Small and medium enterprises: Funds shortage hampers progress
To create links, SMEs have to approach banks in big cities.
FAISALABAD:
The economic potential of small and medium enterprises (SMEs) has largely remained untapped which find it difficult to access bank credit and have to go to urban centres to establish links with banks that shy away from operating in rural areas of the country.
“SMEs in Faisalabad are facing acute shortage of funds mainly due to conventional banks concentrated in urban areas and mega cities,” said Shahbaz Khan, District Officer for Industry, adding a significant number of these businesses were operating in rural areas.
He said lack of focus on facilitating SMEs had led to social disparity, economic imbalance, inequality and discrimination between urban and rural societies.
According to the Small and Medium Enterprises Development Authority (Smeda), a small enterprise is one which employs up to 35 people and has capital of Rs2.5 million. Similarly, medium enterprises employ up to 250 people with annual turnover of up to Rs50 million.
“SMEs are creating significant number of jobs in rural areas and have penetrated the market well. In Faisalabad, 194,922 SMEs are registered, of which 77,631 are working in rural areas and 117,291 in urban centres,” said Zulqarnain Shahzad, Regional Business Coordinator for Smeda Faisalabad.
He said assessment of the role of SMEs in national economy was important as the size and strength of these enterprises could be exploited for addressing poverty in rural communities.
However, he agreed that a major stumbling block in the way of development of SMEs was lack of linkage between financial institutions and small businesses.
Waqas Alam, an SME proprietor, told The Express Tribune small and medium businesses mostly did not qualify for bank loans because of their size and vulnerability to shocks. “Rate of interest is another major hurdle as banks charge up to 19 per cent on loans which is quite high,” he added.
However, Punjab Small Industries Corporation (PSIC) Faisalabad Regional Director Habib Ullah said it was giving loans of up to Rs2 million to small industries at a reduced interest rate of 12 per cent to encourage the industry, and also provide other services to help them overcome weaknesses.
PSIC, set up by the Punjab government to assist the growth and development of small industries, is said to have not done any significant work for the industry’s promotion. “The department cannot achieve its objectives in the Faisalabad region as it is facing dearth of funds required to promote and facilitate small industries,” a source said.
Published in The Express Tribune, October 5th, 2011.
The economic potential of small and medium enterprises (SMEs) has largely remained untapped which find it difficult to access bank credit and have to go to urban centres to establish links with banks that shy away from operating in rural areas of the country.
“SMEs in Faisalabad are facing acute shortage of funds mainly due to conventional banks concentrated in urban areas and mega cities,” said Shahbaz Khan, District Officer for Industry, adding a significant number of these businesses were operating in rural areas.
He said lack of focus on facilitating SMEs had led to social disparity, economic imbalance, inequality and discrimination between urban and rural societies.
According to the Small and Medium Enterprises Development Authority (Smeda), a small enterprise is one which employs up to 35 people and has capital of Rs2.5 million. Similarly, medium enterprises employ up to 250 people with annual turnover of up to Rs50 million.
“SMEs are creating significant number of jobs in rural areas and have penetrated the market well. In Faisalabad, 194,922 SMEs are registered, of which 77,631 are working in rural areas and 117,291 in urban centres,” said Zulqarnain Shahzad, Regional Business Coordinator for Smeda Faisalabad.
He said assessment of the role of SMEs in national economy was important as the size and strength of these enterprises could be exploited for addressing poverty in rural communities.
However, he agreed that a major stumbling block in the way of development of SMEs was lack of linkage between financial institutions and small businesses.
Waqas Alam, an SME proprietor, told The Express Tribune small and medium businesses mostly did not qualify for bank loans because of their size and vulnerability to shocks. “Rate of interest is another major hurdle as banks charge up to 19 per cent on loans which is quite high,” he added.
However, Punjab Small Industries Corporation (PSIC) Faisalabad Regional Director Habib Ullah said it was giving loans of up to Rs2 million to small industries at a reduced interest rate of 12 per cent to encourage the industry, and also provide other services to help them overcome weaknesses.
PSIC, set up by the Punjab government to assist the growth and development of small industries, is said to have not done any significant work for the industry’s promotion. “The department cannot achieve its objectives in the Faisalabad region as it is facing dearth of funds required to promote and facilitate small industries,” a source said.
Published in The Express Tribune, October 5th, 2011.