An Empirical Analysis of SMEs Growth and its Contribution in Poverty Reduction of Pakistan

Abstract

This study establishes a linkage between small and medium enterprises (SMEs), economic growth and poverty reduction. The small enterprises are main tools for social integration, innovation, employment generation, and poverty reduction. The information and dataset for study was from the period of 1980 to 2020 and it was collected from different reliable national and international organizations. The multiple regression model have been used for data analysis. The empirical results showed a strong inverse relationship between SMEs growth level and poverty level. The results confirm a strong and positive relationship exist between gross domestic product and SMEs development. This relationship was justifiable because establishing more small and medium enterprises can be helpful in employment generation, local production sector, contribute in economic growth and poverty alleviation of Pakistan. The economic policy makers may focus to subsidize the small enterprises as a policy tool. Financial markets may facilitate the potential SMEs by providing them ease in commercial transactions and capital flow.