Last five years policies have resulted in
impressive economic growth for Pakistan. Gross domestic product (GDP)
growth rate has gone up to over 6 percent and it is being predicted at
around 7 percent this year. This remarkable growth is attributed to
the growth of Large Scale Manufacturing (LSM), which showed an
increase of 15.4% during H1-FY05. Other achievements during the year
were decline of fiscal deficit to 4%, fading of current account
deficit, increase in foreign direct investment from almost negative to
950 million dollars and increase in foreign exchange reserves from $1
billion to $12 billion. All is now set to make Pakistan the Asia's top
ten fastest growing economies as said by the Prime Minister Shaukat
A very impressive picture of the Pakistan has been
presented now turn around the face of the picture, the Micro Economic
Situation. Masses of Pakistan are still facing problems, such as lack
of access to education, primary health care, basic infrastructure and
Why masses have not benefited from the impressive
economic growth rate? A simple answer is because the engine which is
running at micro level is not being fueled the way as it required. As
per data provided by SME Bank, SMEs employed 80% of Pakistan's labor
force; contribute more than 50% to GDP, and 50% towards export
earnings through both direct and indirect exports. This data speaks
itself about the importance of SMEs in Pakistan. In contrast to this
only 15% SME's, as against 65% LSEs avail credit to the tune of only
12% from the formal financial sector, which indicates the wide gap
between the lenders and SMEs. There is a need to reduce this gap as
most important hurdle being faced by SMEs is limited capability to
generate their own financing resources.
This leads to further problems such as — (1)
Low technology updation; (2)
No expansion and diversification; (3)
Procurement of raw material at higher prices and (4) Not able to
market their products.
The financial sector can play a very vital role in
eliminating this problem. But most lending institutions think that
lending to SMEs is risky, so they are biased in favour of large scale
business. Therefore, credit entities penalise the risk of their
operations through the collection of risk-premium on interest rates or
directly by means of credit rationing. Thus reducing the power of the
SMEs to avail loans on favourable terms.
As already mentioned SMEs in any country contribute
60% to 70% of employment. This contribution is vital for economic
growth. As we know that the most important determinant of GDP is
consumption. Consumption is triggered by income people earn during a
particular period. This consequently depends upon the employment. If
70% employment contributor is provided with the right support from the
government and financial institutions, it will create jobs and will
contribute directly to overall goal of reducing poverty especially in
women and youth. This will lead to increase in the consumption; which
will result in increased GDP, which I think will be the real growth.
This is from economic perspective, which is very important, but let me
highlight the more important factor, i.e., social perspective. A very
important social achievement which SME's can help the government to
achieve is equal distribution of wealth, which in result will
contribute to social stability. Equal distribution of wealth will
result in reduction in social disparity, which is prime contributor
towards dissatisfaction among the people and creates social
instability. Secondly it also reduces migration from rural areas to
urban areas (problem being faced by the government).
Both perspectives, i.e., economic and social have
been discussed, and the role of SMEs have also been elaborated, which
confirms that SMEs are essential for achieving social and economic
The support which is backbone of the economy
requires is not being provided due to the following reasons:
1. They do
not have the right background as the young yuppies commonly found in
modern banks who have no experience of industry at large, resulting
communication gap between the bankers and the sector
2. Lack of
financial modelling skills (primary requirement of loan sanctioning)
3. Lack of
desired "polish"/market "lingo"
4. Lack of
cashable collateral available to SMEs.
Askari Leasing Limited knowing the above mentioned
problems came with a plan to tackle these problems. Askari Leasing
Limited has trained professionals and has provided them with right
background for SMEs, which enable them to talk the way, SMEs
understand. This reduces the communication gap between the company and
SMEs. The trained professionals can take raw inputs and details
regarding the business, machinery, marketing etc., and develop
financial models, which describe and predict the venture behaviour in
question. This input is extremely invaluable for SMEs as they are
getting guidance and help in addition to just funding.
Askari Leasing Limited team is not just trying to
capture the SME customers to earn profits but their job is to identify
the customer needs, which includes following:
1. Why they
require funds; 2.
How much funds are they in need of and 3.
How best can these funds be utilized
When a customer from SME sector requests financial
help, Askari Leasing's team member visits his premises and try to
evaluate the production capabilities of the customer, which includes
identification of number of machines installed there, and their per
day production capability, and other over head requirements. Based on
which, a professional model is developed, which helps in calculating
the actual funds requirement, and also the projected profitability.
Based on all this information at Head Office, the
team then try to evaluate the consequences of disbursement, i.e., will
customer be able to repay the loan (based on the profitability
calculations, and marketability of products being produced). If it is
decided that financial help will increase the financial strength of
the customer payment is released, otherwise the customer is informed
regarding implications of the loan. This helps the client to avoid
financial distress, which may lead to close down of one SME, a
contributor to economy.
Being a large company, and having ready access to
information, Askari Leasing is also planning to equip the staff with
latest information so that they can provide SME operators with
information on appropriate technology and domestic and export markets.
This will be an indication of Askari Leasing Limited commitment to the
development of SMEs, which will result in development of Pakistan.
With its focus on SME sector, Askari Leasing
Limited has rapidly achieved a unique leadership position in this
area. It has developed sizeable business in golden triangle of
Pakistan, namely Faisalabad, Gujranawala, Gujrat, Sialkot and Lahore.
The exposure is in variety of SME related industries including,
textile, machinery, leather etc. It is hoped that these efforts will
prove successful in developing both SME sector as well as the economy
and GDP of the country.