It is considered that the backbone of developing economies is the small and medium
enterprises (SMEs). By using low capital cost they provide jobs, economic growth and reduction
in poverty (Ayanda & Laraba, 2011). It is interested to note that 95 percent firms in many
countries consist of SMEs (Chiao, Yang, & Joseph Yu, 2006). Their contribution in the global
economic growth is around 80 percent (ACCA Global Report, 2010). The growth and fortune of
any nation is mostly depending on the expansion of its small and medium industry. We cannot
overlook the large scale contribution of big corporation and other economic variables in the
development and prosperity of any nation but the role of SMEs in GDP growth is widely
accepted. SMEs are the vital sources for any country for enhancing the entrepreneurial
environment, employment generation, boosting income, innovations, development of skilled any
semi-skilled human capital, reduction in poverty and improve the standard of living. In the
presence of SMEs in the market the culture of completion and equal distribution of wealth
enhanced.
The markets which has less SMEs or they are not functional the environment polluted
with extreme or near extreme form of monopoly and oligopoly where one supplier or few
suppliers control the market and there is no space for completion and no benefit for the buyer.
This result into the unequal distribution of wealth in the society and no revenue generation for
the government, and SMEs create an environment where there is fair completion, revenue
generation for government in the form of taxes and flow of wealth to general public. According
to SME Bank (2015) SMEs are boosting and helping economic activities by linking the semi
structural rural regions industry with the structured and organized of urban regions. SMEs plays
a significant role in developing the world‟s rapidly growing economies like china, Korea,
Taiwan and japan (State Bank of Pakistan, 2014). These small and medium enterprises push the
economic activities at the very grass route level and then by aggregating the whole sector
performance it cannot be completed by other giant corporations. Now a days India and other
countries like South America concentrating to enhance and encourage their SME sector by
making new policies and giving special offers to SMEs. Keeping in view the importance and
significant role played by the SME sector in the economy, Government of Pakistan along with
Sate Bank of Pakistan focusing on the development of this industry. Both work on the
reestablishment and major changes in the working and structure of key institutions like SMEDA
and SME bank that shows their efforts to encourage this sector.
As being small and medium size enterprises these companies faces many challenges that
hinder their growth. The big challenge of these SMEs is the access to finance, being small and
medium companies they cannot have access to the formal and big financial markets where they
can go for equity or bond options, stated by West (2010) in the Economist newspaper. Lack of
finance becomes the greatest challenge in the formation, sustainability and growth of the SMEs.
These companies are now spreading in all regions of Pakistan in the shape of cottage industry,
import and export companies, trade plazas, shopping malls, industrial parks and small business
units. When we look at the past there are many flourished SMEs in all over Pakistan especially in
the major cities because of the availability of skilled and semi-skilled labor, technology,
managerial staff, financial accessibility and the most important the entrepreneurial culture all
over in Pakistan. Along with the above mentioned facilities these companies have the marketing
skills, culture of innovative and customized products, customer loyalty and fair competition
among the suppliers. The fluctuating political and economic circumstances of the country makes
it difficult and in some areas impossible to sustain and access to basic facilities for these SMEs,
especially those who situated in the small cities and remote areas. These remote and rural regions
have less information and knowledge that make it difficult to reach the desired objectives.