1 Small & Medium Enterprises Development Authority

Introduction
SMEDA-The Small And Medium Enterprises Development Authority

Premier institution of the Govt. of Pakistan under Ministry of Industries and Production,

SMEDA was established in October 1998 to take on the challenge of developing Small &
Medium Enterprises (SMEs) in Pakistan. With a futuristic approach and professional
management structure it has focus on providing an enabling environment and business
development services to small and medium enterprises. SMEDA is not only an SME policy-
advisory body for the government of Pakistan but also facilitates other stakeholders in
addressing their SME development agendas.

SMEDA Vision

“Growth of globally competitive SME sector, through a conducive environment and support
services, serving as an engine of sustainable growth for national economy”

Mission Statement

“To function as the promoter & facilitator of SME sector in Pakistan by creating a conducive
and facilitating environment as well as providing and facilitating service delivery to SMEs
for enhancing their capacities and competitiveness”

SMEDA Objectives

1. Formulate Policy to encourage the growth of SMEs in the country and to advise the
Government on fiscal and monetary issues related to SMEs.
2. Facilitation of Business Development Services to SMEs.
3. Facilitate the development and strengthening of SME representative bodies’
associations/chambers.
4. Set up and manage a service provider’s database including machinery and supplier for
SMEs.
5. Conducting sector studies and analysis for sector development strategies.
6. Facilitation of SMEs in securing financing.
7. Strengthening of SMEs by conducting and facilitating seminars, workshops and
2 Small & Medium Enterprises Development Authority

training programs.
8. Donor assistances for SME development of SMEs through programs and projects.
9. Assist SMEs in getting international certifications (such as UL, CE, DIN, JIS, ASME,
KS, etc.) for their products and processes.
10. Identification of service opportunities on the basis of supply/demand gap.
S ME D efin ition s

SMEDA SME Definition:

Small & Medium Enterprises are defined as follows, as approved in SME Policy 2007

Employment Size
Enterprise Category Paid Up Capital (b) Annual Sales (c)
(a)
Small & Medium Enterprise Up to Rs. 25 Up to Rs. 250
 Up to 250
(SME) Million Million
The Federal Government, in line with the economic development of Pakistan may, from time
to time modify the eligibility criteria as it sees fit. All providers of services receiving funding
from the Government may define more narrow scopes for specific targeting purposes.

SME Definitions used by various institutions in Pakistan

Institution Small Medium

Total Assets of Rs. 100
SME Bank Total Assets of Rs. 20 million
million
Federal Bureau of
Less than 10 employees N/A
Statistics
Punjab Small Industries Fixed investment. up to Rs. 20 million
N/A
Corporation excluding land and building
Punjab Industries
Fixed assets with Rs. 10 million excluding cost of land
Department
Entity engaged in handicrafts or manufacturing of consumer or
Sindh Industries
producer goods with fixed capital investment up to Rs.10 million
Department
including land & building
State Bank of Pakistan An entity, ideally not being a public limited company, which does not
(SME Prudential employee more than 250 persons ( manufacturing) and 50 persons
Regulations) (trade / services)   and also fulfils one of the following criteria:
(i) A trade / services concern with total assets at cost excluding land
3 Small & Medium Enterprises Development Authority

and buildings up to Rs 50 million.

(ii) A manufacturing concern with total assets at cost excluding land
and building up to Rs 100 million.

Importance of SME’s

Developing a group of diverse and competitive small and medium enterprises (SMEs) is a
central theme towards achieving sustainable economic growth. SMEs are crucial to the
economic growth process and play an important role in the country's overall production
network. Some advanced economies have succeeded because SMEs form a fundamental part
of the economy, comprising over 98% of total establishments and contributing to over 65%
of employment as well as over 50% of the gross domestic product. Although the numbers
might be lower in Pakistan, SMEs have the potential to contribute substantially to the
economy and can provide a strong foundation for the growth of new industries as well as
strengthening existing ones, for Pakistan's future development.

The ideology behind the promotion of SMEs comes from the perceived failure of large
enterprises in creating adequate productive jobs to absorb a significant share of the rapidly
growing labour force in many developing countries. This perception inspired emphasis on the
development of small industries by stressing benefits such as income generation, dispersal of
economic activities to small towns and rural areas, and mobilization of entrepreneurial
talents.

Following are some points which will reveal the importance of SMEs.

 SMEs are more labour-intensive than large enterprises

 SMEs are as efficient as LEs or more efficient than large enterprises.
 SMEs are more equitable in distributing the income they generate than large
enterprises.
 SMEs are more likely to play a higher role in rural development than large
4 Small & Medium Enterprises Development Authority

enterprises.
 The significance of SMEs is associated primarily with their role in stimulating
economic growth.
 SMEs create employment opportunities as they are labour-intensive.
 SMEs enhance regional development.
 Create more equitable income distribution.
 SMEs play a complementary role in relation to larger firms--as suppliers and
distributors.
 SMEs serve as a training ground for developing the skills of workers and
entrepreneurs.
 The presence of SMEs curbs the monopoly power of larger firms.
 A country can reduce its vulnerability to financial crises by strengthening its SMEs.
 SME's are the backbone of a national economy, particularly in developing countries.
 SME provide the platform for small & medium entrepreneurs to work as an arm
taking of economic and social indicators of a country.

