technology (IT) has assumed the role of a solution provider at all levels
of the economic spheres around the world, naturally Pakistan was not an
exception too. Since the struggle for an economic upturn is in the middle
of its way as things are still taking shape in our country the proper
application of the cutting edge technology as a solution provider becomes
imperative in our economic scenario.
In order to discuss the current situation as to how the latest technology
is helping shape the Small and Medium Enterprises (SMEs) in Pakistan to
rise to the occasion, Intel Pakistan Corporation in collaboration with
Pakistan & Gulf Economist (PAGE) organized a panel discussion titled
"Small Businesses, Big Picture". Leading professionals from the
important tiers of the economy participated in the discussion. They were
from SMEs, banking system and of course the leading IT players.
Following is the detail of the discussion for the benefit of the readers.
— Amanullah Bashar
The Small & Medium Enterprises have
played a key role in development of economies the world over and Pakistan is no
exception. Pakistan is in the midst of an economic upturn and the role the SME
sector can play in Pakistan's economic reform is mission critical. Currently,
this segment contributes a little over 30% to the country's GDP.
Today, the SME sector is inundated with
managing multiple priorities in the face of resource constraints and increasing
customer demands. Whether a new start-up or an established concern, businesses
need to re-look at their operational model in order to stay ahead of competition
both at a local level as well as internationally.
One of the key ingredients needed to
make SMEs competitive is enhanced technical skills and organizational
capability. The pressures on small businesses today are more intense than ever.
Fortunately, the advancements in technology are playing a pivotal role to help
small businesses meet new demands for speed and productivity and enable them to
stay ahead of competition.
To discuss how latest technology is
helping shape the SMEs in Pakistan to meet the global standards Intel Pakistan
Corporation in collaboration with Pakistan & Gulf Economist (PAGE) recently
organized a high level panel discussion titled "Small Businesses, Big
The august panel comprised industry
chieftains and opinion leaders such as; Arooj Alam Khan, General Secretary,
PASHA; M. Mir Nasir, Chief Operating Officer, Inbox Business Solutions; I. A.
Siddiqui, Senior Consultant, International Office Products; Muslim Raza, Manager
Sindh, SMEDA; Humayun Akhlaq, Channel Operations Manager (Pakistan &
Bangladesh), Intel Corporation. Asif Ali Khan, Provincial Manager, SME Bank;
Saleem Baig, Head Commercial Banking, Habib Bank Limited; Zafar Iqbal,
President, SAMEA; Ahmed Afzal, Director Domestic Business of PSEB. Ms Rabia
Gharib, the Editor-in Chief, Net Express Magazine, who also serves as a Media
Consultant to Pakistan Software Export Board (PSEB) and Ministry of IT &
Telecom (MoITT) was the moderator and led the discussion.
The panel discussion commenced with an
intensive debate on the definition of Small & Medium Business. Varied
opinions were brought to light as to how exactly a business entity is classified
and clubbed in the 'S' of Small and the 'M' of Medium.
Although the definition, of what
exactly in terms of resources, define the SME segment may differ from country to
country and entity to entity, SMEDA's definition for the SME in Pakistan seemed
most appropriate. SMEDA tends to look at this segment from primarily two angles:
a) number of employees and b) investments. An entity employing 9-35 people or an
organization with a productive investment (which may include land and building)
of Rs. 2 to 20 million is categorized as small. Medium entity is usually
categorized as having an employee base of 36-99 and with a productive investment
of Rs. 20 to 40 million.
Muslim Raza of SMEDA added that apart
from just looking at these definitions per se, one should also look at it from a
sector by sector basis stand point and that might just be the perfect way as the
nature of companies within an industry varies. Different sectors define the 'S'
& 'M' differently. What is an 'M' in a dairy industry might not be an 'M' if
looked at it from a macro level.
Zafar Iqbal, President, SAMEA
highlighted that four sectors were identified by the present government, when it
came to power - reduction of poverty, development of human resources and
strengthening of the industrial base. The SME sector was identified as one of
the main drivers of economy. He stressed upon the fact that this segment has
great potential for rapid growth in the shortest time provided; the necessary
measures are taken.
The discussion took a turn towards
financing, emphasizing on the fact that SMEs in Pakistan are in dire need of
financing to enter the next level of growth. They might not have enough funds in
hand to invest in technology, machinery or even human resources; they may also
not have the necessary collateral that most banks require disbursing a credit
line. After multiple rounds of debate amongst the panelists, it seemed that
increase in lending to this segment is really a catch 22 situation. The banks,
world over, require adequate assurance to extend credit. Once that is provided
companies do usually get the desired level of credit while those who cannot
convince lending institutions, be it for lack of a solid business plan or the
required paperwork or collateral which usually is a requirement to ensure
minimization of default rate, do not get the advantage of financing and hence
may not be able to grow or compete.
Saleem Baig, Head Commercial Banking,
Habib Bank Limited further elaborated on the topic and said that as per State
Bank of Pakistan the definition of SME falls under three tangible parameters
which banks can follow in deciding which entity falls into which category and
accordingly disburse finances to them. Those three tangible parameters are
assets, sales, and the number of people employed. He added that the SME sector
need to become sophisticated, acquire more skills and maintain proper financial
documents, as the banks have their minimum requirements which need to be met. If
these requirements of documentation are met, then loan disbursement to this
segment will increase automatically.
