SUMMARYSmall and medium enterprises are considered an engine of growth for developing economies. The importance of this sector cannot be overlooked due to its greater importance and contribution to GDP growth and job creation. The SME sector in Pakistan is facing a number of issues that pose a barrier to their growth. The main obstacles to SME growth include financial constraints, regulatory and tax constraints, infrastructural constraints and human resource constraints. These four factors deteriorate the growth of SMEs in Pakistan. A sample of companies was selected from the trade, manufacturing and service sectors, of similar size and capacity. The problems encountered by SMEs are dimensions of the four major obstacles highlighted. Less technical and professional training of owners, difficult entry into the business, high rents of commercial premises, high cost structures, high average credit recovery period and electricity shortages are key problems that have been reported by entrepreneurs. Other problems include lack of official account books, accounting training, computer usage, bank accounts, awareness of bank loan products, low loan acceptance rate, government regulations excessive, hostile tax authorities, competition from Chinese products, lack of technical and professional training. training facilities and poor roads and communications infrastructure. Various dimensions have been revealed in this study which affect the growth rate of SMEs. Regulatory constraints and infrastructural constraints have been identified as major obstacles to the growth of the SME sector. Future research can be carried out by calculating the financial losses suffered by individual companies and the country in general due to the obstacles faced by SMEs.INTRODUCTION... middle of article...... Business Research Papers, 5, 85-95. Farooq, M. (2006). Credit guarantee scheme for SMEs. IBP – the journal of the knowledge institute, July 2006, 61-66. State Bank of Pakistan (2009). Prudential Regulation for Financing Small and Medium Enterprises, Department of Banking Policy and Regulation. Budget for fiscal year 2009 not published (February 11, 2009). The News. Retrieved from http://www.thenews.com.pkBaseline Survey, a roadmap for the development of the SME sector. (May 19, 2010). The Nation. Retrieved from http://www.nation.com.pkState Bank of Pakistan, SME Finance Department (March 2010). Quarterly report on financing for development. Retrieved from http://www.sbp.org.pk/smeReserve Bank of India (August 27, 2009). Annual economic review. Retrieved from http://www.rbi.org.in/scriptsSmall and Medium Enterprises Development Authority (2007). SME Policy 2007. Extracted from http://www.smeda.org