KARACHI: The State Bank of Pakistan (SBP) and the United States Agency for International Development (USAID) have assured the Karachi Chamber of Commerce and Industry (KCCI) that several policies have been devised for small and medium enterprises (SMEs).
The assurance was given by Najam Altaf, senior joint director, Development Finance Division of the central bank and Nauman Ali Syed, business development support specialist at a Small and Medium Enterprises activity held at the chamber on Wednesday.
In his presentation, Altaf said that keeping in view the 30 percent contribution of SMEs in GDP, 25 percent in exports and 78 percent in the industrial employment, banks and the government have started realising the particular needs and preferences of SMEs.
The SMEs are confronting numerous issues, including low financial literacy, lack of collateral and documentation, lack of awareness on SME financing products, complicated loan procedure, reluctance to tax filing, and quick and easy access to informal finance, he said.
The State Bank is trying to deal with these issues and is taking steps to increase SME share from the existing eight percent of private sector credit to 17 percent by 2020, he added.
Altaf said that the steps were being taken to simplify tax regime for the SMEs, which include tax rate reduction on banks’ income derived from SME financing, tax holiday on income of eligible startups and women borrowers and reduction in sales tax on service sector.
Moreover, the Ministry of Commerce and other stakeholders will work to create a marketplace website under e-Commerce, while an innovation challenge fund will also be launched to explore new solutions to promote SME financing through technology, he added.
Nauman Ali Syed said that SMEA, a five-year project worth $35 million, is aimed at helping SMEs from selected sectors to grow.
“We aim to do this by improving firm level performance, fostering entrepreneurship, helping understand and access new markets and promoting access to finance,” he added.
Under SMEA, work was being carried out in different sectors, including ICT, hospitality, textiles, light engineering, logistics and packaging and minerals with an objective to help increase sale revenues and help create jobs, besides focusing on identifying and supporting women-led businesses along with exploring new and emerging sectors, he added.
“We are also planning to launch SMEA Challenge Fund soon in which startups and small companies will be invited to pitch their solutions to sector specific challenges and also giving the opportunity to get funding to pilot solution,” he added.
KCCI President Junaid Esmail Makda said that keeping in view the significance of the SME sector, the Karachi Chamber particularly focuses on raising awareness about the status and potential of the sector, besides helps in identifying the key issues being faced by this important sector of the economy.
He said the importance of the SME sector in the industrial development of a country cannot be underestimated.
The SMEs in Pakistan face numerous problems, including access to finance, which affects the overall productivity of SMEs; thus making them uncompetitive across the global value chain.
Makda urged the government to provide incentives to the financial institutions that support SMEs, while more refinance schemes with easy terms and conditions must be introduced particularly for the urban SMEs.