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Research Studies on SME Lending Requirements for Agriculture Machinery & Implements Cluster

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Client Name

National Business Development Program, (NBDP) Small & Medium Enterprises Development Authority, (SMEDA). Ministry of Industries & Production Government of Pakistan, (GoP) (A PSDP Funded Program)

Project Title

Research Studies on SME Lending Requirements for Agriculture Machinery & Implements Cluster

Description of the Project

Conducted this project on behalf of our client, SMEDA, focusing on in-depth and targeted research into the lending needs of SMEs within the Agriculture Machinery & Implements Cluster. This comprehensive project aimed to understand the specific financial requirements of small and medium-sized enterprises (SMEs) operating within the agriculture machinery and implements sector. The agriculture machinery and implements value chain comprises various stages, ranging from sourcing raw materials to manufacturing finished products, distribution, and retail. To meet our research goals, the NJHR project team engaged in detailed analysis to identify the distinct financial needs and challenges SMEs face at different points along this value chain. We interacted with various stakeholders through surveys, interviews, and comprehensive case studies, including SME owners, financial experts, regulatory authorities, and industry associations. This effort enabled us to gain valuable insights into the specific lending requirements of SMEs involved in the agriculture machinery and implements sector.

Task Performed

Main Task Performed:

1. Conducted desktop research concerning the contribution of selected SME Clusters to the overall GDP of Pakistan and its share in export earnings where applicable, employment generation, and value addition in the country.

2.Conducted Global trade and market analysis through authentic data sources (e.g., UN Comrade, Trade Map, ITC, etc.), where applicable.

3. Developed a questionnaire for conducting a primary research survey.

4.Performed Sampling of SMEs for conducting primary survey.

5. Ensured that the sample size for the primary survey should not be less than 20 SMEs per City with a total of 150 SMEs per sector/cluster with the following category-wise distribution; o Small Size (S): 15% Units o Medium Size (M): 70% Units o Large Size (L): 15% Units

6. Ensured that the sample size would be distributed among the subsectors/value chain players as per the estimation of several units in the value chain. Definitions of S, M, and L will be considered as per the prevailing 'Cluster Dynamics' and 'Business Volumes and will be finalized in consultation with the Client.

7. Studied the existing value chains, its backward and forward linkages, and identification of geographic sources of raw material, product mix, exportability, and market segmentation in which the particular cluster is potentially active.

8. Conducted SWOT analysis of the cluster

9. Analyzed the growth potential of the cluster in various domestic and international market segments.

10. Suggested improved technologies that need to be introduced/improved along the value chain to meet the high-end market. The following table will be provided for Small, Medium, and large units in each value chain segment.

11. Quantified the future financing needs of SMEs belonging to a particular category (i.e., S, M, and L), primarily related to the identification of 'Short Term,' 'Medium Term,' and 'Long Term' financing needs/requirements. For instance;

12. Identified the short-Term Financing (e.g., Working Capital) Requirements for S, M and L

13.Identified medium Term Financing (e.g., Technology Upgradation) Requirements for S, M and L

14.Identified long Term Financing (e.g., Business Expansion) Requirements for S, M and L

15.Identified business areas for which these enterprises feel financial crunch/cash flow problems and are willing to seek funding from financial institutions to bridge this gap.

16. Made a comparison of the impact of informal / trade credit with formal / bank financing in terms of the IRR, Annual Revenue, and net cash at the end of the year.

17.Developed a detailed financial model for each type of Financing. The economic models comprise projected expenses, estimated revenues based on certain

18.Developed draft lending programs for each category (S, M, L), including loan type, average loan size & tenure of the loan.

19.Identified issues faced by the SMEs in the sector concerning policy & regulatory processes, market development/marketing, capacity building & training, etc. Provided high-quality pictures and 03-05 minutes of high-definition video of the production process.

Geographical Spread

Mian-Channu & Daska Punjab