MGT601 SME MANAGEMENT

Lesson 05 Small Entrepreneurs in Pakistan and Role of SME in Global and Regional Level

Chapter Learning Objectives  This lecture will introduce the small entrepreneur in Pakistan.  The activities of SMEs in global and regional level.  It will also reveal the role of SMEs in a developing economy.

Salient Features of Small Entrepreneurs in Pakistan 1. Single Owner Entrepreneur He works with his own hands, combines the entrepreneur function of initiating the business making investments, taking decisions and performing managerial functions.

Continued…… 2. Age Pattern The mean age of entrepreneur was found to be 42 years and of their enterprises 12 years. It is comparable to the Korean age pattern (46).

Continued…….. 3. Educational Level Differing from industry to industry 60% have school education and 30% have college or better education only 10% have professional or graduation level

Continued…….. 4. Social Background Caste played an important role in certain industries and on the other hand heritage is dominant. But overall it is much diversified.

Continued……. 5. Sizes and Investment Majority started in a small way with less than 10 workers and 1/2 to 2/3 of the firms started with less than 50,000 investment.

Continued……… 6. Growth The growth was fast in case of small firms than in large firms. 7. Profitability Rate of profit is higher in case of small industries in comparison with the large industries.

Role of SMEs in a Developing Economy Over the past decade, one of the major policy prescriptions for SME development has centered on the benefits of clustering and the potential for small enterprises to achieve economies of scale and scope through co-operation at the local and regional level.

Role of SMEs in a Developing Economy……. Unemployment and under employment are the prevailing economic diseases in most of the Asian countries and they are result of a fundamentally disproportionate relationship between population and the use of available land resources.

Role of SMEs in a Developing Economy……. Rapid and continuing increase of population, in the last half century have led to a situation in which there are far too many people engaged in agriculture this situation is further aggravated by an antiquated system of land tenures, by poor standards of health and malnutrition by the use of primitive and inefficient techniques on small un-Economical holdings and by an uncertain climate for rains, weather changes etc.

Role of SMEs in a Developing Economy……. The classical remedies suggested for tackling the problem of poverty and underemployment, large scale industrialization is perhaps the most important.

Role of SMEs in a Developing Economy…….  Under the circumstances, the problem of unemployment and underemployment can be tackled by the expansion and modernization of the existing small and medium- scale industries and the introduction of new industries capable of raising the level of production and improving the present depressed standard of living.

Role of SMEs in a Developing Economy……. The large-scale industry has been slow to develop and has succeeded to a very limited extent in absorbing the surplus population of the countryside. SMEs are still the most extensive tools for controlling unemployment.

Role of SMEs in a Developing Economy…….  In Ceylon (Sri Lanka) as early as in 1949 nearly 286,000 persons were engaged in small industries.  In China in 1949 approximately 10 million workers were responsible for 80% of the total industrial output by working in SMEs.  In India more than twenty five million people are engaged in cottage and small industry.

Role of SMEs in a Developing Economy…….  The importance of the SME sector as the cornerstone of most economies is widely. This is not only borne out by the number of SMEs (almost 90% of the total number of businesses across the world), but also by their significant role in creating employment opportunities. The roles of SMEs are vital to the emergence of healthy private sectors, especially in poorer countries.

Role of SMEs in Pakistan SME sector is the backbone of Pakistan’s economy. There are approximately 3.2 million business enterprises in Pakistan. Enterprises employing up to 99 persons constitute over 90% of all private enterprises in the industrial sector and employ nearly 78% of the non-agriculture labour force. They contribute over 30% to the GDP and account 25% of exports of manufactured goods besides sharing 35% in manufacturing value added.

Role of SMEs in Pakistan…… Promotion of SMEs has therefore been the center piece of Government’s strategy for economic revival, poverty alleviation and employment generation. To this end, the logical first step was the formulation of a comprehensive SME Policy reflecting the viewpoints of multiple stakeholders.

Role of SMEs in Pakistan……  The SME sector also provides both rural and urban women to utilize their vocational skills while staying within residential premises. In urban areas, many female entrepreneurs have introduced product lines uniqueness has created a strong demand in the market.

Conclusion Today, the SME sector is the lifeline of the big industrial establishments due to its direct contribution and support towards value addition and exports. For the past three decades, the fastest growing export industries have been dominated by SMEs.

Conclusion…… Of all, cotton weaving and textile rank between the top two exporting sectors. Others include sports goods, surgical instruments, carpets and footwear etc. SME exports dominate low value added sectors and rely on traditional technologies.

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