Impact of Small and Medium Scale Enterprises on Poverty Reduction in developing country: A case of Pakistan

Mahwish zafar, Muhammad Waqas, Muhammad Nawaz


This research has been conducted to examine the role of SME`s to eradicate poverty in Pakistan over the period of 2001-2015. The study investigates relationship by using secondary data from World development indicator by estimating simple linear regression model. Results indicate that small medium enterprises have a negative association with poverty and significantly lower poverty rate in Pakistan. SMEs generate employment opportunities which contribute to the poverty alleviation in the economy of Pakistan. Moreover, human capital and government expenditure also significantly reduce poverty in Pakistan. As government expenditure and human capital increase, it causes to lower poverty growth rate. Similarly trade and inflation also have significant association with poverty, however, inflation and poverty have positive association while trade has the negative association with poverty growth rate in Pakistan. The value of R square (0.756) indicates that model is a good fit and F-ratio states the overall significance of the model. Therefore, results suggest that government should adopt the policies that promote SME growth rate, trade openness, human capital, GDP, government development expenditure and lower inflation rate to control poverty in Pakistan.

Keywords: SMEs, Poverty reduction, inflation, trade openness, government expenditure.




Abor, J., & Quartey, P. (2010). Issues in SME development in Ghana and South Africa. International Research Journal of Finance and Economics, 39(6), 215-228.

Agwu, M. O., & Emeti, C. I. (2014). Issues, Challenges and Prospects of Small and Medium Scale Enterprises (SMEs) in Port-Harcourt City, Nigeria. European Journal of Sustainable Development, 3(1), 101.

Agyapong, D. (2010). Micro, small and medium enterprises' activities, income level and poverty reduction in ghana-A synthesis of related literature. International Journal of Business and Management, 5(12), 196.

Ali, S. (2013). The Small and Medium Enterprises and Poverty in Pakistan: An Empirical Analysis. Ali, Sharafat (2013). The Small and Medium Enterprises and Poverty in Pakistan: An Empirical Analysis. European Journal of Business and Economics, 8(2), 25-30.

Beck, T., Demirguc-Kunt, A., & Levine, R. (2005). SMEs, growth, and poverty: cross-country evidence. Journal of economic growth, 10(3), 199-229.

Biggs, T., & Shah, M. K. (2006). African SMES, networks, and manufacturing performance. Journal of Banking & Finance, 30(11), 3043-3066.

Bowale, K., & Akinlo, A. (2012). Determinants of small and medium scale enterprises (SMEs) performance and poverty alleviation in developing countries: Evidence from South-West Nigeria. European Journal of Humanities and Social Sciences Vol, 17(1).

Cicowiez, M., & Conconi, A. (2008). Linking Trade and Pro-Poor growth: a survey. Trade and Poverty in the Developing W, 7.

Eneh, O. C. (2007). Growth and development of sustainable micro, small and medium enterprises sector as a veritable factor for poverty reduction in developing countries. The Nigerian Journal of Development Studies, 6(1), 99-122.

Gebremariam, G. H., Gebremedhin, T. G., & Jackson, R. W. (2004). The role of small business in economic growth and poverty alleviation in West Virginia: An empirical analysis. Paper presented at the The paper at the American Agricultural Economics Association Annual Meeting, Denver, Colorado, August.

Hallberg, K. (2000). A market-oriented strategy for small and medium scale enterprises (Vol. 63): World Bank Publications.

Herman, E. (2012). SMEs and their Effect on the Romanian Employment. Procedia Economics and Finance, 3, 290-297.

Islam, M. A., Khan, M. A., Obaidullah, A. Z. M., & Alam, M. S. (2011). Effect of entrepreneur and firm characteristics on the business success of small and medium enterprises (SMEs) in Bangladesh. International Journal of Business and Management, 6(3), 289.

Mazumdar, D. (2003). Small-Medium Enterprise Development in Equitable Growth and Poverty Alleviation. Reducing poverty in Asia: emerging issues in growth, targeting, and measurement, 143.


Mukras, M. (2003). Poverty reduction through strengthening small and medium enterprises.

Oba, U. O., & Onuoha, B. C. (2013). The Role of Small and Medium Scale Enterprises in Poverty Reduction in Nigeria: 2001–2011. African Research Review, 7(4), 1-25.

Radam, A., Abu, M. L., & Abdullah, A. M. (2008). Technical efficiency of small and medium enterprise in Malaysia: A stochastic frontier production model. International Journal of economics and Management, 2(2), 395-408.

Subhan, Q. A., Mahmood, T., & Sattar, A. (2014). INNOVATION AND ECONOMIC DEVELOPMENT: A Case of Small and Medium Enterprises in Pakistan. Pakistan Economic and Social Review, 52(2), 159.

Theng, L. G., & Boon, J. L. W. (1996). An exploratory study of factors affecting the failure of local small and medium enterprises. Asia Pacific Journal of Management, 13(2), 47-61.

Turker, D. (2015). An Analysis of Corporate Social Responsibility in the Turkish Business Context Corporate Social Responsibility in Europe (pp. 483-499): Springer.



  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.