Research Methods for Business Research on The role of SMEs in Pakistan Table of Content S # Contents Page # 01 Research Proposal 02 Observation & Broad Problem Area 01 03 Preliminary Data Collection 03 04 Problem Definition 08 05 Theoretical Frame Work Development Relationship Of Dependent And Independent 09 Relation Ship Of Intervening Variable With The Dependent And Independent Variables 11 Relation Ship Of Moderating Variable With The Dependent And Independent Variables 12 Variables Model 13 06 Hypotheses 14 07 Elements Of Research Design 15 08 Relationship Of Independent Variables And Its Elements 16 09 Data Collection Method 18 1
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Research Methods for Business
Research on
The role of SMEs in Pakistan
Table of Content
S # Contents Page #
01 Research Proposal
02 Observation & Broad Problem Area 01
03 Preliminary Data Collection 03
04 Problem Definition 08
05 Theoretical Frame Work Development
Relationship Of Dependent And Independent 09
Relation Ship Of Intervening Variable With
The Dependent And Independent Variables
11
Relation Ship Of Moderating Variable With
The Dependent And Independent Variables
12
Variables Model 13
06 Hypotheses 14
07 Elements Of Research Design 15
08 Relationship Of Independent Variables And Its Elements 16
09 Data Collection Method 18
10 Sampling 19
11 Interviewing Questions 20
12 Conclusion 25
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13 Recommendations 26
14 Articles
15 Appendixes
16 Bibliography
2
A
All praise to Almighty ALLAH, the most merciful
and compassionate, who enabled us to complete this
Project.
We express our gratitude to our kind course
coordinator Mr. Faisal Azeem Malik, who kept our
moral high by his suggestions and appreciation. He
was available to us whenever and for whatever we
consulted him. Without his precious guidance and
help we could never be able to complete this task.
We thankful to all interviewers who cooperate with
us and provide best possible information.
And at last but not the least, we would like to
acknowledge the support of our family members. We
would like to admit that we owe all our
achievements to our truly, sincere and most loving
family members who mean the most to us, and whose
prayers are source of determination for us.
CKHNOWLEDGEMENT
Research Methods for Business
Research Proposal
Management QuestionManagement would like to investigate,
“What is the role of SMEs in Pakistan?”
Reasons of selecting research design:
We have made this type of research proposal because it suits
a lot to our problem. SMEs can only be determined through
only this type of research proposal. We have research
questions for which we will directly interact with loyal
customers and able to identify competitor position in
market. Data collection helps us in determining SMEs’ image.
We will apply statistical tools for acquiring desired
results. Professional report will be prepared. Hypothesis
tells us either our research fruitful, completion its
objectives or it fails.
Hypothesis
“Access to finance for SMEs capacity development and
enchasing their contribution in economy”
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Research Methods for Business
Research Proposal for SMEs
Research Purpose
The purpose of the study is to analyze SMEs
contribution in our Economy. Specially
research objectives are to,
To have thorough analysis of working of
SMEs in Pakistan
How SMEs are attractive?
Role of SMEs in employment generation
What is the role of finance in development
of SMEs?
Research Design
The survey will be conducted by interview,
to a total of 10 -15 different small &
medium enterprise owners in Wah Cantt.
Secondary data is available on Web,
magazines, journals and we can have
telephonic survey also.
The questions covers wide range of issues
including
Image of the SMEs will clearly be peep
after the research
Research
Questions
In this section we have interview questions
which will support our research.
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Questions can be open ended or close ended.
Sample Selection
10 - 15 owners will select from Wah Cantt.
This type of technique is very much
successful in such type of surveys.
Data CollectionData will be collected to evaluate
interviews.
Project Report
A written report will be submitted and an
oral presentation of the findings can be
made in lecture hall.
Project Cost &
Schedule
Project will be completed with in a period
of 8 weeks from the time of submission of
proposal. Project Submission date is January
05, 2006. The cost of the project estimated
to be Rs. 3000, including the fare of buses
and other activities generated due to this
project.
