1. definition of smes · 1.2. smeda definition of smes smeda gives the definition of small and...
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Research Thesis on Small & Medium Enterprises
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1. Definition of SMEs
There are lots of definitions regarding small and medium enterprises and
different departments and organizations categorize them according to their
perspective, while few commonly used definitions regarding small and medium
enterprises are elaborated below.
1.1. SBP Definition of SMEs
State bank of Pakistan has defined the small and medium enterprise in the
following way:
An entity, ideally not being a public limited company, which does not employee
more than 250 persons ( manufacturing) and 50 persons (trade / services) and
also that institution should fulfills one of the following mentioned Criteria:1
Trading Manufacturing Services
No. of Employees up to 50 250 250
Total Assets at cost up to Rs.50 M Rs.100 M Rs. 50 M
Total Sales Turnover up to Rs.300 M Rs.300 M Rs. 300 M
1.2. SMEDA Definition of SMEs
SMEDA gives the definition of small and medium enterprises in the sme policy
2007 as given below;2
Enterprise Category Employment Size Paid Up Capital
Annual Sales
Small & Medium Enterprise (SME)
Up to 250 Up to Rs. 25 Million
Up to Rs. 250 Million
1 http://www.sbp.org.pk/bpd/Conference/Day_One/SBP_Initiatives_for_SMEs_Financing.ppt.
2 www.smeda.org.pk/main.php?id=2 - 34k -
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1.3. PSIC Definition of SMEs
Punjab small industries corporation elaborate the definition of small and medium
enterprises in the following way;
“Fixed investment. Up to Rs. 20 million excluding land and building.”3
1.4. PID Definition of SMEs
Punjab industries department has given the definition of the small and medium
enterprise in following standpoint;
“Fixed assets with Rs. 10 million excluding cost of land.”4
From all of above mentioned definitions of small and medium enterprises I
followed the definition given by the state bank of Pakistan in this research study;
2. Intro & Historical Background of SMEs:
There is brief introduction of small and medium enterprises with regards to
Pakistan in which the importance and contribution of this sector is also
elaborated in concise way.
Today SMEs are widely regarded by experts as the panacea for many economic
problems confronting the LDCs. In particular, vibrant small-scale sector
incorporating the informal firms is expected to solve a variety of problems,
including unemployment, low growth and poverty. SAARC region countries too
have designed policies for the promotion of this sector, though with uneven
results. Yet their faith in SMEs is ever growing. The planners now realize that
since the modern production methods are generally more flexible, so
manufacturing can be undertaken anywhere, and at any level through inter-firm
3 www.smeda.org.pk/main.php?id=2 - 34k
4 www.smeda.org.pk/main.php?id=2 - 34k
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linkages. At the same time individual country experiences in the SAARC region,
and also in other parts of the world, indicate that the real catalyst for the SMEs
growth is the general economic environment born of a pro-active industrial
Policy.
For a longtime the mainstay of Pakistan’s industrialization strategy was large
scale manufacturing which recorded 8.78% growth rate during 1950-2003 as it
was consistently supported by a set of macroeconomic policy measures. The
small-scale sector too registered an impressive growth rate of 5.06% during
1950-2003 and that too without benefiting directly from policy support. It virtually
existed in the shadow of the large scale-manufacturing sector. A distinct feature
of Pak manufacturing sector is its product diversification: textile (24.02),
Chemicals (15.17%), food (13.77%), followed by others. It needs to be
mentioned here that all these sectors comprise of large, medium and small firms,
except in cases where economies of scale do not permit small-scale production
e.g. automobiles, steel, fertilizer, heavy engineering, etc.5
The government statistics show that Pakistan’s SMEs sector recorded an
impressive growth of 14.7% during 1987/88 – 1996/97 when the estimated value
of its output increased from Rs. 19,683 million to Rs. 67,541 million. Meanwhile,
the number of Small and Household Manufacturing Industries recorded growth of
5.8% in that period. The contribution of SMEs to Pakistan’s economy,
employment and poverty reduction can be seen from the fact that 90% of all
private sector manufacturing units employ less than 99 workers and the SMEs
employ some 78% of non-agricultural labour force. They contribute about 30% to
GDP, Rs.140 billion to exports, and generate 25% of exported manufacture.6
5 www.gcu.edu.pk/publications/vc-sme.pdf
6 GOP 2005, P293
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3. Banks Services for SMEs:
Almost every bank is offering specialized products and services to the small and
medium enterprises of Pakistan so in this regard I elaborate the details of
services provided by each bank separately and I start from the services and
efforts put by state bank of Pakistan in this aspect.
