Spread Knowledge

MGT601 - SME Management - Lecture Handout 45

User Rating:  / 0


The role of government as a facilitator of business and its interaction with business support institutions is imperative for the establishment of a mutually beneficial relationship for the growth of the sector. SME promotion is an important issue for many government departments and central offices. For example, the Ministry of Labour plays an important role in shaping the labour market policy of the state. Similarly, in order to gather information on the health of the SME population the role of Federal Bureau of Statistics, the Ministry of Finance, and planning division is pivotal. Other ministries and divisions such as Ministry of Local Government and Rural Development, and the Ministry of Science & Technology also influence the situation of our SME. Provincial and local governments also take their share in responsibility.

However, there is an existing lack of coordination and regular information exchange mechanism among institutions, which constrains their collective ability to deliver in the SME development process. As a result of the Government’s recent efforts, two institutions Small and Medium Enterprise Development Authority (SMEDA) and SME Bank were created.

The responsibility for facilitating SME policy development now lies with SMEDA, which is attached to the Ministry of Industry and Production (MOPI). SMEDA is responsible for creation and coordination of Government policy for the SME sector. Parliament, naturally, is responsible for monitoring policy and its implementation.

One of the major reasons for the lack of coordination is that SMEDA has not been provided with a formal mechanism to initiate, coordinate, monitor and evaluate initiatives undertaken for SME development, which fall outside of its own scope of activities.

Therefore, cross-departmental and stakeholder consultations, resulting in the preparation of our national SME policy are our key to success. Regular information exchange mechanism and networking needs to be developed amongst our public and private sector institutions. There is a strong need to devise such an information exchange mechanism and redefine the role of institutions, specifying their functions in order to avoid duplication of efforts and allowing the best possible usage of resources.

Under the SME Sector Development Program it is expected that SMEDA

  • Prepares Government documents on policy regarding SME.
  • Drafts relevant laws and regulations.

To form a collective view of all stakeholders, the SME task force has been established at the MOIP, SMEDA will serve as the secretariat.

A network of institutions stimulating the growth of SME is being proposed. The institutions in this network cover all stakeholders involved in SME promotion; Regional Development Agencies, Business Support Centres, Chambers of Commerce as well as other organizations, which are established as an initiative of local communities.

Pakistan has no across the board legal definition of SME. This makes it extremely difficult to monitor the development of our SME economy and to establish benchmarks against other countries in order to devise areas of intervention and support.

Various government departments and public-sector agencies have adopted their own definitions. There are, of course, various reasons for them to define SME, and there may even be discussion on just how a strict and reasonable size standard could be defined.

A number of current definitions are based on capital standards since this influences the pattern of fund raising in the formal and informal market by SME.

Many stakeholders consider enterprises with 100 or more employees as large, and enterprises with less than 5 employees as micro. Yet our statistical system classifies enterprises with more than 10 employees as large, and the State Bank of Pakistan considers those with more than 250 employees as large.

The reference to international practice also suggests differentiation among industrial, wholesale, and retail10 and services related enterprises. This view also gets credence from various studies on the issue for pakistan11. Again, this consideration is only visible in the SBP definition and missing in all others. There are also rationales beyond the particular organizational motivations for defining specific size classes, and it will therefore be useful for all stakeholders to review definitions on technical grounds.

For a national policy, it is extremely important to have a harmonized definition for, as it is also important for the government to focus assistance as reasonably as possible for maximum efficiency. It is also imperative to adopt a definition to foster the coherence of vision in the SME policy development and for the better implementation of related support programs across institutions.

Financing Tool

There should be a security tool devised be SBP to handle the security problem of SME LENDING.

Think Small First

The small industries should be given priority in purchasing from private sector and priority should be given to small industries like UK.

Approach On Site

The small industries should be approached at the it site as due to scattered locations of the small industries.

Technical and language barriers.

The training of manpower should be in line with the requirements of the industries and the main policies and plans should be published in Urdu to make it understandable for every body.

Soft Tax System

There should be customized system for the small industries as that lack documentation and can not afford costly book keeping.

Simple Labour & Other Laws

The labour and other laws should be made very simple as there are 56 laws in labour only. To make them simple should be adopted

Book Recommended

Small Entrepreneurs in developing countries By Dr Asher S. Nair


Related Content: MGT601 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of SME Management