KARACHI, July 2: The Union of Small & Medium Enterprises has urged the State Bank to consider classification of SMEs on the basis of the number of employees.

The Union says the SBP definition of SMEs as per the number of employees does not distinguish between part-time and full-time employees. “Based on our experience and interaction with SMEs it is not uncommon for such firms to employ staff on a part-time basis and/or contractual basis,” it says in a press release. “In light of the above it is critical that the definition of SMEs clearly states whether the number of employees for the purpose of classification (of SMEs relate to)...full-time or part-time (employees).”

Commenting on the SBP draft prudential regulations for SMEs the Union says that these regulations define an SME as an entity other than a public limited company which fulfils certain specific criteria as per the number of employees and/or total asset base.

It says that the above bias towards the proprietorship/ partnership and private limited organizational models may discourage both domestic and foreign venture investors. “Venture capital investors typically fund early stage and/or distressed mature enterprises with an initial public offering as the preferred mode of exit owing to the higher return on initial investment.”

That is why the Union has asked the SBP to review the same keeping in view this obvious discrimination against SMEs that are public limited companies as this could potentially discourage venture capital companies and funds.