The challenge with this focus is that it ignores a much bigger share of companies that employ a large number of people in the MENASA region because not all SMEs are in capital intensive sectors and the threshold for small enterprises is relatively high in many countries. The study provided a detailed ‘to do’ list for governments and banks in each country to open up financing for SMEs, but it puzzlingly reflects an unfriendly attitude towards microenterprises and the sectors in which they account for a large share.
The opening section of the report’s executive summary states that “very small enterprises […] generally operate in the trade and commerce sectors, which have low economic potential, as they serve local markets and do not add significant value to final products”. This is in contrast to the description of SMEs which “operate in high economic impact sectors such as manufacturing and construction”.
Capital intensive SMEs ‘more value added’ than microenterprises
On its face is the idea that businesses that are more capital intensive and generate more value added will benefit an economy, particularly if the markets in which they compete are made more inclusive by allowing SMEs to access markets where large firms have dominated. It also reflects an attitude that by encouraging a country to move up the value chain and focus on export-led growth SMEs can more successfully develop, to the benefit of its population. These are certainly examples where the oil importing countries in particular can benefit from greater development of their export sectors but the bias towards these sectors seems disproportionate to their importance in employment creation. Other countries with large oil exporting capacity will face challenges developing export-facing businesses because their oil exports, as in the cases of Iraq and Saudi Arabia, can make their other exporters uncompetitive.