3.1. SBP’s Services for SMEs:
State bank of Pakistan has designed certain important policies and lay down
certain important rules in order to stabilize and support the sme sector of
Pakistan.
The most prominent steps in this regard are mentioned below;
• Issuance of a separate Prudential Regulation (PRs) for SME financing.
• Help in capacity building in human resource development of banks/DFIs in
the field of SME lending.
• Creation of a separate SME Department in State Bank.
• Enlarging the scope of Credit Information Bureau (CIB).
• Granting commercial banking license to SME Bank.
• Focus on SME lending in SBP Lending Schemes for banks.
The main Objectives of the Separate SME department in SBP are as follows;
• To help create conducive macro-prudential environment for banks/DFIs
thereby increasing the flow of credit to SMEs;
• To promote strategic focus on SMEs on the part of the banks/DFIs;
• To facilitate banks/DFIs in adopting best practices for the development of
their SME business lines through provision of capacity building and
training services;
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• To induce banks/DFIs for up-front investment in people and technology.
• To coordinate with other SME stakeholders for matters relating to SME
financing.
Banks/DFIs are encouraged to lend to SMEs on the basis of asset conversion
cycle/cash flow basis.
Banks / DFIs are allowed to take clean exposure i.e., facilities secured solely
against personal guarantees on an SME up to Rs. 3 million provided that funded
exposure should not exceed Rs. 2 million.
State bank of Pakistan has also defined the exposure limit for smes as follows;
• Per SME limit Per Bank: Rs. 75 M
• Per SME limit From All Banks: Rs.150 M
• It is expected that SMEs approaching this limit should have achieved
certain sophistication as they migrate into larger firms and should be able
to meet the requirements of Prudential Regulations for Corporate /
Commercial Banking.
State bank is also performing certain important functions in this regard as
stated below;
• SBP has hired a foreign consulting firm, which will provide capacity
building support to a few commercial banks, including SME Bank, on cost
sharing basis.
• The above will cover full spectrum of establishing an SME business line
ranging from preparation of participating banks’ business plans to training
of loan officers.
SUBJECT TO:
For other than leased assets: Up to Rs. 100.0 M For Clean exposure: Up to Rs. 3.0 M
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• The IBP and NIBAF will also collaborate with the firm in providing training
on SME credit to bankers.
• SBP is in the process of further lowering the CIB limit from Rs 500,000 to
cover all loans by the end of June 2005. This will help in improving the
financial institutions’ ability to provide loans especially to individuals and
SMEs.
• The State Bank in its different credit schemes namely:
• Long Term Financing of Export Oriented Projects (LTF-EOP);
• Locally Manufactured Machinery (LMM); and
• Export Finance Scheme (EFS) has been paying special attention to
the financing needs of SME Sector.
• The banks/DFIs are advised to focus SME sector while allowing credit
under these schemes. 7
The graphical diagram is showing the distribution of bank credits sector wise.8
7 www.sbp.org.pk/bpd/Conference/Day_One/SBP_Initiatives_for_SMEs_Financing.ppt
8 Bankind supervision Department,SBP.
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3.2. Services offered by SME Bank:
SME bank is offering following some main services/Products to small and
medium enterprises;9
• SME Smart Loan
• SME Asset Finance
• SME Running Finance
• SME Express Loan
3.3. Services offered by BOP:
Bank of Punjab is offering following different kinds of services/products to the
SME sector;10
• Running Finance
• Lease
• Guaranties for Connections
• Karobar Barhao Scheme
• Power Generators Lease Financing Scheme
• Lady Entrepreneur Financing Scheme etc.
