Pakistan Businesses Forum (PBF) Punjab President Muhammad Naseer Malik has urged for the establishment of a vending industry to aid in the growth of small and medium-sized enterprises (SMEs) in the country. He noted that in order to finance SMEs, the credit guarantee scheme (CGS) as well as non-banking financial institutions (NBFIs) and modaraba should be incorporated.

Talking to the media, he stated that the automobile sector's vending business supplied high-quality components for cars and motorbikes assembled or produced in Pakistan. We must promote a similar vending business in the textile sector and other significant industrial units. In Pakistan nowadays, the SMEs sector employs 80% of the non-agricultural work force and accounts for 40% of the gross domestic product.

He noted that the growth of the small and medium-sized business sector was 8% in the manufacturing sector and 10% each in the export and service sectors, both of which needed to be improved. In the period from December 2020 to December 2021, Malik said that the number of SME borrowers fell to 164,752 from 179,934 while the ratio of SME non-performing loans (NPLs) stayed nearly constant at 15.85%, except for September 2021, when the NPLs ratio was 19.1%.

SMEs are the foundation of every nation's economy, according to Muhammad Naseer. Currently, Pakistan has more than 38 million SMEs, of which 800,000 are industrial units, 1.2 million are service businesses, and 1.8 million are commercial and retail shops. Among these small industrial units, 41% are located in urban regions, while 59% were situated in rural areas, he said.

He mentioned Japan as having 4.2 million SMEs with 20.84 million workers, whereas Japan has only 12,000 large-scale enterprises, which employ around 10.22 million people. He said India could become Asia's third-largest economy due to the rapid growth of its industrial/manufacturing sector, providing employment to approximately 45% of the population.

He continued by stating that China has become the second-largest economy in the world after the United States as 86% of Chinese citizens are currently employed in these industries, contributing 60% of the country's GDP. Similar to the United States, 67% of people are employed by 99.8% of small and medium-sized businesses in the European Union, he said.

60% of the world's population is employed by small and medium-sized businesses, which make up 95% of all businesses worldwide, he said. In order to boost SMEs, Pakistan formed the Small and Medium Enterprises Development Authority (SMEDA) in 1998. SMEDA is charged with providing sectorial feasibility studies in collaboration with local chambers of commerce and relevant stakeholders to promote SMEs.

According to Muhammad Naseer, SMEDA's 2007 SME Policy did not significantly contribute to the development of SMEs since it did not take into account the rapidly evolving global business environment, which prevented Pakistan's SMEs and vending sector from expanding.

He stated that SMEs should be defined uniformly, with small industries having an annual sales turnover of up to Rs 200 million and medium industries having an annual sales turnover of over Rs 200 million and up to Rs 1200 million. According to the proposed new SME policy, all industries should be included based on the definition of yearly sales turnover, and credit should be granted for working capital and BMR (benchmark regulation) at 6%, he said.

The majority of small-scale enterprises, according to Naseer Malik, are rented, and since they lack ownership rights, they cannot be mortgaged, which is a barrier to obtaining bank loans. "Unfortunately, the banks are still giving loans to SMEs at 18% to 20% by keeping their assets as collateral under the old regulations, due to which the small and medium industries in Pakistan could not grow," he added.

Credit : Independent News Pakistan-WealthPk