Government urged to finance SMEs

Senior Vice President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Shaikh Khalid Tawab has expressed his concern over the low and insignificant level of financing of Small and Medium Enterprises (SMEs) which otherwise might have contributed significantly in the economic and social development, employment generation and poverty alleviation of country.
"It is worrying that only seven to eight percent credit financing of private sectors are given to the SMEs despite the fact that 95 percent of the enterprises are SMEs in Pakistan while most of the credit are given to corporate sector," he said in a statement on Tuesday adding that although the financing to SMEs sector was increasing since 2015, yet this financing too was very low as it contributed in the GDP of Pakistan over 40 percent and in exports earning by 25 percent and employs 80 percent of non-agriculture labor force.
While quoting the examples of other countries he said that SMEs were dominating in China, Taiwan, Singapore, Hong Kong and Korea in these countries and contributed more than 80 percent in their development. He said that these countries achieved the status of industrial advanced countries or newly industrial nations just on the basis of development of SMEs sector. He stressed that Pakistan should learn from the experience of these countries and formulate SMEs driven policies.
He elaborated that in Pakistan the banks are generally reluctant to give loans to SMEs sector due to high risk and transaction cost while 95 percent SMEs loans are given on collateral basis and commercial banks lack effective credit models to finance SMEs. He indicated that without financing and other facilities it was difficult for SMEs to modernize, innovate and expand themselves.
Keeping in view the potential, he suggested to increase the financing for SMEs and urged the government to adopt significant measures for the development of SMEs sector and training on the issues related to cost-competitiveness, quality competitiveness, marketing, networking, product diversification, beginning a business, business plan, legal issues, financial management, time management etc.