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6
R
TO UNDERSTAND THAT
WHO ARE THE SMEs?
WHAT ARE THEIR BASES OF DEFINATION?
WHAT IS THEIR CONTRIBUTION IN THE ECONOMY GROWTH?
WHAT LEVEL OF EMPLOYMENT THEY ARE PROVIDING?
WHAT ARE THEIR PROBLEMS?
WHAT IS THEIR MAJOR PROBLEM?
WHAT ARE THE CAUSES OF MAJOR PROBLEM?
HOW WE CAN ELEMINATE THAT PROBLEM?
esearch Objectives
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OPakistan's economy is an economy of SME. Policies in
the past have given a general perspective, direction
and defining broad parameters of activity within the
macroeconomic framework, but efforts have focused on
the large enterprises, neglecting SME which are at the
heart of our economy.
Our SME suffer from a variety of weaknesses which have
constrained their ability to adjust to the economic
liberalization measures introduced and to take full
advantage of rapidly expanding markets of the world.
But SME importance and contribution in the economic
activity suggests that there is a significant potential
to enhance their growth through appropriate regulations
and promotion.
While SME are being mentioned in some of our socio-
economic strategies and policy documents, measures are
not sufficiently specified and prioritized for us to be
able to speak of any coherent SME policy or approach.
The SME Sector Development Program seeks to improve
this situation by inviting all concerned stakeholders
to draft Pakistan's future SME policy.
verview of SME Sector in
Research Methods for Business
1. OBSERVATION & BROAD PROBLEM AREA
The present phase of the industrialization in which the
large number of industries is growing and they are
contributing in the countries development more as compared
to the countries based on the agricultural economy because
the last century is the century the countries whose economy
is based on the industries leave far behind in the race of
the development as compared to the agricultural based
economies.
There is no single example of any single agricultural
economy which is in the list of developed countries. Even
with the help of industrialization the developed countries
are trying to rule also in the agricultural sector. Because
of the expertise in the production of the agricultural
equipment which is making them superior in the agricultural
sector production.
As Pakistan is also agriculture based economy where more
than 60% population is engaged with the production of
agricultural products and agricultural sector is
contributing only 14% o 20% in the economy and if we divide
the industrial sector in different sub parts then
agriculture is the 2nd largest sector in the economy
contribution and the 1st largest in employment. As for our
concern is only with the contribution in the economy. This
poor performance of the agricultural sector can not boost
the Pakistani economy so if we take the industrial sector
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which is lifting up the Pakistani economy it is
concentrating upon the different sub sectors like Textile,
leather, Electrical, Surgical equipment sector, sports and
lot of different sectors. In the classification of the
industrial sector we can not regret the role of Small and
Medium Enterprises (SMEs) in the economy because the SMEs
are prevailing in every sector of the economy.
The development of small and medium size enterprises in
Pakistan means elevation of the poverty in Pakistan because
promotion of the SMEs increases the number of job. SMEs in
the Pakistan are providing the 78% jobs to those persons who
are not employed with the agricultural sector. The SMEs are
contributing the 30% to the GDP of the Pakistan and it’s
around the Rs.140 billion. This contribution of the SMEs in
the economy development is only with out the development of
the SMEs policy and still the SMEs don’t have the status of
the SMEs sector.
So if we want to boost the Pakistani economy then it is
important to encourage the SMEs and also eliminate the
hurdles from the growth of the SMEs. Those hurdles may be
financial, knowledge based, cooperation, and technology etc.
There are two nature of problems first currently
existing and second situation requiring improvement. In
our case it is the problem existing in the present
scenario.
Problem currently in the SMEs sector is, they have lack
of finance that’s why they don’t grow and as well
export
There is need to solve the problem, because if this
problem would be solved so there are other related
problem would be solved
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2. PRELIMINARY DATA COLLECTION
Introduction
The development of small and medium size enterprises in
Pakistan means elevation of the poverty in Pakistan because
promotion of the SMEs increases the number of job. SMEs in
the Pakistan are providing the 78% jobs to those persons who
are not employed with the agricultural sector. The SMEs are
contributing the 30% to the GDP of the Pakistan and it’s
around the Rs.140 billion .The government of Pakistan is
developing the SMEs policies which is likely to be completed
by the June 2005.
