Pakistan’s economy has faced many ups and downs since its inception. The economic shifts have been changing in the last few decades as the economy has to move attention from agriculture to small and medium-sized businesses. The development in the small and medium enterprises is directly proportional to the high rate of urbanisation. As a majority of people shift to cities and urban centres, the economy has become more urbanised, and more attention is being placed on the development of SMEs.
A small enterprise can be defined as an enterprise with an annual turnover of around 150 million and houses not more than 50 employees. At the same time, medium enterprises have an annual turnover of about 800 million with up to 250 employees. These enterprises can be in the manufacturing, services, or trade sector. There are more than 5 million enterprises in the Pakistani market, and SMEs contribute to about 90 per cent of all these enterprises. According to the Planning Commission of Pakistan, the sector contributes 40 per cent to GDP and over 40 per cent to exports and employs 80 per cent of all non-agricultural workforce. In addition, more than 21 million people are employed in the SME sector of Pakistan.
Due to their immense importance to the economy, the government introduced several reforms to target the sector, but they lacked implementation. Small and medium-sized enterprises are the backbone of a modern urban economy as they create the highest level of employment in the region. State institutions like banks and other microfinance institutions should also facilitate small and medium-sized businesses. Such policies will enhance the efficiency of SMEs and help generate employment and economic growth in the country.
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