Principally, the purpose of defining any enterprise category is to identify enterprises for interventions targeted at offsetting the disadvantages and market failures that accrue specifically due to their size. These interventions can include regulatory exemptions, differential taxation treatment and direct interventions, such as, subsidized business development services and preferential access to public procurement and finance. Therefore, defining SMEs is an important element of the Policy.

An SME definition is also useful to collect and organize data to understand the role of SMEs, to evaluate the impact of SME policies and to provide information for SME support program design. In addition, a nationally accepted SME definition can help coordinate efforts across multiple agencies such as Small & Medium Enterprises Development Authority (SMEDA), State Bank of Pakistan (SBP), Small Industries Corporations (SICs), Federal Board of Revenue (FBR), Securities & Exchange Commission of Pakistan (SECP) and others, by ensuring that the term “SME” refers to a common and easily understood metric.

The most common variables used to define SMEs globally are the number of employees, assets, and turnover. The Government will ensure that a single definition of SMEs is adopted across Pakistan. It will also, at regular intervals, review the effectiveness of and issues with the definition and agree on refinements, if required. The Government of Pakistan will revise the SME Definition through notification in the official gazette, from time to time, as may be required. Given below is the National SME Definition to be adopted across Pakistan: