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1st International Conference on Business Management (ICOBM)

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Welcome SME Pakistan 1st International Conference on Business Management (ICOBM) EYF By Rehmatullah Javed Chairman FPCCI SME Regional Committee – PowerPoint PPT presentation

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Title: 1st International Conference on Business Management (ICOBM)


1
Welcome SME Pakistan
  • 1st International Conference on Business
    Management (ICOBM)

EYF
By Rehmatullah Javed Chairman FPCCI SME
Regional Committee
2
Personal Profile
  • Mr. Rehmatullah Javed is presently the Chairman
    of GRAND GROUP of COMPANIES and SME Expert for
    which he has lifetime experience with grassroots
    information for the establishment and promotion
    of SMEs.
  • Mr. Rehmatullah Javed is the only member of the
    Federal Task Force to formulate the SME policy
    from the private sector.
  • Mr. Rehmatullah Javed is also Chairman of the SME
    Committee of FPCCI LCCI.
  • Mr. Rehmatullah Javed has attended several
    international forums and seminars on SME in
    Pakistan and abroad.
  • Mr. Rehmatullah Javed has also organized about
    500 similar programs in Pakistan and abroad.
  • Mr. Rehmatullah Javed also led the Pakistan SME
    Delegations to attend the SME Conference
    organized by APO in Pakistan, India, Taiwan
    Malaysia
  • He further attended several international
    conferences held by UNIDO, UNDP, European Union,
    WIPO, USAID and WTO.

3
Togetherness
  • GET TOGETHER GROW FOREVER

4
INTRODUCTION
  • Small and Medium Enterprises (SMEs) are one of
    the largest and the most important sector of
    Pakistan's economy.
  • 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 labor force.
  • Contribute over 30 to the GDP
  • 25 of exports of manufactured goods besides
    sharing 35 in manufacturing value added.

5
ISSUES
  • There is a dire need to create a favorable
    business environment for SMEs by eliminating
    unnecessary obstacles to reduce cost of doing
    business.
  • Access to Finance is another major issue that
    requires thorough consideration of concerned
    counterparts.
  • Lending money to SME is still a problem SME
    Policy cannot be successful or properly
    implemented without cheap and readily/easily
    available financing
  • Banks shy away from lending to SME and as result
    have put in place strict credit criteria
    requiring a lot of detail and documentation.
  • Loaning criteria is very strict besides having a
    condition of provision of collateral. Banks also
    demand accounting financial statement before
    considering application for loan.

6
Areas like business development services
  • Qualified human resources,
  • Marketing and technology require special
    attention to improve SMEs competitiveness,
  • Productivity and capacity for Employment
    generation.

7
RECOMMENDATIONS
  • The FPCCI Regional Standing Committee on SME
    Sector for the year 2009-2010 has made efforts
    through identifying the problems Suggesting
    Workable solutions recommendations Some of
    them are listed the next.

8
RECOMMENDATIONS
  • Separate Definition For Cottage/Micro Industries
  • There is a need to separate the cottage industry
    From SMEs. The Government of Pakistan should
    Clearly define the minimum number of employees,
    which small and medium size businesses should
    have. In this respect, the house recommended the
    minimum limit from 51 up to 250 employees.

9
Financing policy of Banks for SME
  • The banks should facilitate businesses through
    lending money on easy terms conditions. This
    aspect required much more attention because
    businessmen having small setup deserve
    facilitation in this respect to run their
    business operations. The State Bank of Pakistan
    should formulate a prudential regulation to
    facilitate the SME sector rather then issuing an
    advice to banks for providing loans to SME sector
    without clear instructions.
  • There is a need to make suitable monitory
    regulatory policy for SME sector. It is suggested
    that Banks should provide good financial
    assistance according to the business requirements
    besides providing following facilitation to the
    SME sector.

10
Some Suggestions
  • Loan application processing time should be 15
    days.
  • SME sector should be offered 5 interest rate
    with one-year grace period.
  • Loan limit up to Rs. 5 million without any
    collateral/guarantee should be provided to SME
    sector for the period of one year. The loans may
    be granted up to Rs. 3 million to those, running
    a business for at least three years.
  • Govt. of Pakistan and Bank of Punjab should
    establish a equity fund, for which at least Rs.50
    million should be allocated.
  • There is a need to create a guarantee fund for
    SME Sector.
  • In loan sanctioning process, banks should put
    private sector preventatives/stakeholders on
    board before making any decision.

11
Infrastructure for Industrial Estate
  • The Government should establish SME
  • industrial estate having an area not less than
    200 Kanals. It is suggested that land for SME
    industrial area should be allocated near the city
    area, enabling SME sector to run their businesses
    effectively and contribute their due role in
    employment generation.

12
Skill Development Center/Cluster
  • Technology parks may be established near the SME
    industrial estates so that the small industry may
    be benefited with the facility.

