Key Takeaways
- Pakistani export finance schemes primarily support traditional products.
- Only 5% of exporters benefit from the Export Finance Scheme.
- Firms are 80% more likely to qualify for support on existing products than new ones.
The export landscape in Pakistan remains stagnant, with a significant portion of firms unable to secure financial support despite clear market demand. A recent analysis by Dawn Business highlights the challenges faced by small and medium enterprises (SMEs) in accessing export finance schemes designed to boost trade.
In Sialkot, for instance, a surgical instruments manufacturer holds an order from a distributor in Frankfurt but struggles with the logistics of exporting directly due to information asymmetry. Similarly, consumers in Europe and beyond are willing to pay premiums for Pakistani goods, yet many face barriers in obtaining them officially.
Despite these opportunities, policy responses have often been reactive, focusing on additional financial support rather than addressing underlying structural issues. The instinctive approach has been to provide more subsidies or refinancing lines, but this has not led to meaningful export growth. As noted by the Notorious B.I.G., 'the more money we come across, the more problems we see.'
According to Gonzalo (2024), export finance support programs have a limited impact on firm-level export performance. While participants do increase their export volume by seven to 11 percentage points, there is no significant effect on the number of products exported or markets served. This suggests that such schemes primarily finance scale rather than discovery.
The data reveal a stark reality: only five percent of exporters benefit from the Export Finance Scheme, with long-term financing under the Long-Term Financing Facility (LT FF) reaching fewer than one percent in terms of the number of exporters. The top 100 exporters, who account for about 40% of export value, absorb two-thirds of all export finance and 86% of LT FF flows into textiles and allied segments.
This concentration of support has led to a narrow focus on traditional products. Firms are 80% more likely to qualify for support on existing products than on new ones, meaning that the schemes primarily finance what we already sell to buyers we already know. Such programs do not encourage diversification or discovery in new markets.
The structural arithmetic paints a clear picture of the cost of this approach. The average Pakistani exporter ships $1.4 million annually, compared to Bangladesh’s $3.8 million and China’s $2.5 million. The median exporter moves just $68,000 per year. Only one-third of the smallest exporters move up a size class over five years, against 45% in Bangladesh and 53% in China.
Ten products dominate Pakistan's merchandise basket, with little diversification observed over two decades. This lack of product diversity limits market reach and growth potential, highlighting the need for more comprehensive support mechanisms that can foster innovation and discovery.
