

2. Regulatory Procedures
SMEDA Regulatory Procedures have been developed to
disseminate information and to assist Small & Medium Enterprises on existing
regulatory environment, through user-friendly systems, providing detailed
description of laws & regulations, including processes required for compliance
while doing business in Pakistan.

3. Sector briefs
One of the objectives of SMEDA is to provide fresh impetus to
Pakistan’s economy through an aggressive Sect oral Development program. Its
role in this regard will be recommending policy guidelines to the government
for development of small & medium businesses.
 4. SMEDA Publications
Small & Medium Enterprise Development Authority, SMEDA, has
initiated a process of articles, books & other publications to create awareness
among the general public on optimal business practices, regulatory issues, GOP
schemes, new business concepts, etc.

5. Commercial Contracts Templates for Business to Business

Contracting is at the heart of business development. Any business
firm interested in outsourcing any of its functions, looks for good sources and
secures its interest through commercial contracts.
Documenting the business arrangements and for consistent standard of
transactions, appropriately worded contracts add security and value to the
business. In line with SMEDA mandate to facilitate Small and Medium
Enterprises sample contract forms for various business to business activities
have been developed by 'SMEDA Legal Services'. The purpose of these
Business to Business Commercial Contract templates is to provide SMEs,
Service Providers, Companies and Firms with information pertaining to
requisite format and content of a Business to Business Commercial Contract.

6. Guidelines for SMEs on Compliance and ISO Certification

In post WTO era, sectors of Pakistani economy particularly
industry, agriculture and services are increasingly exposed to various
challenges. One of the major challenges for low income countries towards
adopting the path of sustainable development is the limited enterprise
capacity to comply with the international buyers’ requirements. International
buyers are increasingly demanding compliance on quality, safety, environment
and social standards.
Compliance to international and national standards promotes enterprise
efficiency and competitiveness through international trade, protects
consumers’ rights of health and safety and in turn leads to socio economic
development of economy. Non compliance to these requirements often results
in loss of business.
SMEDA Projects
Following are some of the finished and ongoing projects of SMEDA.

1. Women Business Incubation Center

Women Business Incubation Center (WBIC) is an initiative of
SMEDA being funded by Government of Pakistan to provide ‘hands-on support’
to Women Entrepreneurs (WEs) in an exclusive female oriented environment.
It is the first of its kind center in Pakistan wherein, Offices, Exhibition/Display
facility and Business Development Services (including training programs) are
being offered to Women Entrepreneurs (WEs) less than one roof.
The entire effort is focused at encouraging new business start-ups and support
to existing businesses including the right environment for nurturing women
owned and managed businesses to an extent that these become sustainable;
more specifically, in start-up period (first five years) when they are most
vulnerable. WBIC is a supportive entrepreneurial community designed to help
grow small businesses. The center is established for providing assistance to
home-based businesses or those in earlier stages of development.

2. Industry Support Program

SMEDA initiated an Industry Support Program in 2003 for
technical support of different industrial sectors in Pakistan. SMEDA has
collaborated with different international organizations like Japan International
Cooperation Agency (JICA) and Gesellschaft für Technische Zusammenarbeit
(GTZ). These organizations provide foreign experts to enhance the capabilities
and operational techniques of local industry in different ways.
For the success of these development initiatives an Industry Support Cell (ISC)
at SMEDA has been established. The main objective of establishing this cell is
the capacity building of SMEDA staff and to ensure the continuity of different
initiatives. ISC consists of professionals who work closely with foreign experts
for the development and up gradation of local industry.
 3. Industrial Information Network
The Industrial Information Network (IIN) www.iin.com.pk connects and
facilitates businesses in Pakistan. IIN is the first dual purpose portal, providing
Business-to-business (B2B) and information services to businesses from various
industrial sectors in Pakistan.

4. Cluster Development
Clusters are geographical concentration of enterprises which
produce and sell a range of related or complementary products and are, thus,
faced with common challenges and opportunities. Cluster development is
basically supporting and strengthening the clusters by creating networking
among the stakeholders to reduce the cost of doing business, bringing them on
a single platform for more voice among policy makers, create new business
opportunities, reducing risk of doing business and capacity building of the
enterprises. Cluster development has also proved its contributing in
employment generation and poverty reduction worldwide.

Sector development
SMEDA is currently working to develop the following main sectors
which are backbone in stimulating SMEs in Pakistan.
 Dairy sector
 Jem & Jewelry sector
 Agri Business services

SMEDA Business opportunities

Following is glance on SMEDA’s business opportunities
development.

 International Business Opportunities Service

SMEDA is providing a unique service to facilitate SMEs by
promoting business-to-business relationships. SMEDA's role is that of a
matchmaker and we provide a platform for SMEs to come together and
explore different areas of cooperation using SMEDA's databases and web-site.
Now anyone can look for joint ventures, buy running business, form equity
partnership, and look for agents or distributors franchises and other business
investment opportunities through this initiative.

 Business Matchmaking Service

SMEDA is providing a unique service to facilitate SMEs by
promoting business-to-business relationships. SMEDA's role is that of a
matchmaker and we provide a platform for SMEs to come together and
explore different areas of cooperation using SMEDA's databases and web-site.
Now anyone can sell their business, look for joint ventures, buy running
business, form equity partnership, and look for agents or distributors through
this initiative.

Conclusion
It is a fact that SME sector is really at its developing stage in Pakistan.
We need a lot of effort to develop it and make it parallel to the developing
countries. SMEDA is also working very good to enhance the potential of SMEs.