Role of SME in Poverty Alleviation in SAARC Region via Panel Data Analysis

Abstract

The key objective of the formation of the South Asian Association of Regional Cooperation (SAARC) is to join hands collectively for slow economic growth, poverty eradication, deprived health and education sectors. In the 12th SAARC Summit, it has been declared that poverty eradication is the main area of concentration and SAARC countries would strive their best to minimize all types of poverty with the help of any possible strategy. The main objectives of the current study are to evaluate the development of the agenda of poverty eradication in SAARC countries through small and medium enterprise (SME) development because it would be considered as a short-routed remedy to mitigate poverty. The poorest 20% income holder as a percentage of GDP has been used as the proxy for poverty in the SAARC region. SME development has been measured through the SME share in GDP in respective countries. The panel dataset has been developed for the period of 1990 to 2015. The fixed effect method (FEM) and regression equation techniques were used to analyse the observed data. The results of the FEM were misleading. The regression equations for the respective countries were used for empirical analysis. The results have identified that there are three main factors that are essential in reducing poverty in the SAARC region: SME growth, openness of trade and social sector development.

Micro, small, and medium enterprises (MSMEs) and poverty reduction: empirical evidence from Indonesia

“…His study recommended the importance of simplify procedures to access finances and reduce the cost of credit. This empirical finding is supported by a study carried out by Manzoor et al (2019) through analysis with a data panel model in SAARC. Furthermore, Kowo, Adenuga, and Sabitu (2019), using analysis of variance, coefficient of correlation, and regression analysis, found that the development of SMEs influences poverty in Nigeria.…”

“…Earlier studies found a significant influence of MSMEs on the number of job vacancies (Herman 2012;Hussain, Bhuiyan, and Said 2017;Rotar, Pamić, and Bojnec 2019) and economic growth (Beck, Demirguc-Kunt, and Levine 2005;Manzoor et al 2019). As Manzoor et al (2019) observe, SMEs are economy growing machines, and there is a positive correlation between the growth of SMEs and a rising economy. The mechanism of economic growth can further reduce poverty.…”

“…MSMEs still face various problems and barriers when it comes to influencing their product competitiveness. According to Manzoor et al (2019), the development of MSMEs can absorb more labor, improve income, and push economic growth to further reduce the number of poor people and improve their socioeconomic condition (Geremewe 2018).…”

“…Some earlier empirical studies have demonstrated a strong correlation between the role of MSMEs and the reduction of poverty, both in developed and developing countries, such as West Virginia, U.S. (Gebremariam and Gebremedhin 2004), Pakistan (Ali, Rashid, and Khan 2014), metropolitan Ibadan, southwestern Nigeria (Adeyemi and Lanrewaju 2014), and most recently, in the eight countries of the South Asian Association for Regional Cooperation (SAARC) (Manzoor et al 2019). However, other empirical studies have described different results, including Harvie (2003) and Beck, Demirguc-Kunt, and Levine (2005), who sampled 45 countries; the Indonesian Ministry of National Development Planning Agency (2014) and Bank Indonesia (2016) investigations in that country; and Geremewe (2018) in the U.S., who performed their research through literature surveys.…”

“…Nevertheless, earlier studies correlating indirect paths via the quantitative approach are rarely undertaken in Indonesia. Manzoor et al (2019) estimated the effect of MSME growth on the reduction of poverty using a quantitative approach but did not observe its indirect effect. MSMEs are the drivers of increased demand for labor and economic growth that are expected to further improve the socioeconomic prospects of the MSEs actors (Hussain, Bhuiyan, and Said 2017).…”