Full upon bunch of factors like: resources,

Full length term paperFinancial inclusion and relevant obstacle in SMEsAbdul Moeed Butt, Moaaz Zulfiqar and Shahzaib SaleemUniversity of Management & Technology, SialkotKeywords: Financial inclusion, Demographic part, General information & type of the firm and Future growth on, SMEs, Pakistan.Introduction Industrial performance of Pakistan has been consistent decline from the last few years. This decline leads by decrease in the job creation and increase in the countries trade deficit. Pakistan trade deficit: FY 2016-17 $32.578 billion whereas in 2016-16 $23.898 (Business recorder). Problems have manifested in economies outfalls which includes factor increasing youth unemployment, lack in the education and health and the ever increasing level of poverty. SMEs are based upon bunch of factors like: resources, regulatory frameworks, organizational performance and many more these factors are different cut-off values in different economies. Developed countries like UK, Germany and USA etc. They have much higher cut-off value for annual reserves and paid up capital as compared to developing countries.Economic survey of Pakistan 2005, show total running business are 3.2 million in which share of SMEs are more than 90% of all private businesses and employ nearly 78 percent of the non-agriculture labour force (PBS 2011). SMEs contribute more than 30% in national GDP. The sector represents 25% of exports is manufactured goods whereas value added manufacturer are 35%. Estimated engaged SMEs are 53% with retail trade, wholesale, restaurants and the hotel sector. Whereas 20% of SMEs activities are related to establishment of industry and service provision covered by 22 % (PBS, 2011). With the great contribution of SMEs to economic employment creation, income generation and remove poverty the Government of Pakistan put their effort for the development of SMEs like they make Small & Medium Enterprises Development Authority (SMEDA) in October 1998 for development of SMEs.In Pakistan financial inclusion is the main issue for the growth of SMEs. Before half of decade small firms were totally enable to have financial resources. Even now, financial institutes in Pakistan being a lot concerned for providing finance but due to less awareness around the SMEs they not enjoying the benefits. Moreover, so many factors influenced to SMEs by cause of finance or less capital. Importance of certification playing vital role for firms export, non-certified firms getting behind with low profit ratio and more circumstances. Due to lack of finance Pakistan SMEs less innovative as compared to other countries. Other than small & medium enterprises development authority, State Bank of Bank Pakistan (SBP) also developed the Refinancing scheme for firms but SBP directly not deal with the public, commercial banks are mediator for this scheme. For achieving the performance development and growth of the SMEs awareness sessions should be held and government have to take part for Pakistan SMEs betterment. Literature reviewIrfan Saleem. (2011) concluded that economies who’s SMEs can produce effectively if they have the certifications like ISO 9000 whereas non-certified SMEs left behind. The result found through questionnaire represent the ISO 9000 certification must be adopted by SMEs for value creation.The study of Hassan, M.  SMEs of Pakistan facing lack of financial resources just because of the banking sector are not establish in rural areas. Around 2 million SMEs are working in Pakistan with 400,000 manufacturing units. Just because of small units their contribution is not dominant in national GDP whereas they are 90% of all enterprises.Iftikhar Hussain. (2012).SMEs are behind from large organization in several ways like, limitation in resources (Technology, Finance, and HRM), partnership between public and private sector can help for the development and growth of SMEs. The result of sample of 72 SMEs shown that progress so far, to reach SMEs development process and enhancement in productivity public and private sector have to be capitalize through mutual strengths. Khattak, J., Arslan, M., & Umair, M. (2011). The result of this study present the current export obstacles for SMEs in Pakistan and the barriers effect the SMEs. The result of structured interview on 25 textile SMEs shows that internal barriers are more influenced than external. Export manager have to be more concerned about export, internal barriers are controllable if possible steps has adapt where 68% are the internal barriers and 32% are the external barriers for SMEs export. Dr. Akhtar, W., Afzal, H. (2013) conducted this study to examine the opinions of SME employees about effects of knowledge management practices on organizational innovativeness and organizational performance. Through Questionnaire survey information receive from SMEs. This is an important study in the context that knowledge management is the key to innovation and SME sector in Pakistan really needs innovative culture in order to compete in global market place. The knowledge transfer/sharing activities are having strong positive affects in development of innovation culture in the SME sector.Ali, S. (2013), research on the SMEs and poverty in Pakistan. The impact of the SMEs on poverty measured by poverty head count ratio for the period 1972-2008. Income inequality, and education expenditure also measured. The analysis done on both short and long run effect of inflation, income inequality and health expenditure. If the factor of poverty squeezed out than SMEs can play important role in the growth of the economy. This also imply that economy policy should be revised in the right of SMEs for support.Haroon, M., Noor, M., Bin, H. (2012). This paper is conceptual based has been written by supposing innovation mediate the linkage between entrepreneurial orientation, firms resources, SMEs branding and firm performance. This paper work describe the role in improving the innovation and firm performance in SMEs.The paper written by Awais, M., Javed, A. (2014). Structured