The Interest Rates Have Risen Sharply

Interest rates have risen sharply, but SMEs are borrowing more from banks. However, they are putting additional funds into operation to stay at sea, not to improve their abilities. SMEs generated net debt of Rs111 billion in the eleven months of 2018-19, and according to the Central Bank of Pakistan (SBP) SMEs had a working capital.

Sharp increase in working capital

Their net borrowing was Rs 25 crore from 2017 to 18, and working capital was slightly less than Rs 18 crore. The sharp increase in working capital is due to the increase in operating costs of SMEs as the rupee is weak and inflation is rising. Economic growth slowed to 3.3 percent last year from 5.5 percent last year. It is expected to grow at a much slower rate this year at 2.4pc. This means that SMEs need to make more efforts to strengthen sales.

The SBP expects inflation to rise by an average of 11 to 12 percent this year. The tightening of interest rates continues to check inflation. In addition, SBP faithfully implements the flexible exchange rate regime determined by the market under strict supervision of the International Monetary Fund (IMF). Therefore, the Rupee may decline further as the external imbalance has not disappeared. All this means that the working capital needs of SMEs outstrip the funding requirements for fixed investment.

Chinese SMEs with better management skills and advanced technology are expected to start operations in Pakistan. Local SMEs will face even more intense competition in the near future. In this situation, capacity building and technological development are key to survival. However, there are no banks that offer enough loans to SMEs for fixed investment. Chinese SMEs are expected to compete with Pakistan.

The time has come for the government to introduce a long - awaited SME policy. However, the UK-funded Pakistani company Karandaz has secured $ 23.7 million from overseas to invest in the current financial year, and IFC will invest $ 2.5 million to support technology-led start-ups is. These will help prepare small businesses for future growth.

Economic growth increase

But will interest rate cuts and slowing economic growth increase the number of bad loans (NPLs) to hinder the generous distribution of local bank lending among SMEs? Can the small business or whole business class run smoothly as the political confrontation grows? The NPL as a percentage of infection or as a percentage of total bank loans is the highest among SMEs, 16.4% of March 2019 and 16.1% of infamous agricultural sectors. Therefore, the banking industry in general needs to be cautious about long-term, fixed investment, particularly in SME loans.

The banking industry is expected to continue to provide short-term working capital for SMEs. During the first 11 months of 2018-19, they lent less than Rs 12 billion to SMEs for a fixed investment of Rs 15 billion in 2017-18. If interest rates had not risen so fast in 2018-19, SMEs would have borrowed more under this head. If banks were not afraid to build up in the NPL, they would have put additional funds on them. During the first 11 months of 2018-19, the bank's net assets to SMEs under trade financing also stagnated.

It also reflects how difficult it is for small businesses to borrow from banks due to high interest rates and how economic growth affects profitability. During the current financial year, SBP will struggle to contain inflation and interest rates will remain higher as the economy slows down further. Therefore, the problem of the SME sector is still far away. In the present situation, SMEs will lose their positions when they enter Pakistan.

Even survivors can be constrained in many cases. Therefore, SMEs need to strengthen their capabilities and innovate their business models. On July 11, a Chinese company delegation met with Prime Minister Imran Khan and was confident to invest $ 5 billion in Pakistan in the next 3-5 years. The delegation represented the fields of construction, machinery, glass, electricity, power, transportation, IT and technology.

As promised funds begin to spill, many SMEs are expected to compete with SMEs in Pakistan after they become part of the upstream and downstream industries of the China-Pakistan Economic Corridor (CPEC) project. The SME sector needs the necessary adjustments. The time has come for the government to introduce a long-awaited SME policy. Business lobbies are already attracting government attention to this matter.

SMEs to compete with China

The key objective of this policy is to enable SMEs to compete with China, India and Bangladesh to contribute to export growth. Another key goal is to help SMEs adopt a forward-looking approach to catering to local markets while maintaining a view of the changing dynamics, quality and consumer choice of urbanization. Most SMEs currently operate in manufacturing and trading, and some are engaged in IT and online business.

