SMEs Sector in Pakistan

We know that small and medium-sized enterprises (SMEs) play a crucial role in the social and economic development of Pakistan, where they produce a wide range of goods, provide employment for a large number of skilled and semi-skilled workers in both urban and rural areas, account for a substantial proportion of manufacturing output, and make a major contribution to the country’s balance of payments.  In overall terms, SMEs account for about 30% of Pakistan’s GDP, 15% of investment, and 80% of employment.  They also play a prominent role as existing or potential producers of export goods.  SMEs may thus be justifiably characterized as the principal building blocks of the Pakistani economy, providing the country with many opportunities for increased employment (including female employment) and poverty eradication on the one hand, and enhanced productivity, competitiveness and international market penetration on the other.

Despite its importance as an engine of growth in the Pakistani economy, the SME sector continues to suffer from a variety of weaknesses.  These lingering weaknesses have been widely recognized by the government and other developmental partners in Pakistan, who have attempted to overcome them through a number of measures introduced in recent years.  To address the policy-level constraints, the Government of Pakistan introduced a new economic policy on 15 December 1999, which places high priority of the promotion of SMEs.  At the institutional level, a number of specialized agencies have been established to support the growth and development of SMEs.

Due in great part to earlier UNIDO efforts, a variety of government agencies and private sector institutions in Pakistan have adopted the Cluster and Network Development (CND) approach as a major tool for the promotion of SMEs.  Such CND programmes now constitute a very important part of the government’s SME promotion strategy, with even greater emphasis expected to be placed on this approach in the future.

Several major ministries have the primary public responsibility for regulation and promotion of the SME sector, especially the Ministry of Industries, the Ministry of Commerce, and Ministry of Science and Technology.  However, as they address a broad constituency, the bodies that are most directly responsible for SME development and promotion are:

  • The Small and Medium Enterprise Development Authority (SMEDA), which was set up in 1998 as the apex body for the promotion of SMEs in Pakistan, and is associated with the Ministry of Industries and Production.
  • The SME Bank, which emerged from the restructuring and amalgamation of the earlier Regional Development Finance Corporation and Small Business Finance Corporation in January 2002, and which is mandated to support and develop the SME sector by providing the necessary financial and technical support on a sustainable basis.
  • A number of small industry development corporations operated by the various provincial governments, such as the Punjab Small Industries Corporation (PSIC), the Sindh Small Industries Corporation (SSIC), the NWFP Small Industries Development Board, the Mineral and Industrial Development Corporation Azad Kashmir, and the Directorate of Small Industries Balochistan.
  • The Export Promotion Bureau (EPB) – now TDAP, which is associated with the Ministry of Commerce and acts as a facilitator to help SMEs gain access to foreign markets.
  • The Ministry of Science and Technology, which provides significant support services within its field of competence to SMEs.
  • The National Productivity Organization, which comes under the aegis of the Ministry of Industry and Production, and is affiliated to the Asian productivity Organization.  It imparts productivity tools for SMEs in Pakistan as well as organizing training workshops on various topics related to SMEs.
  • The network of Chambers of Commerce and Industry, which operate at both the local level throughout Pakistan and the national level through the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).  They play a pivotal role in conducting trade negotiations and creating linkages and between enterprises in Pakistan and foreign countries through their association with counterpart institutions in these counties.


"A cluster is a sectoral and geographical concentration of small/medium enterprises facing common opportunities and threats."
Definition of a cluster