questionnaire survey conducted at Lahore the SPSS software present   The data was collected through structured questionnaire at Lahore by using SPSS software some business use system, hybrid, comparative, ineffective and stakeholder approach to measure performance of the organization but this research show that most of the SMEs calculate their performance by their revenue and sales (81% maintain their revenue record, 19% didn’t maintain revenue record) it is also a factor of performance but people didn’t calculate their profits in regular basis. In SMEs they consider customers for their performance because if customer satisfied with the product and services than company in performing well and customer can also increase the sales of the organization.Objectives of study: How SMEs operations are affected by financial constraints? The Data SetThe paper focuses on one sector of the SMEs economy, those firms that are registered with the registration office, municipality or tax authority. These surveys collect data on registered SMEs activities and are implemented in SPSS software. The formal firms Surveys are conducted using a uniform sampling methodology in order check the financial inclusion and regulatory restrictions. For this study population of the SMEs of Pakistan are selected. The target population for this study cover the all types of SMEs, City Sialkot is taken for the study due to the convenience. Survey is based upon questionnaire in which four sections are asked, demographic part, general information on the type and situation of the firm, financing of the firm, and future growth and obstacles to growth. These four factors help to find the overall position of the firm, during survey many problem we faced, some of SMEs feel unsafe for providing information, and some say this is unconditional to give our personal information, even may of firms was small they have no idea of critical things. In positive review: there were also those firms who were provide information very consistent and appreciate the work. Survey we have done through different channels, by going to firm, sending emails to firms and with the help of friends. Questionnaire is based on 4 factors: 1. General characteristic of the firms, 2. General information on the type on the type and situation of the firms, 3. Financing of the firms, 4. Future growth and obstacle to growth. Figure 1 despite the firm observation by questionnaire survey, where total working firm in Sialkot are 9000 and the target SMEs for survey is 200.  Figure 1 Source: Sialkot Chamber of Commerce (SCCA) Finding and AnalysisGeneral Characteristics of the firms (Demographic part)Figure 2 shows the total number of employees who are working in different firms out of 200 in which 1-9 employees are 21.5%, 10-49 employees are 55.0%, 50-249 employees are 13.5% and more than 250 employees are 10.0%. This indicate 21.5% of employees firm outsource the products and upper than this case firms having their own production units. Figure 3 shows that more of the working firms are Surgical and Apparels which contains 80% and leather firm only consist of 20% this tell that leather manufacturing declined through over the period. Figure 4 despite the annual turnover which shows that 72.5% SMEs don’t know the annual turnover just because of poor accounting and old method of working system. Only 4% are the firms who are earning more than 50 million turnover and rest of the 23.5% SMEs relay on more than 2 million to 50 million. Figure 5 represent the SMEs owners in which 92 out of 200 firms are owned by family or entrepreneurs, the numbers of firms owned by male are more than female respectively 44 and 10.General information on the type & situation of the firmAs shown in figure 6, most pressing problem firms are facing is competition in market cause of regulatory constraints (certification ISO 9001, 2005, and 2008). Only 4.5% (9/200) of SMEs are facing problem of labor or production cost. Whereas, shown in figure 7 and 8, does firms have introduced during the past 12 months. Figure 7 is to improved product or service to the market in which 158 are those who did, only 4 are those SMEs who have no idea about this factor and rest of the 38 SMEs didn’t introduced by intentionally. Figure 8 is about way of selling your goods or services, according to the survey analysis most of the SMEs (91/200) have adopt the new way of selling whereas, 93 are those who has not adopted this factor and only 16 SMEs are those who have no idea of new ways to introduce their goods and services in the market.Figure 8Figure 9 shows the labor cost that SMEs are facing. 66.5% of SMEs are working without their own production units and get the products by outsourcing these are those SMEs who are facing high labor cost, firms with their own production units facing low labor cost. Where figure 10, based on other cost (Material & Energy). The energy problem comes from high electricity bills and 50.5% SMEs use the generators on alternative of electricity to continue their production. 45.5% are remained unchanged and only 4% are those who don’t know about this factor.Figure 11 shows, 21% of SMEs debt are increased as compare to their assets, 33.5% are remained unchanged and 12.5% are those whose debt are decreased because of good trade credit with their clients and rest of the 66 are with no debt. Financing of the firm Figure 12The section now present and analysis that look at some of financing method for firms. Even through the analysis shown in upper chart (Figure 12), represent three way of financing; 1. Internal funds, 2. Bank loans and 3. Other loans. 155 SMEs use internal funds to expand their businesses, and 17 are those who don’t have their own enough funds so they go for alternatives. According to survey report 110 SMEs used bank loans because of knowledge and the idea working of banks, some of the firms (71/200) concerned with the factor of interest as Islamic perspective they don’t feel their selves comfortable with bank loans, and rest of 19 SMEs have no knowledge about bank loan schemes. Other loans get by friends or relatives, 91 firm owners feel comfortable by getting other loans and the reason they shared with us is no maturity limitation and exemption of interest factor, 61 are those who didn’t adopt this financing way because they believe this method can influence/ruin their relationships. 