Role of small businesses in development
Such ventures are a majority in countries like Pakistan
PHOTO: FILE
NORTHAMPTON:
Academics and policy practitioners prescribe to the view that Small and Medium Enterprises (SMEs) play a crucial role in economic development. They are critical for driving growth, opening new markets and creating jobs. They also act as platforms for innovation and encourage competition.
There is no doubt that small businesses are important towards growth and job creation both in advanced economies and developing countries. According to statistics provided by the World Bank, SMEs account for more than half of formal jobs across the globe.
In the United Kingdom (UK) alone, the number of employing businesses increased by 14,000 and the number of sole trader/self-employed businesses grew by 84,000 from 2015 to 2016, according to the Federation of Small Businesses UK. The importance of SMEs in the UK’s economy can be judged from the fact that the annual turnover of these companies was £1.8 trillion, which constitutes of almost 47% of the private sector turnover in the UK.
In Pakistan
SMEs represent the vast majority of business population in low income countries (excluding micro-firms and self-employed) which includes Pakistan. They constitute nearly 90% of all enterprises in Pakistan, employ about 80% of the non-agricultural labour force and contribute almost 40% towards the country’s Gross Domestic Product. According to the annual report of the Small and Medium Development Authority (SMEDA), there were about 1.7 million SMEs in Pakistan in 2013, employing about 15 million people. The number would be much higher if micro-firms and sole proprietorships were also included.
However, SMEs, micro-firms and sole proprietorships face numerous obstacles which threaten their survival in Pakistan. According to a Gallup survey conducted in 2004, SMEs rely primarily on personal finances, loans from friends and family and credit from suppliers. The role of banks in providing financing to SMEs is limited.
Besides inadequate availability of funds, poor marketing of products, shortage of skilled labour and a general lack of knowledge have also been stated as causes towards closures.
The Pioneer Book House
The Pioneer Book House located on MA Jinnah Road, Karachi is the oldest bookshop in the city formed during the colonial times. A small family-owned business, it is part of the city’s heritage. Located in close proximity to the courts in the city, the book shop is a haven for books on law and official government publications. It saw its glorious days as a hub of activity, but over time, it saw a rapid decline in its sale which endangered its viability to stay open. Nevertheless, internationally acclaimed author Maniza Naqvi, driven by her passion to save the bookshop from closure, dedicated herself to achieve her goal. She convinced the owner not to close down the shop and took to the task by personally dusting the floors and bookshelves.
More importantly, Maniza used social media to record her daily interactions and activities at The Pioneer Book House. As a result of her narratives, she has generated a following and an interest. The book shop has recently hosted a book reading and is one of the partners and one of the venues for the Karachi Biennale. Aided by her experience in development at the World Bank, Maniza was able to make the impossible possible. But the more important question is how many other small businesses, which had a heritage and a cultural value, were forced to close down?
Small businesses form the backbone of many economies worldwide. In this competitive world, organisations such as SMEDA have a role to support micro businesses and sole proprietorships. They can act as a liaison between banks and businesses, providing mentoring and training in marketing products – both on physical and on electronic forums. They can also provide special incentives to those businesses which are significant in terms of having heritage value.
The writer is an economist and ex-central banker
Published in The Express Tribune, May 8th, 2017.
Academics and policy practitioners prescribe to the view that Small and Medium Enterprises (SMEs) play a crucial role in economic development. They are critical for driving growth, opening new markets and creating jobs. They also act as platforms for innovation and encourage competition.
There is no doubt that small businesses are important towards growth and job creation both in advanced economies and developing countries. According to statistics provided by the World Bank, SMEs account for more than half of formal jobs across the globe.
In the United Kingdom (UK) alone, the number of employing businesses increased by 14,000 and the number of sole trader/self-employed businesses grew by 84,000 from 2015 to 2016, according to the Federation of Small Businesses UK. The importance of SMEs in the UK’s economy can be judged from the fact that the annual turnover of these companies was £1.8 trillion, which constitutes of almost 47% of the private sector turnover in the UK.
In Pakistan
SMEs represent the vast majority of business population in low income countries (excluding micro-firms and self-employed) which includes Pakistan. They constitute nearly 90% of all enterprises in Pakistan, employ about 80% of the non-agricultural labour force and contribute almost 40% towards the country’s Gross Domestic Product. According to the annual report of the Small and Medium Development Authority (SMEDA), there were about 1.7 million SMEs in Pakistan in 2013, employing about 15 million people. The number would be much higher if micro-firms and sole proprietorships were also included.
However, SMEs, micro-firms and sole proprietorships face numerous obstacles which threaten their survival in Pakistan. According to a Gallup survey conducted in 2004, SMEs rely primarily on personal finances, loans from friends and family and credit from suppliers. The role of banks in providing financing to SMEs is limited.
Besides inadequate availability of funds, poor marketing of products, shortage of skilled labour and a general lack of knowledge have also been stated as causes towards closures.
The Pioneer Book House
The Pioneer Book House located on MA Jinnah Road, Karachi is the oldest bookshop in the city formed during the colonial times. A small family-owned business, it is part of the city’s heritage. Located in close proximity to the courts in the city, the book shop is a haven for books on law and official government publications. It saw its glorious days as a hub of activity, but over time, it saw a rapid decline in its sale which endangered its viability to stay open. Nevertheless, internationally acclaimed author Maniza Naqvi, driven by her passion to save the bookshop from closure, dedicated herself to achieve her goal. She convinced the owner not to close down the shop and took to the task by personally dusting the floors and bookshelves.
More importantly, Maniza used social media to record her daily interactions and activities at The Pioneer Book House. As a result of her narratives, she has generated a following and an interest. The book shop has recently hosted a book reading and is one of the partners and one of the venues for the Karachi Biennale. Aided by her experience in development at the World Bank, Maniza was able to make the impossible possible. But the more important question is how many other small businesses, which had a heritage and a cultural value, were forced to close down?
Small businesses form the backbone of many economies worldwide. In this competitive world, organisations such as SMEDA have a role to support micro businesses and sole proprietorships. They can act as a liaison between banks and businesses, providing mentoring and training in marketing products – both on physical and on electronic forums. They can also provide special incentives to those businesses which are significant in terms of having heritage value.
The writer is an economist and ex-central banker
Published in The Express Tribune, May 8th, 2017.