SMALL & MEDIUM ENTERPRISES
IN THE MENA REGION
SME Sector Contribution to Wealth Generation
The role of the SME sector is significant in terms of its contribution to GDP and employment generation, particularly in developing economies. According to the IFC, formal SMEs contribute up to 45 percent of employment and up to 33 percent of GDP in developing economies.
These numbers are significantly higher when taking into account the estimated contributions of SMEs operating in the informal sector. More importantly, in high income countries, SMEs contribute nearly 64 percent to the GDP and 62% to employment, making the case that the SME sector is the engine of economic prosperity.
SMES & PRivate sector employment
SMEs account for a very high share of private sector employment in the MENA region, particularly in countries with large informal sectors. According to statistics, SMEs typically average between 10% and 40% of all employment in MENA. However, employment in SMEs is likely to be significantly under-estimated in official records. The typical non-GCC MENA country is estimated to employ as much as 67% of labor informally.
Micro & Small & Medium enterprises
The majority of enterprises in MENA are Micro and Small and Medium Sized Enterprises (MSMEs) estimated at 19-23 million (formal and informal) in number and comprising 80-90% of total businesses in most countries. Access to finance is one of the greatest challenges facing MSMEs globally, but particularly for MENA where nearly 63 percent of the MSMEs do not have access to finance.
The total financing gap for MSMEs in MENA is estimated at $210 to $240 billion (of which the formal MSME finance gap is estimated at $160-180 billion).
REASONS FOR THE SME CREDIT GAP
The Financial Infrastructure Gap
- A recent World Bank/Union of Arab Banks survey of over 130 MENA banks shows that only 8 percent of lending goes to SMEs across MENA, and even less in GCC countries at 2 percent.
- Strengthening financial infrastructure is considered a key consideration for the region according to the World Bank. Other measures should include improving legal and regulatory framework, auditing, and accounting standards, credit bureaus, collateral, and insolvency regimes. Data availability is still a problem, and there is a need for an effective data collection framework at the national level.