Small and medium-sized enterprises (SMEs) drive the business landscape in the Middle East and North Africa (MENA) region, accounting for more than 90 percent of the region’s businesses and contributing as much as 50 percent of employment and 70 percent of the GDP in some countries, a new study issued by the International Monetary Fund (IMF) revealed.
However, according to the study, SMEs face significant challenges that impede their growth and their contribution to employment, including limited access to credit, unfavourable business environments, and talent gaps.
To address such challenges, the study stressed that digital technologies present new opportunities for SMEs to achieve faster growth, including emerging technologies and broadband internet that can facilitate operational efficiencies, innovation, access to markets and finance, and can enable firms to operate remotely during lockdowns amid serious crises such as the ongoing COVID-19 crisis.
But so far, SMEs in MENA have been slow to embrace digital technologies and e-commerce, and businesses trail governments and consumers in internet usage. The ongoing crisis has already changed the behaviour of consumers, who have shifted to online shopping, which is a potential form of SME that should be supported, according to the study.
"Because SMEs hold the key to employment generation, governments can help expedite their digital transformation by developing and implementing national strategies that address both supply and demand constraints standing in the way of digitalisation," said the study.
In this regard, the study proposed a number of procedures governments in the region should adopt, including giving priority to removing barriers to competition and increasing investment in information and communications technology to ensure universal access to affordable high-speed internet.
The study also proposed introducing educational and labour market reforms to reduce the digital skill gaps, given that digital skills are in short supply across MENA, while some countries with high levels of digital expertise, such as Lebanon and Egypt, sometimes suffer brain drain to higher income countries, including the GCC.
Reforms are also needed to improve E-commerce logistics and the reliability of electricity, without which the internet cannot function. Deficiencies in E-commerce logistics should also be addressed, including unified address systems, area codes, postal services, and customs clearance, which can reduce the delay in delivery and decrease the costs for online trading.