EVOLUTION OF SMES IN PAKISTAN AND KEY CHALLENGES THAT HAMPERS THEIR EXPANSION

Abstract

“Small and Medium Enterprises” commonly referred to as SMEs have had a pivotal role in socio-economic development across the globe. Much of the growth of leading economies in Asia - Pacific came from the growth of SMEs, in the 1990s, that acted as “Economic Engine” to lift millions from poverty and provided a sustainable platform for socio-economic development. In Pakistan, the SMEs continuum is widespread with a footprint in every sector of the economy and accounts for 30-40% of GDP. These SMEs are not only the source of employment but act as a major supply chain component for “Large Scale Manufacturing” (LSM) and “Services Sector” of the country. Pakistan, since the 1990s, had attempted to rejuvenate SMEs’ growth by offering lucrative business opportunities and enacting the “Small and Medium Enterprise Development Authority” (SMEDA) and later by promulgating a coherent Policy Framework in 2007 with the aim to propel growth and expansion. Nonetheless, serious policy and implementation challenges like business regulations, bureaucratic glitches, skilled human resource shortage, limited investment, etc., have mired the growth of SMEs and as a result, the true potential of SMEs could not be fully realized in Pakistan. Therefore, the aim of this paper is to analyze the SMEs’ growth in Pakistan and to determine the key Challenges that Hampers their Expansion. The paper concludes that there are a number of factors that have created hindrances towards the successful growth and expansion of SMEs. On the basis of analysis and conclusions, remedies have been recommended.