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 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. It is attached with the Ministry of Industries, Production & Special Initiatives.

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. Business Environment - Creating a favorable business environment for SME in Pakistan's economy and eliminating unnecessary obstacles

ii. 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. 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. 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, finalized their recommendations in each of the areas cited above.

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 was held 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 have resulted in the formulation of an SME Policy approved by the Federal Cabinet on January 17, 2007.

Download SME Policy 2007 Document