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The role of small and medium-size enterprises (SMEs) in the socio-economic stability of Karachi

Author

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  • Qureshi, Javed
  • Herani, Gobind M.

Abstract

Purpose: The purpose of this study is to identify the core constraints in financing of SMEs in Karachi that impede their growth and even undermine their liquidity and financial position. Literature review: The problems and constraints are faced by small and medium-size enterprises (SMEs) in Karachi with regard to access to financing. Along with Karachi, the other cities and areas in Pakistan are facing alike problems. Methods: This study is exploratory in nature and includes quantitative and qualitative data. Data was collected through well designed questionnaire from a sample group of 500 respondents of SMEs in Karachi. In addition, one-on-one formal and informal interviews were also taken from various businessmen and bankers. Conceptual Model: A conceptual model/ framework were devised to test and ascertain the statistical validity of the study. It includes dependent variable SME financing, and independent variables, financing constraints, functional/ internal barriers, government support and incentives, and SMEs growth and development. Findings: The findings revealed that most people/ SMEs feel reluctant to borrow from banks and financial institutes because of stringent collateral requirements, high mark up, lengthy and convoluted documentary process, and to some extent malpractices at banks and financial institutions. The preference of the lending institutions is to finance the large-scale corporate sector. The results of the data analysis confirmed profound relation of dependent and independent variables and accepted the hypotheses. Conclusion: A substantial portion of SMEs possesses great potential of growth. There exists unending opportunities to tap, while banking and financial system in Karachi and Pakistan enjoys enough liquidity but SMEs are unable to enjoy financial leverage because of various financial constraints, lack of support by government institutions and policy makers, and internal weaknesses and flaws of SMEs in managing their businesses. Finally recommendations were lodged.

Suggested Citation

  • Qureshi, Javed & Herani, Gobind M., 2011. "The role of small and medium-size enterprises (SMEs) in the socio-economic stability of Karachi," MPRA Paper 35624, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35624
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    Cited by:

    1. Dr. Waseem Ul Hameed & Javed Iqbal & Dr. Nadeem Maqbool & Dr. Hisham Bin Mohammad & Shazma Razzaq, 2020. "The Impact of Human, Structural, and Relational Capital on Product Development Performance in Manufacturing Organizations in Indonesia: Mediating Role of Organizational Learning Capabilities and R&D R," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 2(2), pages 56-68, December.
    2. Yung Chang Wu & Yenchun Jim Wu & Shiann Ming Wu, 2018. "Development and Challenges of Social Enterprises in Taiwan—From the Perspective of Community Development," Sustainability, MDPI, vol. 10(6), pages 1-17, May.
    3. Raheela Maula-Bakhsh, Abdul Raziq, 2018. "Relationship between Servant Leadership and Subjective Well-Being: Evidence from Manufacturing and Services based SMEs in Pakistan," Journal of Management Sciences, Geist Science, Iqra University, Faculty of Business Administration, vol. 5(1), pages 62-85, March.
    4. Ataul Karim Patwary & Fauzan, 2020. "The Impacts of Human, Structural and Relational Capital on Product Development Performance in Manufacturing Organizations in Indonesia: Mediating Role of Organizational Learning Capabilities and R&D R," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 2(2), pages 69-78, December.
    5. Lara Al-Haddad & Muhammad Safdar Sial & Imdad Ali & Rahmat Alam & Nguyen Vinh Khuong & Thai Hong Thuy Khanh, 2019. "The Role of Small and Medium Enterprises (SMEs) in Employment Generation and Economic Growth: A Study of Marble Industry in Emerging Economy," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(6), pages 174-187, October.
    6. Ammad Zafar & Sadaf Mustafa, 2017. "SMEs and its Role in Economic and Socio-Economic Development of Pakistan," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(4), pages 195-205, October.

    More about this item

    Keywords

    Small and Medium enterprise; constraints in financing; Socio-economic Sustainability;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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