Consultative Workshops:- Karachi, Lahore, Quetta, Peshawar and Islamabad SME Policy Project - Concept Paper Promotion of Small

and Medium Enterprises (SMEs) entails enhancement of the competitiveness of the economy and generation of additional employment. A thriving Small and Medium Enterprise (SME) sector has long been recognized as one of the key characteristics of any prosperous and growing economy. Pakistan is an economy comprising mainly of SMEs. The significance of their role is clearly indicated by various statistics. According to more recent estimates there are approximately 3.2 million business enterprises in Pakistan. Enterprises employing up to 99 persons constitute over 95% of all private enterprises in the industrial sector and employ nearly 78% of the non-agriculture labour force. They contribute over 30% to the GDP, Rs.140 billion to exports, and account 25% of exports of manufactured goods besides sharing 35% in manufacturing value added. However, there has been concern that in Pakistan the SME sector has not been able to realize its full potential. The SMEs continue to suffer from a number of weaknesses, which hamper their ability to take full advantage of the opening of economy and the increasingly accessible world markets. The areas of constraints are normally identified as labour, taxation, trade capacity, finance and credit availability. It is understood that despite previous efforts the SME sector has not received due priority on account of segregated efforts and non-consolidation of programs to achieve well targeted results. In order to move forward, we need to develop a common vision for SMEs to be the real engine of growth. Our vision also needs to be achievable so we may find motivation in implementing phase. Implementing change requires the formulation of a Policy for SME development and assigning specific responsibilities for its implementation and continuous improvement. The Government of Pakistan has thus constituted the SME Task Force, by Notification No.1(68)/2003-Inv-III of 29 January 2004 of the Ministry of Industries and Production, which is to define the basic elements of our SME policy. As there are many cross-cutting issues to be addressed, the SME Task Force is composed of diverse sectors and levels of Government and includes major stakeholders of the private sector, and SME in particular. Where the SME Task Force deems it necessary or useful, it may invite specific organizations or individuals to assist its work. It may also co-opt further members.

The Small and Medium Enterprises Development Authority (SMEDA) was established in 1998 under the Ministry of Industries and Production in order to foster the development of SME in the economy and was expected to take a key role in this process. Its functions include, inter alia, the facilitation on policy making and the provision of overall planning, programming, research and evaluation of matters related to SME in Pakistan; monitoring and evaluation; encouraging and facilitating development of SME and to protect their interests. In order to enable the SME Task Force to work effectively, four Working Committees were setup to carry out technical analyses and deliberate the findings. The Working Committees addressed the following core issues: i. Working Committee on Business Environment - Creating a favorable business environment for SME in Pakistan's economy and eliminating unnecessary obstacles ii. Working Committee on Access to Finance - Increasing SMEs access to formal finance including equity financing while addressing the question of "lacking documentation" and banks' technical capabilities and improving SMEs' capacity to become bankable. iii. Working Committee on Access to Resources & Services - Improving the delivery mechanisms for assistance and the access to resources for SME in Pakistan, inter alia business development services, qualified human resources, and technology, so as to improve their productivity and capacity for employment generation. iv. Working Committee on SME Definition, feedback, Monitoring & Evaluation Mechanism - Establishing appropriate and harmonized definitions for Pakistan of what are to be considered micro, small, medium, and large enterprises. Furthermore, the establishment of a sound mechanism by which their development of the SME sector and the effectiveness of the assistance provided to SME can be monitored. The Working Committees after due deliberation, recommendations in each of the areas cited above. have finalized their

The broader objectives to be achieved by this policy exercise are; across the board recognition for SMEs as a sector requiring separate policy & regulatory space, define SMEs that qualify for support, propose counterbalancing measures

to eliminate disadvantage of size, remove unnecessary regulatory burden, institute SME support mechanism in both public & private sectors, improve support delivery mechanisms and establish policy evaluation and review systems. In order to achieve the above, wide scale consultation with the Provinces is being undertaken to elicit views of the ultimate beneficiaries, i.e. SMEs. The participation of stakeholders has been therefore, the cornerstone of the policy development process. The recommendations compiled during the consultative process will result in the formulation of an SME Policy to be put forth to the Federal Cabinet in March 2005. For more information please visit SMEPolicy.Net.pk

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Policy and Planning Role of Policy & Planning Department Policy & Planning Division of SMEDA has dual focus internal & external. It plays a key role in devising and coordinating policies, action plans and strategies for SMEDA operations. On the other hand it has a mandate to carry out research, communicate with stakeholders and advocate policies with different tiers of the government with an ultimate objective of creating a conductive business environment for SMEs in Pakistan. P&P is the hub of policy and regulatory research that provides SME specific policy input to all tiers of government, government agencies and institutions, SME associations, industrial clusters and individual entrepreneurs. Functional Brief Provision of SME specific inputs in the macroeconomic and sectoral

policies SME Policy Development & Implementation

Federal Budget, Fiscal and Trade Policy Generating strategic ideas and their development into projects Hassle Free Business Environment (series of SME business support gala's) Women Business Incubation Center Development of Women Entrepreneurship in Pakistan. (www.win.org.pk) Execution of Research Projects Second Investment Climate Survey (ICS-II) with the World Bank, Washington D.C SME Baseline Survey Liaison with the different tires of government Coordination with the Federal, Provincial and Local Governments Emergency Assignments Information Dissemination Quarterly Newsletters SMEDA Library Cyberary Networking with the relevant organizations to fill in information and resource gaps Strategic linkages with national and international organizations ________________________________________________________________ _______________ http://www.smeda.org/policy-and-planning_33.html

3) SME
Small and Medium Enterprises (SMEs) remain the main area of focus for NBP and are considered the future growth driver. The growth of SME is important as they generate

higher yields and are expected to be a high growth sector in the near- term. The services available to SMEs are similar to those provided to our Corporate / Commercial customers, including, but not limited to working capital finance, term lending, trade finance, letter of credits and guarantees. Our growth strategy for SMEs revolves around developing a better understanding of the SME market, increasing market penetration through our existing products and newly tailored ones, and increasing our capacity to provide SME-specific services to our clients. The bank is engaged with Shore Bank International (SBI) in a technology as well as Technical Assistance agreement. The objective of which is to establish more effective SME lending at a select number of NBP branches. These techniques (including cash-flow based assessment) are institutionalized through an extensive staff training process. The pilot phase of the project (confined to selected Regions of Punjab) culminated in December 2007 and overachieved most of the pre-defined targets. More than PKR 1.6 billion in loans has been disbursed to over 811 undocumented businesses while maintaining an NPL rate of less than 2%. After the success of the pilot project, NBP has decided to engage the services of SBI to roll out the Technical Assistance on a national scale, covering 200 branches in Sindh, Punjab and Balochistan in the next two years.