Objectives of SMEs

Following are some broad objectives of SME’s

 Economic Growth
 Economic Development
 Poverty Reduction
 Employment
 Social and economic sustainability

Characteristics of SMEs

Following are some common characteristics of SME’s

* Owner is the manager & few employees

* Owned & operated independently

* Relatively small investment, production, sales, dealings etc.

* Inadequate efficiency of business operations.

5 Small & Medium Enterprises Development Authority

* No relationship with other firms or parties for Investment, Management, finance, tax

Province wise Distribution of SMEs

o Punjab 65%
o Sindh 18%
o Khyber Pakhtunkhwa 14%
o Baluchistan 3%

Economic Contribution of SMEs

 Employment 78%
 GDP 40%
 Value Addition 35%
 Exports 25%

SMEs Share in Sub-Sector

 Cotton Weaving 13%

 Other Textiles 6%
 Metal Products 7%
 Carpets 4%
 Art Silk 5%
 Grain Milling 16%
 Jewellery 4%
 Wood & Furniture 10%
 Others 35%

Barriers to SMEs Growth

SMEs are facing various barriers in the way of their growth and development. Following are
some main barriers SMEs are facing these days.

 Govt. & SME Interaction

 Taxation
 Finance
 Labour Legislation
6 Small & Medium Enterprises Development Authority

 Human Resource Development

 Technology
 Market & Industry Information
 Lack of Infrastructure
 Environmental issues & compliance
 Social compliance issues
 Intellectual Property Rights

Role of SMEDA in developing SME’s in Pakistan

SMEDA is currently offering following services to promote regulate and enhance SMEs in
Pakistan.

* Consultant Services

* Training Services

* Business Plan Division

* Financial Services

* Information Resource Centre (IRC)

* Intellectual Property for Business Success

* Legal Services

* Policy and planning

1. Training services

SMEDA organizes training programs, seminars, workshops and conferences of short duration
in major cities across the country for raising awareness and capacity building of SMEs. These
need based training programs are affordable, appropriate and innovative. These programs are
aimed at improving knowledge, skills and competencies in the technical, marketing,
financial, compliance, policy, regulatory, legal, and commercial and other important
functions. These programs help to improve major performance indicators such as
productivity, quality, competitiveness and sustainability etc. The results include improvement
7 Small & Medium Enterprises Development Authority

in export potential, investment promotion, business transparency, human resource

development, managerial capacity building etc. These programs help decreasing the level of
SME mortality and increasing efficiency.

2. Business Plan Division

Business Plan development services is one of the key services provided to enable existing as
well as potential investors to make well researched and informed investment decisions.

3. Financial services Financial Services Group

(FSG) is one of the support units of SMEDA. As the name suggests, FSG is responsible for
all financial consulting and advisory services that SMEs may require. As for all the support
functions, FSG caters to both internal sector teams as well as any external walk-in SMEs. In
addition to such consulting services, FSG also acts as coordinator of government schemes,
which involve financial institutions.

4. Information Resource Centre (IRC)

SMEDA Information Resource Centre (IRC) has been established to cater to the information
needs of SMEs and stakeholders from both the public and private sectors. IRC maintains a
collection of more than 3400 books and CD-ROMs/DVDs besides subscribing leading
newspapers and more than 20 journals of international repute on diverse business sections
and related fields. A number of full text online journals are also available for SMEs and
researchers on different fields of knowledge. IRC collection consists of databases, directories,
reports, yearbooks, annual reports, and loose-leaf material that are available for easy retrieval
through latest library management tools. Hard format of training programs conducted by
SMEDA are also available in IRC. SMEDA IRC collection is increasing by an aggregate 10
% every year.

5. Policy and planning

Policy & Planning Division of SMEDA has dual focus internal & external. It plays a key role
in devising and coordinating policies, action plans and strategies for SMEDA operations. On
the other hand it has a mandate to carry out research, communicate with stakeholders and
advocate policies with different tiers of the government with an ultimate objective of creating
a conductive business environment for SMEs in Pakistan. P&P is the hub of policy and
regulatory research that provides SME specific policy input to all tiers of government,
8 Small & Medium Enterprises Development Authority

government agencies and institutions, SME associations, industrial clusters and individual
entrepreneurs.

6. Intellectual Property for Business Success

Intellectual Properties (IPs) are intellectual assets that are intangible such as knowledge,
creativity and inventiveness. Intellectual property in its essence is that information which has
economic value when put into use in the marketplace. The rationale of protection also rests
on the premise that both forms of assets (tangible & intangible) have potential of wealth
creation. IPs generally falls into two categories; industrial property and copyrights. The rights
of inventions, industrial designs, trademarks, integrated circuits and geographical indication
are protected under industrial property while the copyrights include literary work such as
novels, poems, plays, films and also artistic works etc.

7. Legal services

SMEDA add value to the business of Small and Medium Entrepreneurs (SMEs) through
facilitation in:

o Resolving legal problems through service providers.

o Creating awareness of legal rights & responsibilities by disseminating information on
existing regulatory/contractual requirements through sample contract templates,
business guides and seminars.
o Enhancing capacities for improved compliance of laws, rules and regulations through
training programs
o Legal opinions to your business queries
o Interaction with regulatory authorities and service providers for removing legal
impediments.

8. Consultant services

SMEDA also provide various consultancy services.