Innovation is the way forward
An incisive appraisal of the developed countries reveals that their phenomenal economic growth was propelled by entrepreneurship, which is rightly regarded as a key to economic prosperity. Entrepreneurship is the capacity and willingness to start a new business venture and the hallmark of entrepreneurial spirit is innovation and risk taking. Countries like USA, Japan, Denmark, Germany, Taiwan are quintessential of the role that entrepreneurship can play in the economic development of a country and, therefore, are role models for other nations aspiring to achieve self-sustained growth in the ever increasing competitive global market.
To promote entrepreneurship it is important that the people with innovative ideas and skills have access to the vital entrepreneurial resources like money, talent and know-how to initiate new business, especially small and medium size enterprises. One of the major objectives of the governments and its economic managers is to ensure full employment in the country or trying to ensure the creation of maximum job opportunities for the ever growing labour force. But the fact remains that the governments can only provide an enabling environment to spur economic activity that leads to creation of more jobs in the private sector.
In Pakistan the government employs only 7-8% of the labour force. So like all other nations the only option available to it is to nudge economic activity in the private sector through encouraging entrepreneurship in regards to the establishment of small and medium size business and industry by making available necessary resources and technical know-how to the youth entering the labour market.
In the past, several initiatives were taken in the public sector to nudge small and medium size business in the form of loans to the youth but unfortunately they all failed to create the desired impact due to the rampant corruption in the public organisations. The parties in power actually showed favours on their own political workers and in most of the cases loans were advanced on fake documents without proper collateral and on the basis of political influence.
The result was that billions of rupees were lost to this plunder and despite best efforts of the state bank the money could not be recovered. The other reason for failure of those efforts was that the basic ingredients of entrepreneurship like the technical know-how and talent to start a business were totally neglected while advancing loans. There was no support available in the public sector for carrying out research and preparing feasibility reports in regards to different lines of business and industry. The result was that the institutions like Youth Investment Programmes (YIPS) and Small Business Finance Corporation, the two main financial institutions in the public sector for promoting small and medium industries and businesses, had to be closed.
But it is encouraging to note that recognising the importance of small and medium size industries and business, creation of self-employment opportunities for the youth in the economic development of the country and learning from the past bitter experience, the PML – N government took a step in the right direction by launching Prime Minister’s Youth Programme in September 2013; a package comprising Youth Business Loan Scheme, Youth Skill Development Programme, Youth Training Programme, Programme for provision of laptops, Interest Free loan Scheme and Fee Re-imbursement Scheme for Less Developed Areas. These initiatives were designed to create a culture of entrepreneurship by making available all the required ingredients to the youth for starting their own business and enhancing their technical know-how and skills for gainful employment in different sectors of the economy. The defined objective of this package was enabling youth and poor segments of population to get good opportunities of employment, economic empowerment, acquiring skills needed for gainful employment, spreading use of computers and imparting on the job training for young graduates to improve probability of getting a productive job.
The major and the flag ship initiative of the package was the Youth Business Loan Scheme. National Bank of Pakistan and Women Development Bank were entrusted with the responsibility to disburse these loans amounting up to two million at a nominal interest rate of 8%, ensuring gender equality in advancing these loans. The step to advance these loans through banks was taken in the light of the unenviable experience of the past, to ensure transparency and eliminating prospects of political interference. Another very important aspect of the scheme was that the Small and Medium Enterprises Development Authority (SMEDA) carried out pre-feasibility studies as guidelines for prospective borrowers. These studies provided a general understanding of the proposed business and were meant to promote entrepreneurial culture in the country as they were structured like a business plan.
A recent review of this scheme and other initiatives reveals that so far Rs 11.03 billion has been sanctioned for 15,101 individuals. In view of its importance, transparency and its unblemished track record so far, 14 other banks including Sindh Bank, HBL, MCB, Habib Metropolitan Bank, Meezan Bank and UBL have also joined the scheme. National Bank is also contemplating to develop pre-feasibilities for almost 100 trades in addition to restructuring of the scheme. From now on balloting will be replaced by the existing loan processing procedures. These measures will ensure quick disposal of the loan applications and identification of the trades where the applicants can invest profitably.
Under the supporting initiative of Skill Development Programme, 22,000 students were imparted training in different skills in the first phase. In the second phase of the programme 21,934 students underwent training. Recruitment for the third phase is already underway. Students are being given training in 195 demand-driven trades through 130 training centres. Under the Laptop Scheme the HEC has distributed 93,255 laptops among PhD, MPhil and MS students. Similarly 84,078 students from 78 universities have been paid back their fees by HEC. However from now onward the HEC will make up front payments to the eligible students at the time of admission. Under the interest free loan scheme Rs 1.9 billion have been given to 90,750 applicants. These are encouraging results and there is a need to pursue these initiatives more vigorously to achieve the desired results.