Understanding the characteristics of contribution of small businesses at local level and its affect overall economic growth is an essential factor. The word SME originated in the world of Economist, denoting firm categorized on the foundation of a set of criteria including employment size and the value of their assets. The size classification varies within regions and across countries relative to how big the economy and its endowments. It is very important to see that there's a minimum as well as a maximum size for SMEs.

Small Medium Enterprises (SMEs) play a really significant role in the well being of any economic system. This role assumes still greater importance if the economies come in transition or fit in with developing countries. Depending on a report by the Economist Intelligence Unit Survey economic growth (averaging 4.6% annually) has largely been because of the SMEs. While there can be a long set of benefits the SMEs offer, the weightiest is considered to be the freedom your small business offers to the entrepreneur to experiment and devise and take risks. It thus generates entrepreneurial zeal and a desire for personal achievement which motivates small investors and professionals. Depending on the exact same Economist report, almost half those surveyed experienced businesses for private fulfillment. This urge for fulfillment then paves the way for the success of those small and medium businesses which provide boost to the entire growth engine of any economy.

The benefits of SMEs aren't confined to the developing world only but are predominantly visible in the developed world as well. Small and Medium Industries and small company community are the backbone of Europe's economy. There are more than 23 million SMEs in the European Union, which represents 99% of European undertakings and are accountable for 60% of Europe's GDP. They're also Europe's main job creators as they employ over 100 million people.

For almost any economy, SMEs with high turnover and adaptability play a significant role in reducing sector imbalances for the reason that economy. Moreover, easy entry and exit of SMEs make economies more flexible and more competitive. Because of this easy entry and the resultant escalation in the number of small and medium businesses, a competitive market pressure is established which dilutes monopolies and helps increase quality of products and services.

Interestingly, all of the current larger enterprises have their origin in small and medium enterprises but downsizing, layoffs and mergers have made jobs in large corporations more risky and less attractive to employees. The beneficiaries of this are small companies as more creative talent is normally keener to become listed on smaller outfits where it might have a much better chance to utilise and explore its potential.

Smaller businesses also are apt to have closer customer relationships and focus on the client needs more effectively and promptly. Smaller businesses also provide better position with their owners to take quick decisions on innovation, pricing and other business strategies which render useful competitive advantage.

SMEs often employ poor and low-income workers and are now and again the sole supply of employment in poor and rural areas. They're usually wide spread and touch base to a vast population of a country even yet in remote areas. This role of SMEs is very important in the developing countries where there's lot of poverty.

Pakistan is one country whose economy has benefited a whole lot from SMEs. According to the Small and Medium Enterprises Development Authority (SMEDA), Ministry of Industry report, SMEs constitute nearly 90% of all the enterprises in Pakistan, employ 80% of the non-agricultural labour force and their share in the annual GDP is 40%, approximately. With these statistics, it will not be unjust to state that SMEs are the rear bone of Pakistan's economy too. Ministry of industry Government of Pakistan has helped the reason for SMEs to a good extent yet you will find problem areas which require constant attention of the the Government.

Financing is one of many problems small businesses face. For SMEs, financial resources tend to be limited which regularly force the companies to pick solutions which seem to be cheap initially but later the hidden costs surface during various stages of execution leading to financial crises. Higher costs of R&D (Research AND Development) and training are issues where SMEs find difficulties especially in the face area of limited capability of development and production.

For their small size, sme
usually lack management capacity and their ability to get into and analyse information is very weak. They can not afford costly support services like financial, human resource, legal and training etc. At a far more strategic level, SMEs do not have the ability to influence the entire business environment inside their favour as larger firms possess. As well as assistance supplied by SMEDA, SMEs themselves have to take measures to handle the problems. They must develop strong management teams and adopt a culture of learning and sharing of knowledge with other SMEs. For financial assistance, SMEs have to count on banks and have to locate approaches to overcome banks' shyness to finance smaller businesses.

Many studies have now been conducted during the last 2 decades about them of sme
Role in National development. All proved that Role of SMEs in National Development, Employment generation and eliminating the poverty is undeniable.

(By Muhammad Ahmad Sheikh (Freelance Broadcaster/ journalist / Incharge R & D, the Sheikhupura Chamber of Commerce & Industry)

I am an International Broadcaster/ Journalist, served 36 years in a repute Public Broadcasting Organization and wrote numerous articles and reports for National Newspapers and magazines. Being truly a sports journalist I covered World cup cricket 1999 live form UK. As a commerce Reporter and producer, I was awarded tow gold medals. My article are simple, precise and easy to understand. My section of interest is Business reporting, preparation of Research reports, covering of sports events with the country and Abroad. Being an educationist I like to disseminate my knowledge to the young generation.