The Role of Commercial Banks in Production of Small and Medium Enterprises (SMEs) in Pakistan

21 Pages Posted: 14 Sep 2014

See all articles by Sehrish Rasool

Sehrish Rasool

Isra University

Javaid Ali Dars

Mehran University Institute of Science, Technology and Development

Beenish Shah

Isra University

Date Written: December 31, 2013

Abstract

The research paper examines the participation of commercial banks financing fund to production level of SMEs in Pakistan. The scholar reviews related to this research work suggests that SMEs contribute more than half of the economic establishments in economies of the world; and so as SMEs in Pakistan add their massive amount of contribution in national economic growth and development. Being as an economic growth catalyst for economy of Pakistan, this sector is under negative macroeconomic conditions that result into negative economic growth since year 2009. Besides other macroeconomic variables, market fund deficiency has been resulting into lack of access to finance and hence hampers the SMEs production. Whereas, access to finance available to SMEs in-terms of working capital finance, trade finance and fixed investment, is limited only through commercial banks than other sectors of fund arrangement. With the major data sources from State Bank of Pakistan publications and Ministry of Finance of Pakistan, the analysis reveals negative growth in private sector financing to SMEs from all scheduled banks. So as, the negative marginal contribution of Private, Public, Islamic and specialized banks to SME financing exclusively relates with the declining SME national output. The research concludes that commercial banks are core source for SME borrowing and hence rationally affect the production of SMEs in terms of working capital requirement. A fiscal policy adjustment along with monetary and capital market innovations is highly desirable to avoid SME sector vulnerability in global and regional competitiveness.

Keywords: Economic Growth, Development Finance, SMEs, Commercial Banks, Banking Advances, Money Supply, Central Bank, Fiscal Policy, Monetary Policy

JEL Classification: C02, D52, E01, E22, E44, E51, E58, E66, G21, G23, G28, H24, H25, H32, L52, O23

Suggested Citation

Rasool, Sehrish and Dars, Javaid Ali and Shah, Beenish, The Role of Commercial Banks in Production of Small and Medium Enterprises (SMEs) in Pakistan (December 31, 2013). Available at SSRN: https://ssrn.com/abstract=2495796 or http://dx.doi.org/10.2139/ssrn.2495796

Sehrish Rasool

Isra University

Hyderabad, Sindh
Pakistan

Javaid Ali Dars (Contact Author)

Mehran University Institute of Science, Technology and Development ( email )

Mehran University, Jamshoro, Sindh,
Jamshoro, Sindh
Pakistan
00923003358570 (Phone)

Beenish Shah

Isra University ( email )

Hyderabad, Sindh
Pakistan

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