3.4. Services offered by UBL:
UBL is offering following list of services/Products to the small and medium
enterprises;11
• Rice/Paddy Advances
• Cotton Ginners Advances
• Credit Facilities against Liquid Securities
9 Annexure
10 Annexure
11 www.sbp.org.pk/sme/pdf/smebooklet-05-jul-08.pdf
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3.5. Services offered by Bank Al-Falah:
Bank Alfalah is offering different kinds of services to the SME sector;
• Al-Falah Karobar Finance
• Al-Falah Milkiat Finance
3.6. Services offered by Standard Chartered:
Standard chartered bank is offering following distinct kinds of services and
products to its customers relating to SME sector;
• Tana Bana
• Rang Hi Rang
• Kissan Card
• Agri Deal
3.7. Services offered by Citi Bank:
Citi bank has following products portfolio for the small and medium
enterprises;
• Running Finance
• Term Loan
3.8. Services offered by NIB:
Following is the list of services/Products offered by the NIB to its SME
Customers;12
• Small Business Loan
• Salaam Business Loan
• General
12
Annexure
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4. Why SMEs Are Bank Shy?
Besides all of the above mentioned services to the small and medium scale
sector still there is prevailing high problem of finances in this sector and one of
the major reasons for this is that small and medium enterprises are highly bank
shy, so in order to sort out the reasons for such behavior this research study is
conducted and following different important rationales are gathered in this regard;
4.1. Lack Of Awareness
Lack of awareness has always played a very important role for creating many
problems in any field while in my research regarding why SMEs are bank shy?, it
is clearly revealed from the information collected that most of the small and
medium scale enterprises are completely unaware about the availability of the
different services which banks are offering to their sector specifically due to
which they are unable to get the benefits from these available services and
remain in the financial crises due to lack of finance as most of the sectors
demonstrate that they are having financing problems due to which they are
unable to grow their business and compete well in the market while on the other
hand there is some deficiency from banking sector also as they are not marketing
their products and services effectively and not Providing any kind of awareness
to the actual sector which is small and medium scale sector so this sector
remains equipped with unawareness of the services offering by the banking
sector to them. Banks just provide awareness of their products and services
which they are offering to the small and medium enterprises through different
printed broachers and there is no any proper way to distribute these broachers to
the actual sector for which these services are designed and these broachers
remain in the banks and whenever any person or business man go to the bank
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Agree Disagree no Comments
Lack of Awareness
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Lack of Awareness
then at that time if he noticed or searched about services available for SMEs he
comes to know about those available products and services while the others
remain unaware in that regard.
The following is tabular and graphical diagrams are showing the results revealed
in this regard from target sample;
Lack of Awareness
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 31 37.3 37.3 37.3
Disagree 34 41.0 41.0 78.3
no Comments 18 21.7 21.7 100.0
Total 83 100.0 100.0
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4.2. Religious Rigidity
It is one of the most important variable in this research because most of the times
it is observed that entrepreneurs just deny to discuss the matters on the grounds
of religion and they found to be completely against the concept of banking and
they showed high resistance towards dealing and availing facilities from the
banking sector on this point of view. Even if they are facing lots of financing and
other different kinds of problems and constraints in their businesses and if they
avail the services and get the support from the banking sector they can over
come all the problems they are facing but they are not ready to deal to get
services or any kind of financing in the form of loan from the banks. While it is
also searched from such respondent about their perception from the Islamic
banking and I found them completely against that concept also as they perceived
that it is just change of the name and change of the name of the services and
products offering by the banks while on the back end all the processing is same
as in the conventional banking so it is also prohibited in the religion while it is
observed that on the side of Islamic banking they are not promoting their
products in right manners due to which there is prevailing high level of
misperception in the minds of such persons who are against the conventional
banking pattern due to religious impact. The entrepreneurs demand that banks
should remove the interest on loans and Islamic banks should justify there
procedures and clarify that they are processing according to the Islamic rules and
regulations then they become able to make dealing with banking sector.
