INP-WealthPk

Steps A Foot to Facilitate SMEs Growth in Pakistan

February 24, 2022

By Faiza Tehseen ISLAMABAD, Feb 24 (INP-WealthPK): Small and Medium Enterprises in Pakistan (SMEs) play a vital role in the economic arena. SMEs contribute to economic development in many ways e.g., creating employment for skilled/unskilled workforce, contributing to enhancing exports, bringing innovation and also providing services to train workforce at a large scale by hiring unskilled people as they are cost-effective. At least 3.3 million SMEs are actively taking part in Pakistan’s economy. The SMEs make up over 30 percent of Pakistan’s total GDP (gross domestic product) and about 25 percent of exports share. The SMEs in Pakistan employ some 78 percent of non-agriculture labour force. In most of the developing countries like Pakistan, SMEs constitute more than 90 percent of all of the enterprises. To make the SME traders community cognisant of the importance and value concerning their registration under the umbrella of Pakistan Stock Exchange (PSX), Islamabad Chamber of Commerce and Industry (ICCI) conducted an awareness seminar with the coordination of Islamabad Stock Exchange (ISE). In the seminar, the SME traders were properly introduced to the initiatives of Growth Enterprise Market (GEM) Board established by Pakistan Stock Exchange. This board is specially designed to look after the stock market affairs of SMEs. The GEM Board has been actively working since the past few years to facilitate SMEs. It is a special initiative taken by the stock exchange to make SMEs self-sufficient for funds generation. SMEs can do better by registering in GEM Board as it sometimes becomes too difficult for them to get enough loans from commercial banks due to their small size. It can be a good alternative to generate funds for SMEs. In the seminar, SMEs were told how they can grow and generate funds by taking part in the GEM Board. Previously, it was difficult for SMEs to register in the ISE due to strict conditions. Now the GEM Board is there to provide ease regarding green field projects, technology start-ups and other small companies. This platform will harness the investors to invest in SMEs which will get better chances to improve and develop. The stock exchange has provided SMEs a better platform to obtain loans. This may help them to add value to their products, to increase their operational abilities, to invest in new plans, to enhance exports and to fulfil the needs of working capital. Asghar Abbas Naqvi from ISE (Regional in-charge of Pakistan Stock Exchange, North) told INP-WealthPK in an interview that the GEM Board is a listing platform aimed to facilitate the growth-oriented business. The stock exchange has allocated special package for SMEs. Now SMEs can get stock exchange registration against the capital value of Rs25 million, while for large-scale manufacturing industries, it is worth Rs200 million. The registration fee for SMEs is Rs50,000 only and the company must be a public one with at least two years audited financial account by a Quality Control Review (QCR) firm along with an actively updated website having a minimum of 10 subscribers. Listing can be done to raise fresh capital or offer shares for sale. Sponsors will hold at least 25 percent of the post issue paid up capital of the issuer for a lock-in period not less than three years. The government has also taken initiatives for SMEs to grow. Small and Medium Enterprises Development Authority (SMEDA) is a positive step towards the said initiative. SMEDA not only provides loans for the establishment of SMEs but also provides consultancy and trainings as well. The government has also allocated Rs12 billion to support risk sharing and collateral free lending to SMEs as described in the monthly economic update and outlook published in July 2021. It is expected that such measures will boost the overall growth of SMEs by creating more jobs and spill over effects to other sectors. There is a significant potential for SMEs but there is a dire need to enhance their growth through appropriate regulations and promotion. It is important to include all the stakeholders to draft future policies for the economic growth of SMEs in Pakistan. Good governance is key to success for the nourishment of any economic body to grow, so it should be implemented under specific and uniformed measures. The trade community in Pakistan is badly in need of such parameters to develop smooth relations among all economic sectors, especially co-relations with SMEs.