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Economic growth

Pakistan's Finance Minister Emphasizes Importance of Small and Medium Enterprises (SMEs) for Economic Growth

Strategic Insights

— 2 min read

Pakistani Finance Minister Senator Muhammad Aurangzeb participated in a high-level panel discussion on "Scaling up SME Finance" at the International Business Forum in Sevilla, Spain, convened on the sidelines of the Fourth International Conference on Financing for Development (FfD4). The discussion aimed to strengthen financing mechanisms for SMEs, which are crucial for inclusive economic growth. Aurangzeb highlighted the significance of SMEs in Pakistan, accounting for approximately 40% of the country's GDP, 25% of exports, and nearly 78% of non-agricultural employment. However, SMEs face significant challenges, including limited access to formal finance, with only a small percentage of private-sector lending directed towards them.

Key Takeaways:

  • The government of Pakistan has set a target to raise SME financing to 17% of total private-sector credit by 2028, aiming to bring the country in line with comparable South Asian economies and global emerging market benchmarks.
  • A multi-billion credit guarantee facility has been rolled out under the Prime Minister's Youth, Business, and Agriculture Loan Scheme to support SMEs, with the government committing to bear up to 50% of potential credit losses on principal for small businesses.
  • The National SME Policy 2021 is to be revised and expanded to set a comprehensive five-year roadmap for sectoral development, with efforts underway to strengthen the institutional capacity of the Small and Medium Enterprises Development Authority (SMEDA).
  • Deregulation efforts, such as reducing reliance on NOCs and increasing e-inspections, are being introduced to reduce compliance burdens for SMEs.
  • The government is interested in learning from successful models across other emerging markets and fostering partnerships that promote technology-driven, climate-compliant, and socially inclusive SME development.
  • A three-pronged strategy has been proposed to implement the Sevilla outcome, including urgent execution of priority actions, expanding access to concessional and blended financing, and reforming the global financial architecture.
  • The need for a paradigm shift in how development cooperation is approached within developing countries is emphasized, moving away from input-focused models towards results-oriented strategies linked to measurable development outcomes.

Statistics:

  • SMEs account for approximately 40% of Pakistan's GDP.
  • SMEs generate 25% of Pakistan's exports.
  • SMEs employ nearly 78% of non-agricultural employees in Pakistan.
  • The government of Pakistan aims to raise SME financing to 17% of total private-sector credit by 2028.
  • A multi-billion credit guarantee facility has been rolled out under the Prime Minister's Youth, Business, and Agriculture Loan Scheme.

Sources:

  • [International Business Forum]
  • [Fourth International Conference on Financing for Development (FfD4)]
  • [Pakistan's Ministry of Finance and Revenue]

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