The results found on this question are precisely elaborated by the following given
table and graphs which gives the more clear understanding about the religious
impact of people and their behaviour in that regard;
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Agree Disagree No Comments
Religious Rigidity
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Religious Rigidity
Religious Rigidity
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 34 41.0 41.0 41.0
Disagree 9 10.8 10.8 51.8
No Comments 40 48.2 48.2 100.0
Total 83 100.0 100.0
4.3. High Rates of Interest
Banks charged different rates of interest to different kinds of customers and on
different types of loans offered by them to their customers while it is very
common perception observed in this research that most of the entrepreneurs
believed that the rates charged by the banks are very high which they are unable
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to pay as the banks are charging different rates if they are lending against
property or personal guaranty the variation can be clearly observed in the rates
of interest charged by the banks as they argue that when they are lending on
behalf of personal guaranty their risk is very high in comparison with lending
against collateral due to which they have to charge high rate of interest even this
perception is observed in the SME bank which is specifically launched to provide
soft loans to the SME sector for their uplift and support. While on the other side
SMEs have not so much collaterals which they can present to take the loans due
to which they have to go for personal guaranties and when the banks rise their
rates due to lack of collateral they are unable to avail the facility of loan from the
banks on those terms and conditions because they are not much strong and
profitable to pay that amount of interest to the banks as they approach for getting
support from the banks so that they can over come financial crises they are
facing but the interest rates which banks charged to them will lead the borrowers
more disastrous situation and instead of overcoming their financial crises they
got in to the trouble of survival and it will more harmful for their business because
their profits got reduced as they have to pay high interest to the banks due to
which they have lower level of savings and investing opportunities and in the end
they become unable to continue their businesses and they shut down their
business and pay the loan back by selling Assets, so instead of giving support
banks are contributing towards their problems due to which most of people prefer
to work on smaller scale with some constraints rather than to approach banks for
availing their services and borrowing from the banks. While banks prefer to lend
large scale units and they charge low interest rates to them on basis of business
relations and it is observed that the default rate in the large units is more than
that of small units but banks charge high rates to small and low rates to large and
banks are also more keen towards large rather than small units which is
completely unfair on behalf of banking sector towards society and small and
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Agree Disagree No Comments
High Interest Rates
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medium scale enterprises. It is observed specifically in the plastic products sector
that entrepreneurs demand for low interest rates and in this regard a suggestion
is also received that in which entrepreneur demand that banks should make their
interest rates variable and rate of interest varies with the amount of loan which is
borrowed and banks should charge low rate of interest on small amount of loans
and rate will increase with the amount of loan to be borrowed.
High Interest Rates
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 49 59.0 59.0 59.0
Disagree 7 8.4 8.4 67.5
No Comments 27 32.5 32.5 100.0
Total 83 100.0 100.0
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According to table it is revealed that only 8.4% of people are satisfied with the
rates of interest charged by the banks while 59% are on the opinion that banks
are charging unfair high rates of interest to their customers.
4.4. Strict Rules and Regulations
Among other lots of problems and constraints it is also one of the important
issues raised by the target sample in this research that banks impose very harsh
conditions and rules and regulations against borrowing due to which they are
highly pessimist regarding borrowing from banks for their businesses as banks
rules and policies are highly complicated and difficult to follow and in this regard
the following certain points are highlighted;
• Rules regarding Default
• Hidden Service/Bank Charges
• Rules regarding loan disbursement
• Complicated regulations regarding payment of loan to the banks
• Percentages of rates of interest year wise or quarter wise
So due to above highlighted different points most of the business community feel
fear to borrow from the banking sector as they are quite unclear about certain
conditions imposed by the banks on borrowing. It is highly demanded from the
targeted sample that banks should simplified their procedures and regulations so
that they can become able to borrow from the banks.
There are 57.8% of the respondents claiming about the strictness of rules and
regulations followed by the banks and just 7.2% have showed their satisfaction in
this regard that bank’s rules and regulations are suitable for them.
