ISLAMABAD: Identifying barriers to competition, a study by the Competition Commission of Pakistan has found that no access to financing is the key barrier limiting the growth of small and medium enterprises (SMEs).
The study titled ‘Enhancing Economic Efficiency of SMEs in Pakistan’ has noted that despite policy measures to increase financing to 17 per cent, the SME sector only receives 6-7pc of private sector financing, while in comparison, SMEs in Bangladesh receive 25pc financing and 18pc in India.
The study is based on data from 50 financial institutions (FIs), 18 focused group discussions, and 362 SMEs across 11 cities and a seminar conducted by CCP on women entrepreneurs.
In response to the CCP’s questionnaire, it was concluded that 93pc of SMEs found it cumbersome to avail financing facilities from banks, and 80pc had not availed of bank financing.
It is recommended that the State Bank of Pakistan should consider allocating separate small enterprise (SE) and medium enterprise (ME) lending targets for financial institutions, set sector-specific targets, set separate financing facilities (for poor districts) and introduce standardised pricing of insurance and evaluation reports.
The CCP study has suggested that non-bank financial institutions (NBFC), leasing companies, crowd-funding, and equity financing can play an important role in the provision of credit to startups and SMEs.
The study points out that there are at least 12 different categories of general regulatory layers that apply to all firms doing business in Pakistan.
Published in Dawn, July 14th, 2023
