Global SME Dominance
SMEs represent the job creators, taxpayers, innovators, and value chain drivers of the world’s economies. They are approximately 90% 1 of all the world’s businesses. They create over half of all jobs and in the United States, 99.9% of all businesses are SMEs – 30.2 million small businesses that employ 58.9 million people. 2 In the emerging economies SMEs contribute up to 40% of national GDP. That figure rises considerably when informal SMEs are included. On a global level, SMEs create seven out of every ten jobs – yet in all markets access to finance is a constraint to growth. The SME funding gap in the developing world is in the region of $5.2 trillion 3 – 1.4 times the current level of global MSME lending and in the emerging markets we need nearly 3.3 million new jobs every month by 2030 to absorb the growing workforce. With such a clear linear relationship between SME success, job creation and economic growth, it is astonishing that such a vast SME funding gap exists within the global economy. In the context of COVID-19, the stakes have never been higher. SMEs are fundamentally critical to the sustenance of the world economy. They are the single most important enabler of innovation in industries such as medicines, digital technologies, agriculture and financial services, amongst others. Not since the first industrial revolution has there ever been such an urgent need to nurture home grown innovation for the development of a thriving SME sector. InAfrica, SMEs operate in a two-tiered economy, a formal one and an informal one. Like the global economy, SMEs are important drivers of growth in countries across sub-SaharanAfrica, accounting for up to 90% of all businesses in these markets. These factors lay bare a stark reality alongside important opportunties. Through collaboration between stakeholders from across the innovation ecosystem, and good policy from national governments, there is a significant opportunity to dramatically increase economic activity. Bynurturing the scalabilityof businesseswithin the informal sector, stakeholders can achieve inclusive economic growth, where hundreds of millions of informal workers and millions of informal SMEs reap the rewards of operating within the formal economy.
¹ WorldBank, Understanding Poverty, SME Finance: www.worldbank.org/en/topic/smefinance ² US Small Business AdministrationOffice of Advocacy, 2018Small Business Profile ³International FinanceCorporation, MSME FinanceGap: Assessment of the Shortfalls andOpportunities in Financing Micro, Small andMediumEnterprises in EmergingMarkets.ch
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