Importance and Role of SMEs Importance and Role of SMEs

Use of IFC Business Edge™ to improve the performance and Growth of SMEs

Outline I d l f SME i d h i • Importance and role of SMEs in an economy and their status in Pakistan

• International Finance Corporation and its portfolio in Pakistan

• IFC Business Edge™ and its potential role in the growth and performance of SMEs in Pakistanand performance of SMEs in Pakistan

Importance of SMEs

• SMEs play a key role in the development and growth of any

Countries Employment Sales/GDP/ Industrialdevelopment and growth of any

country

• SMEs create employment and new

output

USA 53 % 47% of total sales• SMEs create employment and new

job (in the U.S. 60-80 % of net new jobs are created by SMEs)

Pakistan 78 % 30 % of GDP

EU-27 67.4 % 55 % of total sales

• Nurseries and breeding ground for tomorrows corporations

total sales

India 70 % 45 % of output

• Poverty reduction – Direct buyers of products/services

produced by the poor)Job creation for the poor

Sources:1. Ministry of Micro, small and medium enterprises 

Government of India annual report 2009‐102 Eurostat 2009 10– Job creation for the poor 2. Eurostat 2009‐103. US Small Business Administration4. SMEDA and Economic Survey of Pakistan

Importance Of SMEs (Cont.)

h fUSA Pak EU‐27 India

Population (in millions) 310 170 501 1188

Share of SMEs 

Population (in millions) 310 170 501 1188SMEs (in millions) 23 3.2 20.7 26SMEs as % of total business units 99.70% Over 99% 99.80% 99.50%Micro‐enterprises as % of total SMEs Over 90% 91.80%SMEs as % of the population 7% 2% 4% 2%

Micro‐enterprise:‐employing less than 10 peopleSources: Ministry of Micro, small and medium enterprises Government of India annual report 2009‐10Eurostat 2009‐10

p p y g p p

U.S. Small Buinsess AdministrationSMEDA and Economic Survey of Pakistan 2005 

Countries % of People want to become

Entrepreneurial Culture

Countries % of People want to become entrepreneurs

Europeans 45%pChinese 71%Japanese 39%USA 61%USA 61%Pakistan: SME Policy 2007 mentions Pakistan as a society of job seekers

Why entrepreneurial culture is important for economic growth and development?

j

What can be done to inculcate this culture in Pakistan?

Status of Women’s Ownership of SMEs

C t i % h i Countries % share in the SMEs

EU 35.9 %

• For any society to achieve real progress active participation of both men and women is critical in every

h f h i i l di

USA 28.7 % of all non-farm

sphere of the society including entrepreneurship

non farm businesses

P ki t 3%

• What can be done to increase women’s participation in entrepreneurship?

Pakistan 3%

India 13.83 %• What policy/regulatory changes,

support mechanisms and synergies will be required to promote women entrepreneurship?

Some Indicators of Doing Business in PakistanIndicators Global ranking (183

economies) How Pakistani economies) How Pakistani cities (13) compare globally

Number of procedures to start a business All 13 cities (10 procedures)

132All 13 cities (10 procedures)

Days to start a businessIslamabad (16 days)

71

Cost to start a business 89Cost to start a business 89

Cost to register property 119

Cost to export 7

Cost to import 13

Days to enforce a contract 124

Source: Doing Business in Pakistan 2010 (A co publication of the World Bank and IFC)Source: Doing Business in Pakistan 2010 (A co-publication of the World Bank and IFC)13 cities: Faisalabad, Multan, Lahore, Islamabad, Sheikhupura, Gujranwala, Sukkur, Peshawar, Karachi, Rawalpindi, Sialkot, Quetta and Hyderabad

Definition of SMEs in Pakistan

•Definition:– Employment size 250

Paid up capital up to Rs 25 million

Microenterprises in Pakistan

– Paid-up capital up to Rs. 25 million

– Annual sales up to Rs. 250 million

Over 90 % SMES employee less than 10 people

93 % SMEs have annul turnover

• Key Questions?– Is there a need for separate

93 % SMEs have annul turnover of less than Pak-Rs 1 million

96 % SMEs are owned and definitions for micro, small and medium enterprises to have targeted support services for each?

managed by one individual as a sole proprietor

– Do over 90 % of microenterprises need special attention?