The following showed table and graphs are providing clear evidence in this
regard;
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Agree Disagree No Comments
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Strict Rules & Regulations
Strict Rules & Regulations
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 48 57.8 57.8 57.8
Disagree 6 7.2 7.2 65.1
No Comments 29 34.9 34.9 100.0
Total 83 100.0 100.0
4.5. Complicated Documents Requirements
The following are some general things which banks demand most of the time
from the borrowers when they are applying for the loan from banks;
• Computerized National Identity Card
• Photographs
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• Addresses
• Photo copy of utility bills
• Proprietor’s Request letter
• References
The above mentioned details are referred to as personal details while bank also
demand some business details as mentioned follows;
• Bank Statement
• Receivables
• Payables
• Stock Report
• Sales tax Registration Number
• National Tax Number
• Partnership Deed in case of Partnership
These are some few important details required by the bank when advancing loan
facility to its customers besides these there are also many requirements from the
banks and entrepreneurs are on point of view that banks demand so many other
complicated documentation requirements and they have to waste their lot of
important time and sources and money on the establishment of those documents
and in this way their lot of time and resources got wasted and they demand that
banks should simplified their documentation requirements and make it more
convenient for the borrowers to borrow in limited time by spending minimum
resources.
In the research 62.7% of people have showed their great level of resistance
towards banks just because of highly complicated documentation requirements
and just 8.4% of sample have showed their favor towards banks in this regard.
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Agree Disagree No Comments
Documents Complications
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Documents Complications
Documents Complications
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 52 62.7 62.7 62.7
Disagree 7 8.4 8.4 71.1
No Comments 24 28.9 28.9 100.0
Total 83 100.0 100.0
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4.6. General Risk Aversion
This is also very important variable observed in the research that most of the
people and businessmen are generally very high risk averse and they are not
ready to deal with banks in form of taking loans as they consider it as increasing
their business risk and they are also found satisfied at their current state and not
willing to expand their business concerns as they take it in negative way and
relate it with increase in risk so they are not willing to borrow from the banks as
they put the point of view that when they borrow from the banks they have to pay
the specific amount of interest to the banks which will reduce their profit margins
and they have also bound to pay amount of interest to the banks.
While on the other hand banks are also found to be highly risk averse and
hesitate to lend to the small entrepreneurs because of their weak financial
background and limited availability of collaterals.
Out of sample of 100% it is found that 41% respondents are highly risk averse in
this regard and 27.7% have found negative to this query while 31.3% showed no
response regarding risk aversion.
General Risk Aversion
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 34 41.0 41.0 41.0
Disagree 23 27.7 27.7 68.7
NoComment 26 31.3 31.3 100.0
Total 83 100.0 100.0
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Agree Disagree Comments
General Risk Aversion
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4.7. Lack of Collaterals
One of main problems identified in the research is the lack of collaterals available
for pledging against borrowing from banks. Most of the small and medium
entrepreneurs have very limited resources and doing the business on very
scarce resources they have not their personal property or even some are doing
their businesses on the finance of others. Some entrepreneurs borrow from their
relatives and commence the business and most of the small entrepreneurs are
running their business on rented property. So in these situations when they
approach banks for borrowing they are unable to meet the requirements of the
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Agree Disagree No Comments
Lack of Collaterols
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banks regarding presenting of property or any other security to the banks against
borrowing from the banks as they are doing business on the rented property so
due to lack of collaterals banks deny to accept the loan application and hesitate
to advance loans to such entrepreneurs.
While in case of personal guaranties banks charge very high interest rates which
small businessmen are unable to pay due to which their deal remain
unaccomplished.
Lack of Collaterals
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 24 28.9 28.9 28.9
Disagree 39 47.0 47.0 75.9
No Comments 20 24.1 24.1 100.0
Total 83 100.0 100.0
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4.8. Lack of Advertisement
There is no any proper way to promote the products from the banking sector due
to which no one comes to know what bank is offering to him and what are the
terms and conditions and how any person can avail services beneficial for his
business from the bank.
There is no doubt almost all banks are offering different kinds of services
specifically for the small and medium enterprises but on the other side it is
commonly observed that all small entrepreneurs are completely unaware from
these available services which further contributes towards gap between banks
and entrepreneurs.
Banks are just pay attention towards advertisement in the form of printed
broachers/leaflets but there is no any way to distribute these broachers to the
small entrepreneurs and these remain in the banks.
There is high need for proper distribution of these leaflets from the banks by
targeting the sector to which bank is going to offer the services. It will fill the gap
between the banking sector and the small entrepreneurs due to which they
become able to avail the services from the banks and there is commencement of
proper business relationship between banks and small and medium enterprises.