There is a need to promote SMEs dedicated to agricultural production and to promote services in the service sector. Especially IT related business. The Federal Board of Revenue (FBR) has stopped all sales tax-registered businesses from discontinuing sales exceeding Rs50,000 (Rs) without receiving a copy of the buyer's CNIC. 

Registered SMEs are afraid to lose business to unregistered competitors, unlike large companies where gray area operators can do this without fearing to give up their brand sales. How wisely will FBR point out that the solution to this problem can be crucial to the growth of SMEs.

Dream of clean cotton

The dream of clean cotton will be difficult to grasp because of the continuing lack of political will of the government, the discouraging attitude of industrialists, and numerous other factors. The problem of cotton pollution has plagued this sector for decades and has caused losses to the nation's excavators and farmers, which cost billions of Rupees per year. I have not succeeded in an attempt to deliberately try to correct the situation. Because the country does not fulfill the standards, we have to pay a lot of money to a foreign consultant to certify cotton export consignment.

In 2002, the Cotton Standards Institute was established to standardize the clean side and later to certify its quality in international markets where minor pollution caused Pakistan Lint to be treated as a grade 3 agricultural product. Growers lose more than Rs 12 crore (Rs) a year because impure lints bring in lower prices. But the proposal of political leaders to turn all funds into orange line metro trains and to train selectors has never progressed.

To encourage growers and careers to produce clean lint, the government proposed a premium. Through the cooperation of the fabric shredder, growers had to pay Rs50 per week (40 kilograms) and pay Rs30 (Rs30). Pakistan's Trading Corporation has promised to buy pure agricultural products if Miller does not do so.

This project occurs two years later

Depending on the requirements of the project, the cotton was moved to an open trolley unit, but those who had dinner complained that the grower had to weigh the cotton by mixing water. Rizwan Chaudhry, ginner, says that it is difficult to determine the moisture percentage of the raw cotton surface when in loose form without packing in the bag. He also insists that Miller does not pay the promised premium. The project revived for two years in 2006, with the federal and Punjab governments paying equal premiums.

Lint is contaminated for the first time in the collection, storage and transport phases. It has traditionally been chosen by untrained women, the main source of pollution. The plastic bags and silk dupatta yarns used to collect the buds are blended with the produce of the flowers as well as the flowers that are pulled out of the hairs and impurities in the spinning, dyeing and subsequent processing.

Leaf pieces, immature hollow horns, stems, flowers, sticks and weeds, garbage and dirt are also part of the produce at the storage and transport stage. To avoid this problem, the Punjab Ministry of Agriculture prepared a proposal for a training picker and offered special clothes to wear when picking cotton horns. Trolleys shall also be provided for the transport of products to the production unit or market.

According to the plan submitted in 2017, at least 416,000 female pickers had to be trained by a master trainer among female officials in the department. However, this proposal has never been out of political leadership. The general impression is that the government is clinging to the Orange Line subway train and raising funds for other projects across the state.

The paper did not sell a penny for the project, and the related documents sit on a bottom-up table that collects dust." "Cotton growers could not even provide a gray cloth on a shelf or tractor trolley to prevent financial losses of more than RM12 billion. It is a separate story that the state loses due to reduced imports due to the export of filthy lint.

According to him

Pure cotton was selected through its own resources, but producers were disappointed if the sawmill did not pay the right price. Despite these difficulties, the expansion wing of the department is seeking intervention and support for cotton-free crops in 2019-20. In a letter to all deputy ministers in the cotton growing area, Director Anjum Ali Buttar asked women executives to educate pickers and update their knowledge of other new agents.

While female farmers and on-site assistants are maximizing participation and awareness for this purpose, each female officer has been assigned to perform at least 15 training sessions during the ongoing cotton season. The deputy director was asked to submit the latest training schedule and orientation seminar schedule by July 31.

In the meantime, standard operating procedures for picking, storing and transporting cotton have been prepared and distributed to the relevant authorities. But since everyone is waiting for the fund to withdraw, nothing has been done so far, and official consensus on development has been revealed.
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