Key Factors which have an Impact on Entrepreneurial Culture and SMEs

• Regulatory framework (policies •One stop shop for business registration and licensing with reduced• Regulatory framework (policies,

procedures and regulations)

• Physical and technological infrastructure

registration and licensing with reduced number of procedures

•Business incubators and business parks for women entrepreneursPhysical and technological infrastructure

• Access to finance and investment

parks for women entrepreneurs

•Entrepreneurship as part of the formal and technical education curriculum and promotion of business

• Availability of skilled and educated workforce

role models

•Strong linkage between industry/businesses and educational/technical institutions

• Availability of relevant and affordable BDS services

educational/technical institutions

•Close collaboration and synergies between SME support organizations

• Business management and entrepreneurship training

•One stop shop for information about BDSPs

International Finance Corporation

Our Vision and Mission• Our vision is that people should have the opportunity

to escape poverty and improve their lives.

Mission:

T fight t ith i d f i li • To fight poverty with passion and professionalism for lasting results. To help people help themselves and their environment by providing resources, sharing y p g , gknowledge, building capacity, and forging partnerships in the public and private sectors.

Products and Services1. Investment services include:

L • Loans • Equity finance• Intermediary services

Ri k d• Risk management products• Local currency finance• Trade finance

2. Advisory Services• Access to finance• Corporate advice• Environmental and social sustainability• Investment climate• Infrastructure advisory

Investment Portfolio in Pakistan

39 projects with outstanding portfolio of US$ 566 million • 39 projects with outstanding portfolio of US$ 566 million in:– Banking– Microfinance– Other private sector businesses

• 9 new projects with a total investment portfolio of US$ 139 million in the pipeline

Advisory ServicesObjectives: Design targeted, innovative programs aimed at enhancing, strengthening and developing the following focus areas:

Access to Fi Corporate Finance Corporate

Advice Investment Climate Infrastructure

Advisory• Credit

Information Services

• Industry DevelopmentServices

• Bank Advisory Services

• Housing

• Corporate Governance

• Business Edge (SME Management Training)

Gender

• Business Regulatory Reform

• Doing Business Better

• Public-Private Partnership

• PrivatizationFinance

• Leasing

• Microfinance

• Gender Entrepreneurship markets

• Access to Business Services

• Alternative Dispute Resolution

• Industry-Specific Policy Reform

• Privatization

Services Policy Reform

Business Edge products and servicesproducts and services

Business Edge™a world‐class training system setting new standards for 

b i i i i d l i ibusiness training in developing countries  

Mi i B i Ed ™ i i th b i f dMission: Business Edge™ aims to improve the business performance andcompetitiveness of firms and individuals, and to create jobs in developingcountries. This is achieved by strengthening the management skills of SMEsand middle managers of larger firms providing them access to Business Edge’sand middle managers of larger firms, providing them access to Business Edge spractical training solutions.

Values: Excellence, Commitment, Impact focused, innovationValues: Excellence, Commitment, Impact focused, innovation

Business Edge™ Outreach & ImpactMIDDLE EAST 

(2005)

Impact at Individual Level

• 79 % of trainees improved performance

EAST ASIA (2003)ChinaVietnamLaosCambodia

(2005) IraqYemenEgyptJordanAfghanistanPakistan

LATIN AMERICA  (2008)

SOUTH ASIA (2009)

India(2009)

at work (Yemen 2008)• 64% of trainees introduced new managementpractices at work (Vietnam 2007)

Pakistan

MadagascarCameronSenegalNigeriaUganda

HaitiBoliviaHonduras 

Sri Lanka

KenyaGhana

Impact at Firm Level

AFRICA (2008)UgandaChadRwandaDRCGuinea

Ghana

Impact at Firm Level(MobinilValue Chain Training 2008)

• 62 % of firms improved planning (Business Plans)• 42 % of firms improved at least four business

Some Outreach Indicators•Over 135,000 BE training seats achieved

59 % of which in IDA & frontier countries26 % in Yemen & Iraq

behaviors• 100% of firms improved delegation skills anddeveloped specified employee tasks

q• 22% Female participation• 91% Satisfaction rating• 340,000 BE workbooks sold in bookstores (Vietnam)• 170 Certified trainers & 30 Franchised training firms