Lack of Advertisement from Banks
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 40 48.2 48.2 48.2
Disagree 7 8.4 8.4 56.6
No Comments 36 43.4 43.4 100.0
Total 83 100.0 100.0
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Agree Disagree No Comments
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From total of 100% there are 42.8% who are claiming against advertisement
while just 8.4% showed their opinion that they are satisfied from the current
advertisement and promotion efforts by the banks.
4.9. Fear of High penalties
It is fact which is noted in the research study from the banking side as well as
from the customer side also that whenever customer has got default, the bank
impose the high penalties to the defaulter party which further make very
disastrous situation for the customer.
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Many of the cases during research are pragmatic in which customer has got
default and bank as a result impose very high penalties and customers has to
shut down his business and he pays off by selling assets.
Due to such cases in the market the other businessmen feel lot of fear to borrow
from the banks because they are on the point of view that business situation
varies over the time, some times it is on boom, some times it is on recession in
which profits of the business squeeze but on the other hand they have to pay the
bank as bank is not concerned with the situation prevailing in the market they just
have charge interest on specified date and they are concerned with the recovery
of the loan at stated date so if at that time business is suffering then bank loan
will create more hurdles.
In this research study 45.8% of the respondents showed great hesitation towards
banks due to problem of high level of penatlties imposed by the banks while
45.8% showed no response and 8.4% respondents replied in positive towards
banking sector in this regard.
High Penalties Imposed by banks
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 38 45.8 45.8 45.8
Disagree 7 8.4 8.4 54.2
No Comments 38 45.8 45.8 100.0
Total 83 100.0 100.0
The same situation has also showed with the help of the graphical diagram in this
regard.
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High Penalities Imposed by banks
4.10. Non Availability of One Window
Businessmen have no much time to waste as they have to compete in the market
and to handle their business which requires lot of attention and time but on the
other side when they approach banks for loan they have to waste lot of time
because they have to prepared lots of documentation and for that purpose they
have to visit so many departments and after so much struggle they become able
to fulfill the requirements of the bank and further in the bank there is no one
window operation they have to meet so many officers for the approval of loan
and for verification of documents as well.
After verification of documents these documents are proceeded to head office
from where the approval of loan is required but some times head office return the
Research Thesis on Small & Medium Enterprises
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Gujranwala Chamber of Commerce & Industry 26
Agree Disagree No Comments
Lack of one window operation
0
10
20
30
40
50
Pe
rce
nt
Lack of one window operation
documents and disapprove the loan due to some deficiencies in documents and
again to remove those decencies lot of time and effort is required so most of the
businessmen prefer to borrow from other sources instead from banks.
The results obtained form questionnaires in this regard are precisely shown with
table and graph;
Lack of one window operation
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 40 48.2 48.2 48.2
Disagree 4 4.8 4.8 53.0
No Comments 39 47.0 47.0 100.0
Total 83 100.0 100.0
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Agree Disagree No Comments
Non availability of specialized Products
0
10
20
30
40
50
60
Pe
rce
nt
Non availability of specialized Products
4.11. Non Availability of Specialized Products
It is also complaint by businessmen that banks are not offering any kind of
specialized services or product to specific sector as there is little bit change in the
terms and conditions in different products and type of back payment while on the
side of interest it is always almost similar rate on all products/services bank is
offering to the customers.
The following is elaboration with table and graphs generated in SPSS software;
Non availability of specialized Products
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 26 31.3 31.3 31.3
Disagree 15 18.1 18.1 49.4
No Comments 42 50.6 50.6 100.0
Total 83 100.0 100.0
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Agree Disagree No Comments
Taxes Problems
0
10
20
30
40
50
Pe
rce
nt
Taxes Problems
4.12. Fear of Taxes
Most of times business community shies to borrow from the banks due to fear of
disclosure of their secret business information to the tax department as they have
to prepared and present certain important documents to the bank for the purpose
of borrowing so due to this fear they deny to borrow from banks and borrow
finance from other informal resources like from relatives, business partners etc.
