LAHORE: Policymakers should design programmes that help micro-entrepreneurs transition from cottage industries to small and medium enterprises (SMEs). More effective targeting of training interventions can enhance their overall impact.
Upgrading micro-enterprises in Pakistan is vital for inclusive economic development, poverty reduction, and job creation — especially for women and youth. Predominantly informal and low-capital, micro-enterprises in Pakistan operate in sectors such as retail, tailoring, food, livestock, and transport. They face major challenges, including limited access to finance, weak market linkages, poor infrastructure and low skill levels.
The state must improve access to micro-loans through institutions such as the PM Youth Programme, Akhuwat and Khushhali Bank, by simplifying procedures and offering lower interest rates. The government could provide loan guarantees to reduce risk for lenders and increase the flow of funds to small businesses.
Planners should also align technical and vocational education and training (TVET) institutions with the needs of micro-enterprises — focusing on modern retail, e-commerce, food safety, accounting and marketing. Digital literacy and mobile-based business tools must be promoted, particularly for women.
Micro and small businesses would benefit from one-stop SME centres that provide services such as registration, tax assistance, training and legal support under one roof, easing their entry into the formal economy. Government support for platforms like ‘Made in Pakistan’ portals and trade fairs can help link micro-enterprises to larger supply chains or directly to consumers. Cluster development should also be prioritised, through shared facilities such as cold storage, transport, and packaging units in rural and peri-urban areas. Subsidised internet and mobile data packages for registered micro-enterprises are also essential.
To promote formalisation, social protection schemes — such as pensions, health insurance and maternity benefits — should be designed and linked to enterprise registration.
Neighbouring India recognises micro-enterprises as the backbone of its rural economy. Notable initiatives include the MUDRA Scheme (Micro Units Development and Refinance Agency), launched in 2015, which offers collateral-free loans of up to INR1 million (Rs3.3 million) to micro and small businesses under three tiers: Shishu, Kishore, and Tarun.
The Stand-Up India Scheme supports SC/ST and women entrepreneurs in starting small businesses, while the Udyam Registration platform simplifies MSME registration, easing access to credit and government schemes.
India’s Ministry of MSME also funds common facility centres and infrastructure in sector-specific clusters such as textiles, leather and food processing. Digital platforms like the government e-marketplace and ONDC enable micro-entrepreneurs to sell online and receive training.
Bangladesh, too, has made significant progress in empowering micro-entrepreneurs — especially women — through the integration of microfinance. Institutions such as Grameen Bank and BRAC offer microcredit for business growth rather than mere survival, along with training, savings, and insurance programmes.
The Bangladesh government has established an SME Foundation that supports a cluster-based approach, offering grants, training, and support for technology adoption. Central bank guidelines require banks to allocate a share of their portfolio to cottage, micro, and small enterprises (CMSEs).
Bangladesh Bank offers concessional loans at interest rates of 9.0 per cent or less, with dedicated quotas for women-led micro-enterprises. The ‘One House, One Farm’ initiative is a rural income-generation programme that combines microcredit, training, and collective farming or business ventures.
Pakistan should learn from the successes of its neighbours by simplifying regulations and registration processes, similar to India’s Udyam system. Like Bangladesh, it should utilise microfinance as a growth tool rather than just a survival mechanism. Policymakers must encourage digital sales channels and integrate micro-businesses into large value chains and public procurement systems. Most importantly, they should invest in women-focused initiatives, as successfully demonstrated in both India and Bangladesh. Support for cluster development and shared services would also reduce costs and increase productivity.
Over 50 per cent of Pakistan’s population lives below the poverty line, and nearly half of them are engaged in micro-enterprises. These entrepreneurs rarely employ others, and when they do, it is usually unpaid family members. With targeted training and support, these micro-enterprises could grow and provide employment to many more people as they expand.