61% of the SMEs use bank loans to continue their business operations and who regularly take loans from bank is mostly complaining about the highest interest rate charged by bank against their loans and 37% of firms feel no change among interest rate because they often take loans after a long period where only 2% didn’t known about this factor because they generate their funds themselves. Mostly the SMEs are provided loans by banks only 51 firms are provided loan by private individuals. What is the size of the last loan, of any kind, that your firm obtained in last two years? Frequency Percent Valid PercentSmaller than 25,000 21 10.5 10.5Rs.25,000 – 100,000 55 27.5 27.5Rs.100,000-1,000,000 91 45.5 45.5Over 1 Million 20 10.0 10.0DK/NA 13 6.5 6.5Total 200 100 100Figure 15Future, growth & obstacles to growthFigure 16, shows a table of average per year growth in term of employee in which 76 SMEs have less growth than 20% and 33 firm have no growth because of less order from customer side and 14 firm become smaller due to the same reason and the rest of the (32/200) others didn’t evaluate their growth of employees so they didn’t know about this factor. And in figure 17, shows the growth of the turnover in which 26.5% of firms have 20% less growth per year and only 9.5% of firms growth is more than 20% per year and the rest of the others didn’t follow the proper methods to analyze their annual growth because of the old methods of doing work they only calculate their profits on monthly basis and most of the SMEs didn’t know about the annual turnover growth.  Figure 1870 SMEs face no obstacles in financing because of the good relations with banks and most of feel interest rate is high in banks which is the main obstacle for financing (45/200) whereas, 24 SMEs have no guaranties for financing from banks and 43 firms don’t know about this factor because of the less business dealings.   Figure 20, shows how much SMEs want to be listed in stock market in next two year and 79 are not sure about to be listed or not because they don’t know about pros and cons of listed company but 65 firms shows their willingness to be listed in next few years because they want more capital to do business in higher level and be the most prominent and best firm. In figure 21, shows obstacles faced by SMEs for becoming listed company is that 96 firms don’t know about the problems including those who want to be listed or not and 38 firms want to be listed but they says our firm is too small and 8 firms facing the expense as a obstacle for becoming listed company. Conclusion  The objective of the paper was to analyse the financial inclusion constraints in Sialkot region Pakistan. First, part extract the information regarding the general characteristics of the firms. Second, to get the general information on the type and situation of the firm. Third, how the firms are financing and last fourth is about future, growth and obstacles to growth.The analysis shows that most of SMEs having 10-49 employees as its medium level of work, due to less innovation and financial problem firms not in position to put their own manufacturing units and hiring employees. All the firms characterise their enterprises as profit-oriented, making independed financial decisions the ratio of many activity of company are surgical manufacturing, leather SMEs facing many international obstacles that’s why their businesses getting behind by time. Big part of SMEs don’t know about the annual turnover due to lack of knowledge. Through survey it is analyse that most of firms are family or entrepreneurs and only one owner, who is a male. Currently competition in market very high because many new people are entered in market to work, when firms start offering low price product in market, the firms with high labour and other cost lack behind in competition. The study highlighted financing structure of the firm, firms are comfortable using the internal funds and bank loans for financing. Uses of bank loans are increased. Even, firms agree that banks has increased their interest rate factor which is problem for SMEs to bear. They purpose of loan is mostly to spend on land/building or equipment/vehicles and working capital. The result presented in this paper also about future growth obstacles, there is big ratio of less than 20% per year in term of turnover. SMEs said they feel confident to talk about financing with bank and to obtain the desired results, to realise growth ambitions bank loan of external financing is most preferable. SMEs are not here attracted by the listed on a stock exchange even many have no knowledge of stock working. The overall analysis present that facility by banks for loan is not limited even they promote their loan schemes a lot, SMEs accept that they obtain loan easily there no such obstacles for this. According to survey it is conducted that problem of financial constraints getting low by the passage of time.       Recommendations 1. When problem of financial inclusion is not high than find the way for the growth of the firms. 2. Govt. should start providing free consultancy for firms to give them knowledge and the show them practical working patter in international level. 3. Develop an environment that supports the growth and dissemination of innovative technologies for and by SMEs to take advantage of the knowledge-based economy.4. Both public and private sector should try to develop an overall conducive environment to entrepreneurship, innovation and SMEs growth. Promoting access to finance through regulatory changes; developing cooperation between public-private sectors financial institutions, and effective access to financial services, working and development capital, including innovative financial instruments to reduce the risks and transaction costs of lending to