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SMEs: Implications for Economic Prosperity

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By Manan Aslam & Maria Amjad

Small Medium Enterprises (SMEs) is the crucial part of any economy as it helps enhancing the economic growth. It is backbone for large enterprises for instance if a company needs raw material then companies would contact small or medium enterprises for their needs. In my point of view, SMEs are more productive as SMEs are engaged with innovation they produce innovative things to fulfill the demands of local markets and SME’s are more risk takers rather than large enterprises, SME’s provides value added services and goods in an economy, SME’s are the need of any economy.

Pakistan’s economy is comprised largely on SMEs. We cannot ignore the role of small and medium enterprises (SMEs) in the development of economy. SMEs prevail in every sector of economy; if we promote or develop our SMEs sector it can boost economic activities tremendously and ultimately economic development.As we know SMEs contributing 30 percent in GDP, which is approximately 140 billion Rupees. And SME’s are contributing without any development in their sector.

SMEs provides jobs to 78 to 79 percent of people who are not associated with agriculture sector in the country. SMEs use low cost machinery basic technologies and provide high rate of output. For any country it is a favorable condition when they have to invest less and they have more output, it can enhance savings of a nation. SMEs are the major source for employment in a country and also it can also accelerate exports.

SMEs considered as great source to reduce unemployment and poverty in the economy. SMEs are the key source of foreign earnings (exports) as in 2009-10, era SMEs contributed 25% of foreign earnings, but still small and medium enterprises facing heaps of hurdles and challenges which prevent them from further improvement and further growth. These hurdles include low budget, lack of resources, political instability in Pakistan, poor infrastructure, energy shortages in Pakistan these problems won’t let SMEs grow.

The institution is specially established for the welfare of SMEs “SMEDA” (Small Medium Enterprises Development Authority) in the country. SMEDA works for the SMEs sector it acts as policy-advisory body of SMEs it provides finance to SMEs also facilitate stakeholders in the development of SMEs agenda in Pakistan.
For the Development of SMEs, government should provide this sector a sufficient capital, better policies and policy makers for them and the most important, government should polish their skills and provide them training.

SMEs cannot compete on international level; due to lack of competency for the competition SMEs should have enough capital and new technologies. For financial purpose,government should announce effective loan schemes which can give real term benefits to the new comers or SMEs.Government should also establish an act to protect the potential rights of SMEs.

In short, both public and private sector should impart trainings (formal and informal trainings) to the new entrants as well as existing business community so that people will encouraged forming small medium enterprises and improving their quality of work. By the development of SMEs nation will get rid of poverty, unemployment and economic instability. It is a rule of nature that if you put effort you would definitely enjoy the success one day.

(The writer Manan Aslam is an Ass.st Professor in UMT Sialkot campus and his co-writer Maria Amjid [email protected])

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