Back Ground of SMEs in Pakistan
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Pakistan has the very rich fertile land and because of the
fertile land it is an agricultural country. It means not
that there is no industry in Pakistan, it have different
small, medium and large industries. Because of the feudal
and beurocratic rule systems the agricultural sector
receives great attention of the government in the past. The
industrial sector was completely ignored even till now there
in no policy for the SMEs. At that time we don’t have the
exact figure of the SMEs and it estimated that at that time
more than 220,000 SMEs are working in Pakistan.
Definition
The definition of the SMEs varies from country to country,
and also from the period of one government to another
government, but in different places they are defined against
different criteria’s like number of employees, total
investment, sales, and production. In Pakistan SMEs are
defined against two criteria’s 1) no of employees and 2)
investment. A small industry is that in which 10-35
employees are engaged or it have the investment from Rs.2-20
million. And a mediums industry is that which have the 36-99
employees are engaged or investment from Rs.20-40 million.
SMEs contribution in the economy
SMEs plays vital role in the development of any country and
their contribution can be defined in two terms. First in the
shape of socially (by generating the jobs) and the
economically (by generating the revenue).
In Pakistan SMEs are defined in two terms first in the human
capital shape and in the investment. A small industry is
that in which 10-35 employees are engaged or it have the
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investment from Rs.2-20 million. And a mediums industry is
that which have the 36-99 employees are engaged or
investment from Rs.20-40 million.
Where the agriculture and the other sector are playing the
vital role in the development of the country, we can not
regret the role of SMEs. After the agriculture it is the
second largest job providing sector in the Pakistan.
SMEs in the Pakistan are providing the 78% jobs to those
persons who are not employed with the agricultural sector.
The SMEs are contributing the 30% to the GDP of the Pakistan
and it’s around the Rs.140 billion .The government of
Pakistan is developing the SMEs policies which is likely to
be completed by the June 2005.
SMEs account for between 55 per cent and 80 per cent of
total employment in Western Europe, Japan and USA. Their
contribution in output in Japan is 65 per cent, Germany 48
per cent and USA 45 per cent. According to the economic
survey of 1998-99, SMEs with a mere 20 per cent investment
and resource to less than 10 per cent of the total formal
credit generated 80 per cent of the country's total
employment.
Various types of loans available are small loans for
business and industry, small loans for industrialists,
lending for small and medium industries. If strategic
planning for development of SMEs is made successful; middle
class entrepreneurs may play an effective role in the
economic recovery of Pakistan.
In Pakistan adult literacy rate is 48 per cent and majority
of entrepreneurs operating small businesses and industry are
not educated and as such they hesitate in approaching small
and medium enterprises development authority and banks for
loans. High interest rate is the main hurdle facing SMEs.
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Credit may be offered to such enterprises at subsidized
rates, the study said. The research report proposes the
setting up of a 'small business and cottage industries Bank'
with an authorized and paid-up capital of Rs.One billion to
boost the development of existing and developing new small
and medium enterprises.
The role of Small and Micro Enterprises in job creation is
well known and even in developed countries over 60%
employment is in this sector. Therefore, in order to develop
this sector expansion of infrastructure facilities,
deregulation and liberalization of economy, fiscal and
financial incentives are to be provided and promotional
activities such as skill development, industrial estates,
common facilities and marketing arrangements have to be
made. The Micro and Small Industry is considered as the
"back bone" in the economic development of a country. It
plays a pivotal role in contribution towards GDP and job
creation.
SMEs such as their need for less capital investment per
worker than is required by large enterprises. The abundance
of labor and the shortages of capital and foreign exchange
which are characteristics of developing countries are
compatible with the SMEs labor-intensive character. In
addition, SMEs mobilize local human and material resources
and utilize local raw materials more effectively than large
enterprises, and address more of the consumption needs of
slow income people. Their scale of production is more
appropriate to rural areas and small townships in developing
countries.