The financing scenario in Pakistan is
slowly and steadily changing with forward looking institutions such as the SME
Bank with a core charter to support and develop the SME sector by providing
necessary financial and technical assistance on a sustainable basis. Asif Ali
Khan, Provincial Manager, SME Bank said that the SME Bank has already disbursed
a billion rupees. While addressing a mark-up question, he said that the bank's
mark-up rate varies from case to case. He said that the bank's average portfolio
pricing is not in excess of 14% and that most SME financing institutions across
the world are in the vicinity of 20%.
HOW TECHNOLOGY CAN FUEL THE GROWTH:
The discussion took a deep dive into
what the essential building blocks are for the SME segment. Readily available
financing was already described as of the key building blocks along with having
the right business acumen. The other critical aspect that was identified,
despite lack of awareness by many SMEs, is deployment of the right technology
solutions for growth of businesses. The panelists agreed that the right
technology deployment would vary from business to business. For a small business
having just a couple of PC's connected would serve the purpose. However, it was
agreed that both the hardware and the software sectors must play an active role
of advisors and provide customized solutions to this segment.
Ahmed Afzal, Director Domestic
Business, PSEB, said that using the right technology is crucial and directly
propionate to the growth of the SME sector. This can only be achieved if the
businesses follow a certain process. Once that process is in place then software
applications can be created coupled with the right hardware solutions. This
would give the SME a solid platform to leap ahead and enable the desired level
Arooj Alam Khan, General Secretary,
PASHA, during the discussion commented on the phenomenal talent that Pakistan
has in terms of human resources. He said that within PASHA there are SMEs who
can easily compete on an international level, provided they are given the
requisite focus. He appreciated the effort, which was taken to get industry
leaders on the same platform to deliberate upon the issues impacting the growth
of SME and the necessary steps, which need to be taken.
I.A Siddiqui, Senior Consultant at
International Office Products (IOP), made a very valid point on this subject.
According to him, majority of the SME segment is not aware of what exactly their
requirements are and small businesses do not have the finances to pay high
consultation fees. He said "Most of the time we, as consultants, have to
determine and extract what the requirements are for any given business and that
has to be translated into what IT solutions may be provided. That kind of
consultancy is a time consuming exercise involving requirement analyses and then
presenting a customized solution that complements the present business plan
while also planning for future enhancements". He said that IT solution
providers need to realize that many SMEs cannot afford the consultancy fee. The
IT solution provider needs to invest time and provide a viable solution to this
important sector. Most SMEs can pay for the solution, but they might not be able
to pay for the consultancy and the providers need to understand this factor,
invest their time and provide the much needed assistance to the 'S' of this
Humayun Akhlaq, Channel Operations
Manager for Pakistan and Bangladesh, represented Intel, the co-organizer of the
panel discussion. Humayun stressed on creating awareness within the SME segment
on how technology can help their businesses to grow exponentially. He posed
several questions to the panelists on what can be done as a collaborated effort
to fuel that growth whether in terms of financing or playing the role of
advisors as to what IT solutions maybe deployed. He stressed on the issue of
wrong investment, by some of the SMEs, in purchasing obsolete technology in the
shape of second hand systems available in the market. He said "the business
entity needs to look at tomorrow's needs and requirements and question their
decision as to how they would grow and address the needs of tomorrow with the
technology of yesterday".
Chief Operating Officer, Inbox Business
Solutions, a local hardware solution company, served both as a panelist and an
ideal case study. He stated his company's example, which was a small business
enterprise a few years ago and in a short span of six years has reached the
medium stage or perhaps even a large enterprise level business. He said that 30%
of Inbox's business comes from the SME sector. He cautioned that there might be
risk factors that exist within this segment, but argued that these are no
different or no higher than the risks that one faces while providing credit to
large corporate entities. Again quoting his company's example, he said that
Inbox gives credit to both SME segment and the large corporations through
similar evaluation analyses and then support and at times even take certain
calculated risks. Inbox's example resonated very well with both the panelists
and the audience as here was an example of a once small business which has risen
to where they are today.
Finding the right IT adviser is a not
like finding a reliable, trustworthy auto mechanic. The search can be
challenging. You not only have to find someone who is qualified, established,
but also someone who will be honest, thorough, and attentive to your specific
The panelist and the companies they
represented have taken the key steps to fuel the growth within the segment.
SMEDA for instance apart from their core charter of providing the necessary
services to help SMEs overcome the weaknesses that are endogenous to their very
nature, contributes towards the growth and development of SMEs in Pakistan. They
have posted a free of cost basic accounting software on their web site (www.smeda.org.
pk) which will help enable SMEs to be more organized and track their finances.
Institutions like SME Bank provide the much needed financing along with business
support services. Commercial banks like Habib Bank have also identified the SME
segment as an important segment that they should support.
Associations such as PSEB and PASHA are
promoting the local software industries in Pakistan and helping them to be more
competitive in the international arena. A company like Inbox Business
Technologies is a case in point for having the right business acumen and a solid
business plan, there is no reason why an entity cannot evolve from the 'S' to
the 'M' and finally to a large corporate entity. This segment has the potential
to contribute exponentially to the GDP of Pakistan. The transition can only
happen if the right building blocks such as finances, sound business acumen and
deployment of right technological solutions are in place.