ABSTRACT
Small & Medium Enterprises are considered as a growth engine for developing economies. Importance of this sector cannot be neglected due to its utmost significance and contribution towards GDP growth and employment generation. SME sector in Pakistan is facing number of problems which acts as a hurdle in their growth. Major obstacles in the growth of SMEs include financial constraints, regulatory and fiscal constraint, infrastructure constraint and human resource constraint. These four factors are deteriorating SMEs growth in Pakistan. Sample firms have been selected from trading, manufacturing and services sector of similar size and capacity. Problems faced by SMEs are dimensions of the pointed out four major obstacles.
Lesser technical and professional training of owners, difficult entry into the business, high rents of business premises, high cost structures, high average credit collection period and power shortages are key issues that have been reported by entrepreneurs. Other problems include lack of formal books of accounts, accounting training, computer usage, bank accounts, awareness about banks loan products, low loan acceptance ratio, the excessive government regulations, the hostile taxation authorities, competition from Chinese products, lack of technical and vocational training facilities and poor roads and communications infrastructure. Various dimensions have been revealed in this study that affect growth rate of SMEs. It has been identified that regulatory constraint and infrastructure constraint are key obstacles to growth of SME sector. Future research study can be conducted by calculating financial losses to individual firms and country in general due to obstacles faced by SMEs.
INTRODUCTION
...
... middle of paper ...
...Business Research Papers, 5, 85-95.
Farooq, M. (2006). Credit Guarantee Scheme For SMEs. IBP – the knowledge institute journal, July 2006, 61-66.
State Bank of Pakistan (2009). Prudential Regulations for Small and Medium Enterprises Financing, Banking Policy and Regulations Department.
Budget for FY09 not released (2009, Feb 11). The News. Retrieved from http://www.thenews.com.pk
Baseline survey a roadmap for development of SME sector. (2010, May 19). The Nation. Retrieved from http://www.nation.com.pk
State Bank of Pakistan, SME Finance Department (2010, March). Development Finance Quarterly Report. Retrieved from http://www.sbp.org.pk/sme
Reserve Bank of India, (2009, August 27). Annual Economic Review. Retrieved from http://www.rbi.org.in/scripts
Small and Medium Enterprises Development Authority (2007). SME Policy 2007. Retrieved from http://www.smeda.org
It is argued that SME’s are financially sustainable and high outreach means to have a greater livelihood as well as having a positive impact on development because they guarantee sustainable access to income by the poor (Rhyme and Otero, 1992). The focus of this augment is that SME’s enhances the socio-economic well-being of the poor people by facilitating change or improvement in their lives which is reflected in their spending power and or living standards.
In the article, "Strategies for Enhancing Small-Business Owners' Success" by Susan Turner and Al Endres, it is claimed that there is no specific reason as to why small businesses are failing in today's America. They believe, however that two factors can cause the demise of small businesses. These factors are small business financing and the marketing plans associated with those businesses. Small business owners are finding it increasingly hard to acquire funds to start up and help maintain a foothold in the business world. The authors state that this is due to the rising risks of propositions for investors and acknowledge that small businesses have to resort to using their own resources such as their own funds and bootstrap financing. Another
Small and medium enterprises (SMEs) or small and medium-sized businesses (SMBs) are companies whose personnel numbers fall below certain limits. The abbreviation “SME” is used in the European Union and by international organizations such as the World Bank, the United Nations and the World Trade Organization (WTO).Small enterprises outnumber large companies by a wide margin and also employ many more people. SMEs are also said to be responsible for driving innovation and competition in many economic sectors.
In Malaysia, business sizes can be divided into two big groups, which are small medium enterprises (SME) and large companies. There are various definitions of SME that are widely used in Malaysia. Although different organisations have different ways of defining SME, most of them usually include annual income generated, number of full-time employees and/ or total fund available. A widely used definition of SME is by the Small and Medium Industries Development Corpo...
Bank Alfalah has emerged as one of the leading commercial banks in the financial sector of Pakistan. Bank has made major giving ...
...tapping this segment efficiently. Moreover, liabilities of the bank are at an all time high, creating vast quantities of "cash outflows" in the term of interest payments. Countries like Qatar have been having increasing interests in Egyptian banks and see an opportunity for their financial growth. Furthermore, the current political situation pressured the existing market conditions to weaken the financial performance of existing businesses and reduced the growth rate of loans. However, there lies an opportunity in the newly implemented initiative by the central bank to provide 10m to commercial banks to finance small enterprises. This would be a potential for CIB to invest further this segment but there is a dilemma in which business model it should adopt that would tackle the challenges and grab the available opportunities in the market.
