Small and medium enterprises hold key to regional economic growth
Times News Service
MUSCAT: As efforts to stimulate economic growth in the Middle East and North Africa (Mena) territory remain on course, focus is now shifting to small and medium enterprise-driven strategies in a bid to accelerate growth.
This comes on the back of declining oil reserves and revenues, which served as a wake-up call to the Mena governments on overreliance on their energy reserves to fuel their respective economies.
But even as regional political and socio-economic realignment continues to take shape, government-driven diversification agendas are steadily mainstreaming small and medium enterprises (SMEs) and midmarket companies as key economic growth drivers.
In its report titled Financing of SMEs and Mid-Market Companies, Allied Investment Partners (AIP) paints a positive outlook for the regional economic growth.
This, the report says, is as a result of the regional governments’ renewed commitment and focus towards the development of their respective SME industries through their national long-term programs and vision plans.
According to the report, the governments, especially in the Gulf Cooperation Council (GCC) have realised that the SME industry now plays a pivotal role in balancing the economic development of the region.
Their role, however, remains subdued as their overall contribution to the gross domestic product (GDP) remains substantially low despite making up close to 90 percent of the total companies in the GCC.
With an estimated value at US$1 trillion, the Mena SME industry has become important in promoting competitiveness, increasing productivity, and most notably the creation of employment opportunities.
This, according to the report, is as a result of the ballooning number of entrepreneurs driven mainly by favorable demographics, improvements in ease of doing business, progressive economic conditions, and lucrative, fastgrowing markets.
The report also cites 2017 as a landmark year for the Mena startup ecosystem — a trend that has continued its acceleration onto 2018. The region currently boasts the highest number of business owners under 35 years or the socalled ‘millennial entrepreneurs’ with the UAE leading the pack as home to around 42 per cent of start-ups followed by Egypt with 12 per cent.
Despite the important role SMEs play in the economic upturn of the region, most start-ups still face challenges such as financial institution lending capacity, enterprises’ creditworthiness, and the availability of risk-sharing instruments.
According to the report, GCC banks currently allocate a paltry 2 per cent of their loans to SMEs, compared to 13 per cent in the rest of the Mena region. Morocco leads the Mena region with 24 per cent lending while Qatar trails with 0.5 per cent.
Most governments in the region have, however, come to the rescue through the adoption of several initiatives designed to promote the SME ecosystem and narrowing of the finance gap.
Other notable financing avenues include venture capital and private equity, which, according to the report, have also been instrumental in shaping the SME industry across the Mena region.
The report also indicates that the current financing gap in the region poses a very attractive opportunity for private and corporate investors to facilitate these enterprises in achieving their growth and corporate objectives, by providing them innovative and tailored capital, while also generating good returns for such investors.
Full story @ timesofoman.com/business