LAHORE:Pakistan Businesses Forum (PBF) Punjab President Muhammad Naseer Malik Sunday called for establishing vending industry for development of the Small and Medium-sized Enterprises (SMEs).
The credit guarantee scheme (CGS) should be introduced and non-banking financial institution (NBFI) and Modaraba should also be included for financing of SMEs, he added.
Talking to reporter here, he cited that automobile sector’s vending industry was providing quality parts for vehicles and motorcycles assembled/manufacture in Pakistan. “We have to promote similar vending industry in the textile and other major industrial units.
Today, SMEs sector in Pakistan was providing 80 percent employment to the non-agriculture labor and contributes 40 percent in GDP. The growth of small and medium sector was eight percent in manufacturing sector, 10 percent each in exports and service sector which needed to be enhanced, he added.
Malik mentioned that the number of SME borrowers dropped to 164,752 from 179,934 in a year ago i.e. December 2020 to December 2021, while the SME non-performing loans (NPLs) ratio remained almost static to 15.85 percent during this period, except September 2021 with 19.1 percent NPLs ratio.
PBF Chairman (Punjab Chapter) Muhammad Naseer Malik said that in the development of industry and economy of any country, Small and Medium industries (SMEs) serve as the backbone of economy. At present, there were more than 38 million small and medium enterprises in Pakistan wherein 800,000 were industrial units, 1.2 million service sector, 1.8 million commercial and retail shops. 41 percent of these small industrial units were in urban areas and 59 percent were based in rural areas.
He cited that India might become Asia’s third largest economy due to rapid growth of its industrial/manufacturing sector providing employment to approximately 45 percent of population, and Japan had 4.2 million SMEs comprising 20.84 million workers, whereas there are only 12,000 large scale industries in Japan with approximately 10.22 million work force.
He added that China had become the world’s second largest economy after US, and today, 86 percent of Chinese people were associated with these industries and contributing 60 percent in the country’s GDP. Similarly, European Union (EU) had 99.8 percent of small and medium-scale industries providing employment to 67 percent people. “Overall, in the world, there are 95 percent small and medium scale enterprises which provide employment to 60 percent of the global population,” he maintained.
Pakistan had established Small and Medium Enterprises (SMEDA) in 1998 for development of SMEs with the responsibility to provide Sectorial Feasibility Studies in coordination with chambers of commerce and respective stakeholders for the promotion of SMEs.
Muhammad Naseer Malik was of the view that SME Policy 2007 announced by SMEDA did not play any major role in the promotion of SMEs as it did not comply with the fast-changing business environment of the world due to which the SMEs and vending industry could not grow in Pakistan.
He suggested that there should be a uniform definition of SMEs, and the annual sale turnover of Small Industries should be up to Rs 200 million and Medium Industries should be above Rs 200 million and up to Rs 1200 million. It is suggested that the new SME Policy should includes all industries based on annual sales turn over definition and credit be given for working capital and BMR (Benchmark Regulation) at six percent.
The credit guarantee scheme should be introduced and the NBFI (Non-banking Financial Institution) and Modaraba should also be included for the financing of small and medium enterprises.
Naseer Malik further said most of the small scale factories were on rent basis and due to non-ownership rights, such factories cannot be mortgaged which was hurdle in getting loan from banks.
“Unfortunately, the banks are still giving loans to SMEs on 18 to 20 percent by keeping their asset as collateral on the old regulations, due to which the small and medium industries in Pakistan could not grow,” he argued.