FPCCI Demands Grant for SMEs in Pakistan

Almost 90% enterprises in Pakistan are SMEs that contribute 40% in GDP, 25% in exports and 80% in non agriculture labor force. Unfortunately, 7 to 8 percent credit financing of private sectors is given to SMEs sector and most of the credit are given to corporate sector, this was stated by Shaikh Sultan Rehman Vice President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in an Interactive Webinar on SMES in Pakistan: Challenges and Way Forward at FPCCI Head Office Karachi and Capital Office Islamabad & Regional Office Lahore through Video conferencing.

The session was attended by Former President FPCCI, Zakaria Usman, Executive Committee and General Body Members, Qaisra Shaikh, FPCCI Coordinator Women Entrepreneurs, Muhammad Ali Mian, Coordinator FPCCI Regional Office Lahore, Muhammad Asim Anis Convener & Iftikhar Ghani Vohra Deputy Convener FPCCI Standing Committee on SMEs, Rehmatullah Javed, Former Convener FPCCI Standing Committee on SMEs, Arjumand Qazi, Group Head SME Banking Pak-Brunei Investment Company Limited, Representatives of SMEDA, Nazli Abid, Former Vice President FPCCI, Doulat Ram Lohana, Wasif Majeed and Muhammad Atif Haleem Presidents Hyderabad, Jhang and Peshawar Small Chambers & Traders Association respectively.

While welcoming the participants, Shaikh Sultan Rehman Vice President FPCCI highlighted the issues of SMEs including access to finance, high cost of doing business, low value addition, technological advancement, complicated tax system etc. While quoting the examples of other countries he added that SMEs are dominating in China, Taiwan, Singapore, Hong Kong and Korea in these countries and contributed more than 80 percent in their development. These countries achieved the status of industrial advanced countries or newly industrial nations just on the basis of development of SMEs sector. Pakistan should learn from the experience of these countries and formulate SMEs driven policies, he stated. He emphasized on the promotion of SMEs as it provide low cost employment. He also informed the losses to SMEs due to COVID-19 and suggested to provide collateral free loans upto Rs. 0.5 million to SMEs on easy conditions. Moreover, those SMEs who are registered with FBR and filed returns for last three years should be give grants up to 0.5 million and directly transfer in their account. The details of account are already available with FBR. He also urged for holding training sessions for SMEs on E-Commerce.

Mr. Zakaria Usman Former President FPCCI also emphasized on the collateral free loan facilities and allotment of small plots to SMEs. Convener and Deputy Convener of SMEs Committee of FPCCI also stated about the SMEs situation in the period of COVID-19 which also affected the small importers. They underscored the need of special scheme for the SMEs during the period of COVID-19 which should facilitate and stabilize the growth. Arjumand Qazi, Pak-Brunei Investment Company Limited updated the participants about different financing schemes for small, medium, Women and special person enterprises segments. She stated that SBP has given incentives to SMEs and extended loan deferment scheme upto September 30, 2020. They are facilitating the women entrepreneurs in enhancing their skills and providing loan on 5% for 5 years with No KIBOR.

The Presidents of Small Chambers and Traders Association of Hyderabad, Jhang and Peshawar also informed about the problems faced by SMEs and suggested the government to provide business conducive environment with simplification of registration process and favorable trade and tax policy. They also enlightened about the non-acceptance of small denomination of Pak currency by banks and restrictive timings of banks. They also demanded exemption on the withholding tax as they are already paying advance tax.

Muhammad Ali Mian, Coordinator FPCCI Regional Office Lahore stated that Financing of SMEs which does not include the cost of building and land and suggested the SMEs financing amount should be based on turnover of last five years.

During the session, the participants also showed their reservations on various definitions of SME being proposed and discussed. They suggested that a single definition requires to be notified and preferably with higher business turnovers in order to keep accommodating the SMEs in proportion to their business growth in terms of growing sales turnovers with passage of time. Moreover, the SBP should include all sectors in SMEs Financing instead of present restricted to 8-9 sectors and all the banks should consider financing on cash flow basis instead of collateral basis. The participants also suggested establishment of business centers in all cities and organization for capacity building program for SMEs entrepreneurships. The participants added that the SME Policy 2007 was neither implemented properly and nor the data of SMEs are available for further research and strategy analysis to further work upon.

The participants suggested formulating the policy according to the current economic environment for increasing the manufacturing GDP. The policy should also have practical approach of implementation with the linkage of the SME with Vendor industry for buy back arrangements. The participants further suggested the involvement of academia in SMEs promotion and establishment of incubation centers, holding of awareness sessions with the involvement of banks and market facilitation to SMEs for domestic manufacturing and exports. They suggested training on the issues related to cost-competitiveness, quality competitiveness, marketing, networking, product diversification, starting a business, business plan, legal issues, financial management, time management etc