Tabular and graphical representation of this fact is shown below;
Taxes Problems
Frequency Percent Valid Percent Cumulative
Percent
Valid Agree 39 47.0 47.0 47.0
Disagree 7 8.4 8.4 55.4
No Comments 37 44.6 44.6 100.0
Total 83 100.0 100.0
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cutlery
ceramics
food items
fans & room coolers
leather products
nuts bolts
plastic
paper products
sanitary fittings
sports goods
textile machinery
tyresutensils
washing machine
0
3
6
9
12
15
Perc
ent
Type of Indsutry
5. Interpretation of Questionnaire’s Results
Here all the results received from the respondents on the queries confronted to
them in the questionnaires are interpreted with the help of different tabular and
graphical diagrams.
Type of Indsutry
Frequency Percent Valid Percent Cumulative
Percent
Valid cutlery 8 9.6 9.6 9.6
ceramics 6 7.2 7.2 16.9
food items 5 6.0 6.0 22.9
fans & room coolers
9 10.8 10.8 33.7
leather products
5 6.0 6.0 39.8
nuts bolts 2 2.4 2.4 42.2
plastic 9 10.8 10.8 53.0
paper products
6 7.2 7.2 60.2
sanitary fittings
5 6.0 6.0 66.3
sports goods 3 3.6 3.6 69.9
textile machinery
2 2.4 2.4 72.3
tyres 2 2.4 2.4 74.7
utensils 12 14.5 14.5 89.2
washing machine
9 10.8 10.8 100.0
Total 83 100.0 100.0
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Nature of Business
Frequency Percent Valid Percent Cumulative
Percent
Valid Manufacturing Concern 51 61.4 61.4 61.4
Services Concern 32 38.6 38.6 100.0
Total 83 100.0 100.0
Manufacturing Concern Services Concern
Nature of Business
0
10
20
30
40
50
60
70
Pe
rce
nt
Nature of Business
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AOP Individual not available Partnership Private Limited
Legal status of business
0
10
20
30
40
50
60
Pe
rce
nt
Legal status of business
Legal status of business
Frequency Percent Valid Percent Cumulative
Percent
Valid AOP 5 6.0 6.0 6.0
Individual 23 27.7 27.7 33.7
not available
48 57.8 57.8 91.6
Partnership
2 2.4 2.4 94.0
Private Limited
5 6.0 6.0 100.0
Total 83 100.0 100.0
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Number of Employees
Frequency Percent Valid Percent Cumulative
Percent
Valid 0 5 6.0 6.0 6.0
1 4 4.8 4.8 10.8
2 8 9.6 9.6 20.5
3 2 2.4 2.4 22.9
4 10 12.0 12.0 34.9
5 3 3.6 3.6 38.6
6 8 9.6 9.6 48.2
8 2 2.4 2.4 50.6
9 3 3.6 3.6 54.2
10 5 6.0 6.0 60.2
12 3 3.6 3.6 63.9
13 2 2.4 2.4 66.3
15 3 3.6 3.6 69.9
18 2 2.4 2.4 72.3
20 9 10.8 10.8 83.1
22 1 1.2 1.2 84.3
24 1 1.2 1.2 85.5
25 2 2.4 2.4 88.0
30 1 1.2 1.2 89.2
35 1 1.2 1.2 90.4
40 3 3.6 3.6 94.0
70 1 1.2 1.2 95.2
100 1 1.2 1.2 96.4
200 2 2.4 2.4 98.8
300 1 1.2 1.2 100.0
Total 83 100.0 100.0
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0 1 2 3 4 5 6 8 9 10
12
13
15
18
20
22
24
25
30
35
40
70
10
0
20
0
300
Number of Employees
0.0
2.5
5.0
7.5
10.0
12.5
Pe
rcen
t
Number of Employees
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Yes No
Business Expansion
0
10
20
30
40
50
60
Perc
en
t
Business Expansion
Business Expansion
Frequency Percent Valid Percent Cumulative
Percent
Valid Yes 40 48.2 48.2 48.2
No 43 51.8 51.8 100.0
Total 83 100.0 100.0
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Fully Satisfied High Risk Fear Lack of Expertise and Awareness
Lack of Finance Others
Problems to Expand Business
0
10
20
30
40
Pe
rce
nt
Problems to Expand Business
Problems to Expand Business
Frequency Percent Valid Percent Cumulative
Percent
Valid Fully Satisfied 29 34.9 34.9 34.9
High Risk Fear 3 3.6 3.6 38.6
Lack of Expertise and Awareness 8 9.6 9.6 48.2
Lack of Finance 31 37.3 37.3 85.5
Others 12 14.5 14.5 100.0
Total 83 100.0 100.0
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Yes No
Availing Services of Bank
0
10
20
30
40
50
60
70
Perc
en
t
Availing Services of Bank
Availing Services of Bank
Frequency Percent Valid Percent Cumulative
Percent
