ISLAMABAD: The Competition Commission of Pakistan (CCP) has recommended reviewing the definition of Small and Medium Enterprises (SMEs) in comparison to other regional countries, as the current National SME Policy, 2021 excludes micro-enterprises, which overlooks an important segment of the policy focus.
The Commission presented its recommendations while concluding an extensive study titled “Enhancing Economic Efficiency of SMEs in Pakistan”, identifying barriers to competition and providing recommendations for improving the economic efficiency of SMEs.
The study is based on data from 50 financial institutions, 18 focused group discussions and 362 SMEs across 11 cities and a seminar conducted by CCP on women entrepreneurs, said a press release.
Moreover, establishing a clear and transparent legal framework for start-ups is emphasized to define the rights and obligations of all stakeholders operating within the start-up ecosystem.
Access to finance is a significant barrier to SME growth, as highlighted in the study. Despite policy measures to increase financing to 17 percent, the SME sector in Pakistan only receives 6-7 percent of private sector financing.
The study also identifies issues with the SME definition based on annual turnover criteria. The lack of differentiation between Small Enterprises (SE) and micro enterprises’ annual turnover, along with the wide benchmark for Medium Enterprises (ME), creates challenges.
The study highlights that the funds available under various SBP credit guarantee schemes for micro and SEs need to be enhanced. Non-bank financial institutions, leasing companies, crowdfunding, and equity financing can play an important role in the provision of credit to start-ups and SMEs. Improvement in the regulatory environment for these alternate financing channels is required.
It is proposed to simplify the system of licensing and registration and develop one-stop portals for issuing licenses, permits, and registration of SMEs. The data also shows that the regulatory duties in various sectors make imported raw materials expensive for downstream businesses and therefore a critical review of such import duties is paramount.
The study data depicts that SMEs lack the requisite skills and training to efficiently conduct their businesses. It is recommended to the federal/provincial authorities invest greater funds in Technical and Vocational Education and Training institutions with the latest learning output, systems and use of technology and to fast-track the non-operational training institutes.