13
SME FINANCE FOCUS POINTS
  1. Commercial banks have to make concerted efforts
    to explore new avenues of business, especially
    financing to small medium-sized enterprises
    (SMEs), which play a critical role in employment
    generation and poverty alleviation.
  2. SMEs finance play an important role in the
    creation of employment opportunities with
    relatively lower investment levels, it would help
    in reduce poverty and boost economic growth which
    remains one of the prime objectives of Government
    of Pakistan. 3.2 million Economic establishments
    in the country around 99 percent of them employ
    1-10 persons, clearly indicating that they fall
    under the definition of SMEs, more specifically
    lower-end SMEs.

14
SME FINANCE FOCUS POINTS
  1. Separate prudential regulations should be
    developed for small enterprises as these small
    businesses have a huge potential for growth
    compared with medium-sized enterprises.
  2. The focus of financial institutions should be on
    medium entities. The reason for this skewed
    distribution is the unorganized way of doing
    business of small entities. Major issues faced by
    SMEs are lack of skilled labor, outdated
    technology, weak governance, lack of management
    hierarchy, absence of book keeping, taxation
    issues coupled with limited access to formal
    sources of finance.

15
SME FINANCE FOCUS POINTS
  1. Capacity-building of banks through launch of SME
    Finance Grass Root Cluster Training Program for
    credit officers based in SME Clusters in Lahore,
    Sialkot, Gujranwala, Rawalpindi, Peshawar, Quetta
    and Karachi.
  2. SMEs could help to achieve diversified economic
    growth, employment generation, reduction in
    income inequalities and poverty alleviation in
    developed and the emerging economies like USA,
    Japan, Malaysia, Thailand and South Korea.

16
Challenges Faced by SME in Pakistan
  1. Lack of proper infra-structure.
  2. Regulatory complexities relaxation in
    prudential rules and easy access to loan.
  3. Shortage of skilled manpower.
  4. Quality control problems.
  5. Lack of entrepreneurial expertise.
  6. Shortage / irregular availability of financing
    facilities.
  7. Shortage of equity sources.
  8. Inability to meet credit criteria / credit
    conditions.
  9. Inadequate bargaining skills / options.
  10. Lengthy documentation procedure.

17
Challenges Faced by SME in Pakistan
  1. Why should banks promote SME Financing.
  2. Diversification of the loan portfolio.
  3. Boosting the industrialization process.
  4. Reducing unemployment.
  5. Growth of the export sector.
  6. Improving the balance of payment situation.
  7. Low loan loss ratio on SME bank deposits /
    banking services.

18
Preferred sectors for SME financing
  • Export oriented goods and services
    establishments.
  • Largely using indigenous technology and
    resources.
  • Choices of sub-sectors within each industry.
  • Up stream/ down stream serving to medium /
    larger, cottage / heritage industry.

19
Specialized Institutions for SME in Pakistan
  • SMEDA
  • SME Bank
  • Business Support Fund (BSF)
  • Provincial Small Industries Corporation (PSIC)
  • NGOs.

20
Sub-contracting for SMEs
  • Special considerations to evaluate finance
    proposal of sub-contractor.
  • Measures to promote sub-contracting system.

21
Sustainable program for SME financing
  • Banks to re-focus their financing activities
    towards the SME sector.
  • Restructuring of lending organization in banks to
    incorporate SME financing.
  • Making finance available conveniently and
    speedily.

22
Marketing for SME loans
  • Reluctance of SMEs seek bank financing despite
    ability to meet credit criteria.
  • Need for creating awareness of desirability for
    and availability of financing facilities.
  • Proper packaging marketing of SME financing
    proposals developing SME financing schemes /
    products.

23
Creating a SME Venture Capital Fund
  • In this era when the SME sector has been facing
    constraints and shortage of working capital for
    running their business cycle and that the banks
    are also reluctant to finance this sector, there
    is need that the Punjab Government establish a
    Fund for the revival and uplift of these thirsty
    units for wants of working capital requirements
    of about Rs100 billion.

24
Financing without Guarantee Collateral
  • A fund for the purpose may be created to fill the
    GAP of non financing to SMEs out of this Rs.100
    billion Fund for financing up to Rs3 Million
    without any collateral and third party personal
    guarantee. Mark up rate may be at reasonable
    affordable to the customers not more than
    13.Preferably Small businesses or even sick
    units may also be financed to revive them. All
    the Small businesses running for the last 2 years
    may be eligible for this financing. We urged that
    the banks to develop collateral free cash flow
    based lending products to meet the requirements
    of this large segment of SMEs.

25
Proportion
Issues Identified Percentage
Lack of finance 55
Shortage of skilled labour 39
Getting business site 38
Bribes 21
Orders/Marketing of Product 28/
Lack of Knowledge 12
Government interference 12
Raw Material 10
License for work 08
26
Thank You
  • QA
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