Valid Yes 52 62.7 62.7 62.7
No 31 37.3 37.3 100.0
Total 83 100.0 100.0
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Loan Accounts Non
Services Availing from Bank
0
10
20
30
40
50
Pe
rce
nt
Services Availing from Bank
Types of Services Availing from Bank
Frequency Percent Valid Percent Cumulative
Percent
Valid Loan 18 21.7 21.7 21.7
Accounts
34 41.0 41.0 62.7
Non 31 37.3 37.3 100.0
Total 83 100.0 100.0
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Yes No
Problems in Services
0
20
40
60
80
Pe
rcen
t
Problems in Services
Problems in Services
Frequency Percent Valid Percent Cumulative
Percent
Valid Yes 17 20.5 20.5 20.5
No 66 79.5 79.5 100.0
Total 83 100.0 100.0
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Types of Constraints Faced
Frequency Percent Valid Percent Cumulative
Percent
Valid Slow Processing 1 1.2 1.2 1.2
Complicated Documentation Formalities
10 12.0 12.0 13.3
High Rates of Interest 10 12.0 12.0 25.3
Stringent Collateral Requirements 4 4.8 4.8 30.1
Poor Services 5 6.0 6.0 36.1
Unavailability of Finance on time 1 1.2 1.2 37.3
General Risk Aversion 23 27.7 27.7 65.1
Religious Point of View 29 34.9 34.9 100.0
Total 83 100.0 100.0
Slow Processing
Com
plicated Docum
entation Formalities
High R
ates of Interest
Stringent Collateral R
equirements
Poor Services
Unavailability of Finance on tim
e
General R
isk Aversion
Religious P
oint of View
Types of Constraints Faced
0
10
20
30
40
Pe
rce
nt
Types of Constraints Faced
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6. Conclusion & Suggestions
After the concrete and in depth analysis of the research report and gathered
information in this research it is revealed that there are lot of industries in the
Gujranwala working at very small level and having lots of financial and other
different constraints due to which they are unable to continue their pace of
growth while on the other hand lots of decencies are observed from the banking
sector in order to serve the SME sector and it is finally concluded that there is
high need to develop strong bond between SME sector and Banks in order to
support this industry and to remove obstacles they are facing in their way to
development.
Following are some important suggestions are drawn based upon the analysis of
whole research study;
• Policies should be laid down for the banks to properly target the deserved
customers and promote their products according to the culture of the
target audience.
• Banks should make changes in interest rates charges by making rate
variable with the amount of loans taken by the customers.
• Awareness programs should be launched by the Islamic banking sector to
clarify the procedures and to satisfy religious rigid customers regarding
their products/services.
• Local chamber should provide personal guaranty for its members and
make arrangement to provide them loans from banks at low rates.
• State bank should design policies for the banks to provide interest free
loan to cottage industry that deserve whenever they required.
• Banks should simplify their procedures and documentation requirements
for advancing loans to SMEs specifically.
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7. Bibliography
To accomplish the research report “WHY SMEs ARE BANK SHY?” following
links are used to collect the data;
• www.smeda.org.pk/main.php?id
• ec.europa.eu/enterprise/enterprise_policy/sme_definition
• www.smeda.org/downloads/smepolicy2007.pdf
• www.international.lga.gov.uk/european_work/glossary.html
• en.wikipedia.org/wiki/Small_and_medium_enterprise
• www.sbp.org.pk/bpd/Conference/Day_One/SBP_Initiatives_for_SMEs_Fin
ancing.ppt -
• http://www.smeda.org/main.php?id=50
• www.pakistaneconomist.com/issue2002/issue5/f&m.htm
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