SMEs improve forward and background linkages among social
and economic activities of the economy. They promote and
enhance foreign exchange earnings, and offer wider
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opportunities to entrepreneurs and to low income and
minority groups. They are flexible in production, have the
potential as a training ground for managerial skills, and
provide rich personal relations. Their ownerships by the
residents of a community results in community based economic
decisions, greater stability of employment and better
community development. In the modern day structural
adjustment, SMEs constitutes a "labor sponge".
How government can improve their performance
Legal and Policy Framework
Access to finance
Technical support
Marketing support
Bringing the research institutions closer to the SMEs
Linkage with the international network
Compliances
SMEs present a strong case for government/donor incentives
and support. By contrast, large firms, especially in the
textile sector, are already well into the standards regime
and aware of the consequences of the MFA phase-out. The
exporting firms comply unequivocally with product standards
because non-compliance would mean a discontinuation of
orders. Process standards are more of a gray area. An
example of this is ISO 14,001 certification. Some firms have
secured such certification, even though they do not appear
to be fully compliant.
Literature survey
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We have conducted literature survey to narrow down our
problem, we have followed following points
Identify relevant sources ( we have adopted full-text
database)
Extract the relevant information from that articles
Writing the literature review
-------------------------------
We concise the above data which is taken from the site named. www.smeda.org.pk
3. PROBLEM DEFINATION
“Access to finance for SMEs capacity development and
enchasing their contribution in economy”
On the basis of different interviews and varied literature
we have come to know that the FINANCE is the major hurdle in
the growth of the SMEs. The credit will enable the SMEs to
acquire the new technology, improve quality of their
products. They will re-position them through the new
financing facilities that will help earn more profit. As
SMEs after Agriculture, were intensive employment sector, so
it would help mitigate the unemployment problem and high
profitability will make them pay more taxes. All this
exercise would benefit directly and indirectly to the health
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of the economy,” If the income of the SMEs goes up, the
growth rate and employment ratio, vis-à-vis economy will
also be accelerated”.
4. THEORETICAL FRAME WORK DEVELOPMENT
Relationship of Dependent and Independent
The dependent variable is Access to finance which is the
variable of the primary interest in which variance is
attempted to be explained by different independent variables
and those are
High interest rate over the credit
Less number of financial institutes
Unacceptable terms and conditions of the financial
institutes
Lake of entrepreneurs knowledge
The less the interest rates over the credit the higher the
investment in the enterprises which leads to the generation
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of the employment in the country and also increase the
government revenue in the shape of taxes.
There are also the less number of credit providing
institutes if we take the list of banks working in Pakistan
then we have lot of banks but these banks are working only
in the large cities like Karachi, Lahore, Faisalabad,
Hyderabad, Peshawar, Quetta etc., and in the tehsil taxila
and Wah Cantt there are only few banks those are providing
the credit to the SMEs like Bank Alfalah, PICIC commercial
bank, Habib bank.
Some banks require the very strict terms and conditions for
the entrepreneurs like the mortgage of equal value of
property, a huge list of documents required and attested
from different authorities and also the guaranty of
different persons who belong to the very high class. So if
an individual who is working on the small level and have the
bundle of skill but don’t have huge capital how he can
survive in the market where there are large giants are
working and a small or medium entrepreneur bring the
security of different upper class persons.
Some entrepreneurs who are running the business in any form
some time they don’t have the knowledge how to take the loan
or how to meet the banks criteria, and some entrepreneurs
also afraid on taking the loan from the banks they have
their on justifications like after the banks financing the
banks interfere in their businesses and they don’t want the
interference of the banks or any other in there affairs.
