Punjab State of Pakistan

Industrial Development Bank of Pakistan (IDBP)

Joint Financing of Small Industries
Case Study Analysis

Strengths of IDBP:

1. Since Small Scale Industries are employing the 80% of the national labor force so the IDBP have a
large number of small industries to finance:
2. The Punjab Small Industries Corporation (PSIC) was set up to promote and develop small scale
industries so the PSIC assist the IDBP in sanctioning of loans by preparing technical and economic
feasibility study.

Weaknesses of IDBP:

1. IDBP was responsible for leading small businesses as well as some larger ones. However, IDBP was
only financing Large Scale Businesses:
2. Loan was sanctioned to small scale projects for import of machinery on an average of 8 months.
3. The procedure for local currency component of loans is also complex, the study of 35 cases reveals
that the average time taken is actually 128 days.
4. The maximum time of fifteen days is mentioned in agreement for disbursement but the average
time taken by IDBP was 99 days.
5. The sanctioning of loan and approval process was more complex and difficult.
6. The banks faced a shortage of qualified staff for the feasibility study of projects.

Guarantee Operations of PSIC & Attraction to potential clients:

The Guarantee operations of PSIC is profitable for the organization since the guarantee of 75% was given
for foreign currency component and 50% guarantee was given for local currency component. So this was
attracting potential customers. More the clients are attracted the more the organization is getting
profitable.
Mrs. Hirji’s Business
Case Study Analysis

Problem Identification:
Mrs. Hirji was a widow and migrated from Bangladesh to Pakistan after separation. She gets
training of tailoring from a Government Program earlier. But after separation she was given a
pension of Rs. 750 from Government which was not enough to support her family. She was facing
a problem in finding a job and in using her skills to support her family.

Limitations:
She was only dependent upon pension of Rs. 750 which was not enough to support her family
members which includes four daughters. Moreover, she has not enough funds to start any small
scale business.

Case:
Mrs. Hirji had no money at all of her own and there were no jobs available she had no idea how
she might use her skills to solve her financial problems.

Possible solutions:
1. Mrs. Hirji could be provided a tailoring job by the government
2. She could be financed by the government so she can purchase a sewing machine

Best possible solution:

Mrs. Hirji can be financed by the Government so she can start her own business of tailoring and
she could not be dependent on Government job. Moreover, by this approach she can also create
more jobs and can train more women to support their families.

Conclusion:
After the war the families who were migrated to Pakistan were facing issues in getting jobs and
in starting their business due to lack of funds. The Government have to take initiative to support
these families. Mrs. Hirji was a widow and also suffered from War. She was a trained tailor. Either
she should be provided a job or should be financed by the Government so she can support her
family. The best solution is to finance her so she can independently start her own business of
sewing.
The Manju Soap Factory
Case Study Analysis

Problem Identification:
The owner of Manju Soap Factory was facing an issue of costly raw material, so rather than
seeking consultation to minimize raw material cost he was planning to import latest
manufacturing machinery.

Limitations:
To import machinery and estimate of required capital he seek assistance from National Small
Business Assistance Agency. The officer of the agency calculated Rs. 35 Million required budget
for the building, working capital and import of machinery. When the officer asked the proprietor
that what will be his contribution in the budgeted amount, he replied that he is ready to invest
Rs. 100,000/-.

Case
The proprietor was planning to shift his traditional manufacturing plant to upgraded
manufacturing plant for which a capital of Rs. 35 Million is required. However, he has only 1 Lac
to invest.

Assumption:
Since he was not an educated person and was not aware of the technology even if he was
financed by the Government he will not be capable to maintain manufacturing with upgraded
manufacturing machinery.

Possible solutions for case:

There are two possible solutions for him. Either he can be financed by the government if he has
more funds to contribute the required capital or his real issue of costly raw material can be
solved.

Best possible solution:

Since he was not an educated business man so to handle new manufacturing machinery is not
feasible for him. Moreover, he is only ready to invest Rs. 100,000/-. So best possible solution is
to assist him in reducing the cost of raw material.

Conclusion:
When the officer refused proprietor that the project is not feasible if he has only Rs. 1 Lac to
invest. After probing the officer came to know that his real problem is costly raw material, so the
officer advised him to apply for a special tax concession which will enable him to pay less for
acquisition of raw material.