Small and medium enterprises are the backbone of Pakistan’s economy. They are an efficient user of the scarce resources and has better linkages with other sectors of domestic economy. However few researcher studies examined their development, challenges and future prospects. Therefore the aim of this paper is to examine and analyse the structure, growth, impact and problems in financing SME issues affecting SME sector and suggest a strategic framework for enhancing the competitiveness of Pakistan SME in regional and global market. The major conclusion drawn from this paper were the SME sector in Pakistan is facing many problems and challenges both domestic and better prospects in marketing their products at international market. This paper recommend some measures as a positive step towards addressing the above problems and challenges so as to guarantee a sound future for SME in Pakistan.