7 Reasons Why SMEs Are Vital for Economic Growth
SMEs, or small and medium-sized enterprises, are businesses that have revenues, assets, or a number of employees below a certain threshold. The abbreviation “SME” is used by international organizations such as the World Bank, the European Union, the United Nations, and the World Trade Organization (WTO). SMEs play an important role in the economy, as they contribute to employment, innovation, and competition. In this article, we will explore seven reasons why SMEs are vital for economic growth.
Key Takeaways
SMEs are businesses that have revenues, assets, or a number of employees below a certain threshold.
SMEs play an important role in the economy, as they create jobs, foster innovation, enhance competition, support local development, facilitate international trade, promote social responsibility, and enable resilience and recovery.
SMEs face various challenges, such as lack of skills, access to markets, technology adoption, regulatory compliance, and competition from large firms.
SMEs can benefit from government support, such as tax breaks, subsidies, grants, loans, guarantees, training, advisory services, and infrastructure development.
SMEs can grow and scale up by adopting best practices, leveraging technology, partnering with other firms, diversifying their products and markets, and participating in global value chains.
1. SMEs create jobs
SMEs are often the main source of employment in many countries, especially in developing regions. According to the International Labour Organization (ILO), SMEs account for 70% of total employment in low-income countries, 60% in middle-income countries, and 50% in high-income countries. SMEs also tend to hire more women, young people, and marginalized groups, thus promoting social inclusion and reducing poverty.