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Relation Ship of Intervening Variable with the
Dependent and Independent Variables
It is interesting to know that there lake of confidence of
the owners of small and medium enterprises over the
financial institutions. If the financial institutes build
their confidence over the entrepreneurs then can take risk
of high rate of interest, even if the institute is far from
the enterprise, if the terms and conditions are little bit
strict, and even the entrepreneurs have the less education
and the banking structure knowledge. All the above mentions
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Access to financeAccess to finance
High interest rate over the
credit
High interest rate over the
credit
Less number of financial institutes
Less number of financial institutes
Terms and conditions of the financial
institutes
Terms and conditions of the financial
institutes
Entrepreneur’s knowledge
Entrepreneur’s knowledge
Research Methods for Business
elements can be eliminate by the good corporate culture in
the banking structure.
Relation Ship of Moderating Variable with the Dependent
and Independent Variables
It is interesting to know that if the government and the
financial institutions want that small and medium sector grow
then it is important to build up the image of the financial
institutes in the mind of the entrepreneurs. And this image can
be increased by creating the awareness by using the different
modes of communication like TV program discussions, print media
awareness, seminars in which entrepreneurs, representatives of
the financial institutes, journalists and student should be
in the form of government grants. Based on the definition
of the SMEs in Pakistan the priority sector may also
determine for providing financial support and priority
sector for SMEs should be the following
Agro based and agro related industries like food
processing, poultry, dairy, nursery, horticulture and
flowery culture etc.
Hand looms, power looms weaving industry, different
type of handy crafts, leather and leather goods,
surgical equipment industry, electrical industry.
In case of lending from the financial institutions
following should be consider
In case of Islamic banks financing the
appropriate Islamic mode of finances to be
determined (Musharaka, Mudaraba etc.)
The determining of the appropriate rare of
profit and services charges i.e. cost of lending
and borrowing from the commercial banks, Islamic
banks, and ultimate beneficiary entrepreneurs.
RECOMENDATIONS
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1.For Banks
Most financial institutions have not put in place for the
effective assessment for the credit of SMEs, further more
inadequate transparency of their financial status and
management, SMEs often are unable to provide financial
institutions with sufficient information access the business
performance. So in this scenario the SMEs should follow
A. Lending Strategy
The banks those are providing the financing facilities to
the SMEs should provide the short ,medium and long term loan
facility including the leasing, leanding and risk sharing
and other all possible schemes.
B. Lending Modes
1) The minimum loan providing period should be 4-5 years
2) The grace period should be 01 year
3) In case of any loss recovery should be in
installments
4) Lending should be on competitive basis.
2.For Government
(Establishment of Funding Schemes)
The key recommendations for the government are that to
establish the funds for enhancing the competitiveness of
SMEs in Pakistan.
A.Equipment Installation lending Funding Scheme
Government start a guarantee equipment installation funding
scheme from which government create a guarantee fund for
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SMEs and SMEs secure a lending chance from the financial
institutions on behalf of the government to take at least
50% loan with the government.
B. SMEs Development Fund
Government develops the SMEs development fund to subsidize
the projects carried by social and welfare organizations,
research institutions to enhance the SMEs compositeness.
C. SMEs training Fund
Government create a fund for the SMEs training for
developing the skills of the SMEs like the salary management
of the employees, material management, quality management
etc.
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We wrote the above recommendations with the help of our H.O.D Mr.Mushtaq
Bibliography
BooksResearch methods for businessBy, Uma Sekaran
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NewspapersThe Daily DAWN The NEWSThe NationThe Pakistan Observer
Workshops, Seminars & ExhibitionsSMEs & Synergism Conference at Marriot Islamabad DAWS Exhibition “All About Life Style”
Internet www.smeda.org.pkwww.adb.orgwww.dailytimes.com.pkwww.pdg.org.pkwww.pakistanlink.comwww.worldbank.orgwww.sdpi.orgwww.paktribute.comwww.smebank.orgwww.pakboi.gov.pkwww.un.org.pkwww.nation.com.pkwww.comsats.org.pkwww2.uta.eduwww.pakobserver.netwww.smefund.tid.gov.hkwww.islamibankbd.comwww.ilo.orgwww.pakistaneconomist.comwww.nust.edu.pk
RESONS FOR THE RESEARCH DESIGN:
There are number of variables which effect the development of SMEs in several ways. These are;