As mentioned before, SMEs unable to apply for large and long-term Loan, it mainly used to solve temporary liquidity, rarely use in development the projects or exploit technology. Besides, they are lack of sufficient place to set up the new tech-machines or technical and professional manpower. Backward equipment cause the low product level due to companies is wanting in economic market competitiveness. On the other hand, backward equipments have been affected the environment for long times, such as higher Energy
The small and medium enterprises (SMEs) are expected to play a significant role in the growth story of the country's pharma sector as they contribute 35–40 per cent to the industry in terms of production with a turnover of about Rs.35,000 crore (US$ 5.70 billion).
Small, medium enterprises (SMEs) are largest types business in the world, making up an estimated 99.7% of business. According to the Federation of Small Businesses (FSB) there are nearly five million existing businesses in the UK as of 2013. SMEs are a key contributor towards economic growth in terms of creating more employment, stimulating innovation and promoting social unity. SMEs are responsible for 47% of private sector employment, yet despite such global present there is still no agreed definition of a SME (Storey 1994). Bolton (1971) attempted to define them through a statistical and economic analysis. Classifications which are based on criteria, such as number of employees or annual turnover, however, do not remain consistent across borders. Given their size, smaller companies tend to be more intent on survival rather than expansion and profit maximisation. Smaller sized firms have always felt that the current reporting framework for IFRS is tailored more for the needs of larger companies and that the heavy cost burden it imposes upon them may not be entirely justified. In response to these concerns, the IASB subsequently issued the IFRS for Small and Medium-sized Entities (IFRS for SMEs) in July 2009. This standard offers an alternative framework which can be adopted by entities in place of the already extant full set of IFRSs or local national requirement standards.(Holt 2010) This essay will critically evaluate the impact of the IFRS for SME’s and whether or not it stands as the most suitable framework available for SMEs to use.
The greater part of finance demand from these enterprises is in the form of debt, estimated at about INR 26 trillion. Overall demand for equity in the SME sector is INR 6.5 trillion, which makes up 20 percent of the total demand. The sector has high leverage ratios with average debt-equity ratio of 4:1. But these leverage ratios are not even across the sector and variations exist based on the size of the enterprise. For instance medium-scale enterprises exhibit a more balanced debt-equity ratio of 2:1. The unregistered enterprises, which comprise 94 percent of the SME sector, account for INR 30 trillion of the finance demand. This demand estimate does not take into account the demand for finance by unorganized
Small businesses have been considered the mainstay in countries around the world. In many European countries for example, the small business has been considered crucial to the success and flourishment of the country in general. Most individuals start upon a small business venture in the hopes of realizing ownership, independent profits and personal success. Small businesses can prove extremely successful when planned properly. Studies suggest that several small businesses, however, close or fail within the first few years of operation. This failure suggests that a majority of small business owners may not have as yet realized the crucial success factors necessary for successful implementation of a small business.
Identifying and settling down with a simplified uniform definition of SME can be quite an overwhelming Task. Firstly the criteria and threshold for the definition in not only different between developed and developing nations, It is most commonly segregated based on different combination of criteria’s, such as employment, turnover and even assets. Various country policies and economic sectors shape its characterization too. NOC 1
From the Figure 02 we observe that the growth is sustainable in small business. Growth of loan-advance is increased in medium business after 2011 in spite of the negative growth of previous two years and same condition for the large/others business. Interestingly, growth is not steady for medium-sized and large businesses moving into the slowdown of the 2010 and 2011. The
Access to capital and credit at various stages in the business life cycle is identified as the major hurdle by the entrepreneurs. For many small firms and most start-ups, the personal funds of the business owners and entrepreneur and those of relatives and acquaintances constitute as the major source of capital. For many small businesses, especially during the early years of their operation, credit is simply not available. For many others, the limited available credit is not through bank loans. Due to this many of them rely on multiple credit card balances and home equity loans as major sources of credit for start-up firm. Because banks are bound by laws and regulations to prudent lending standards that require them a risk management assessment for each loan made. These regulations were made more vigor during the late 1980'' and early 1990 . Banks always found that lending to manufacturing firm with hard asset such as property, equipment, and inventory has always been easier than lending to today's expanding service sector firms. Because the service sector firms own few hard asses, therefor lending judgment have to be based in terms of character, markets, and cashflow, which make it difficult to the bank to meet the regulations for the approval of the loan. Additional, the banking industry, as well as the entire financial sector of the
Altaf Hussain Sumo “Small Business in Pakistan: Characteristics, Problems and Sources of Finance”. Downloaded from http://sbaer.uca.edu/research/icsb/2009../paper141.pdf