Business Edge Workbooks and Training Manuals

38 training manuals and 37 lf d kb k

ChineseVietnamese

self-study workbooks on:• Human Resource Management, Fi & ti

Lao•Finance & accounting, •Marketing management, •General and operations management

Urdu

Arabic

Khmermanagement•Personal productivity skills

Benefits of Business Edge™

• Practical, localized and easily customized• International content at local prices in local languagep g g• Address key management issues and gaps• A unique methodology transferring directly applicable knowledge to

the workplace and generating consistency in deliveryA h i f T i i N d A t t T i i • A comprehensive process from Training Need Assessment to Training Impact Assessment including quality control

• Delivered by local professional trainers• Focused and concise, (1-2 days)Focused and concise, (1 2 days)

Improves Management Performance

Product quality assurance

• Product development– Licensing of best international training materials– Use of local content experts and consultants– Develop local training capacity (training providers and

trainers)

• Product delivery– Trainer assessment – Trainer certification

BE Approach Objective

Tools and activities Providers and partnersTools and activities•High quality BE training modules and workbooks•Capacity building and licensing of

Training Providers:•Private sector training providers•UniversitiesGovernment entities Capacity building and licensing of

training providers and trainers•SME toolkit•Customization and localization of

i i

•Government entities •NGOs

Partnerstraining content•Business development/promotion •Partnerships and networking

Partners•Investee clients•NGOs/MFIs•Chambers of commerce Donors and development organizations•Donors and development organizations

•Government entities

Example of Tailored Solutions for Corporate Clients

Telecom Sector: B-planning delivered to 15 IFC/BE & A dit d T i i Mobinil distributors. Leadership skills to 205 sales

& finance managers. Selling skills training to 500 sales reps.

FMCG Sector: 50 owners of Unilever’s SME

Accredited Training Providers

Training Needs

IT Sector: Marketing training delivered to 60 of Microsoft’s PC Assemblers; B-planning delivered

FMCG Sector: 50 owners of Unilever s SME distributors trained on leadership skills.

Training Needs Assessment

Customized BE to 15 distributors.

Pharmaceutical Sector: Leadership training delivered to Novartis’s 100 pharmacists; soft skills & marketing to 50 distributors.

Customized BE Content

Q lit C t l skills & marketing to 50 distributors.

Financial Sector: Pricing & Marketing training delivered to 300 SME clients & non clients of BankMuscat & to 20 staff members

Quality Control

Training Impact

Media Sector: B-planning training delivered to contestants of MBC’s “The Investor” reality TV show.

Impact Assessment

IFC-SCB: Evidence of Success in Pakistan

• 69% reported direct application of business knowledge gained from the • 69% reported direct application of business knowledge gained from the workshops;

• 56% reported improved financial reporting, budgeting, and financial decision making;g;

• 20% increase in the number of businesses preparing regular cash flow statements;

• 60% reported changes to company structures and systems to improve customer care;

• 20% of the participants had irregular credit histories but by the end of the programme, out of the 20%, 71% had cleared or decreased their outstanding amountsamounts.

BE Pakistan

• 5 BE licensed training providers

• 26 local trainers trained

• 18 training modules customized and translated into Urdu

• 3 self study workbooks customized and translated into Urdu

• Delivered 492 training seats

• We at IFC are very pleased to be part this initiative the 4th SME forum 2010 as one of the sponsors. I believe such forums and efforts will lead to developing a SME friendly environment in which both men and women entrepreneurs thrive leading to economic growth, improved living conditions and overall reduction of poverty in the country.

IFC B i Ed i h t d l i d t hi t t d • IFC Business Edge is here to develop synergies and partnership to promote and enhance the performance of SMEs in Pakistan through its management skills training products and services.

• Moreover, we have business leaders, business experts and representatives of SME support organization in this forum today and they are going to present their papers, expert opinions, views. I hope their deliberations will lead to practical solutions, policy changes , relevant and more effective support initiatives to achieve the growth and success of SMEs in Pakistan.

•

Thank Youa ou