SMEs (Small and Medium Enterprises) are very important for the development of a nation economically. They are oftentimes, referred to as the bread and butter of an economy since they account for a significant portion of job creation rates, and infrastructure development global ranking.
In the USA, small and medium enterprises are the lifeblood of the U.S. economy, with more than two-thirds of private sector jobs, and roughly thirty million small businesses in the United States in last few decades. Recent research shows that SMEs that export grow faster, create more jobs and pay higher wages than their non-exporting counterparts. Smaller companies in the United States seize job-supporting trade/investment opportunities abroad as well!
The most obvious one is that they are among the largest job creators. The World Bank reports that SMEs represent more than 90% of companies in the world and employ approximately between 60% to70 % of global workforce. SMEs are the principal drivers for employment opportunities in many countries, especially among young people and women. As important drivers of poverty reduction and social cohesion, SMEs can contribute to human development through job creation and income-earning opportunities.
Moreover, SMEs have been known as the cornerstone of innovation and creators. SMEs are small and organized, making them capable of quick real-world adaptations and rapid new product entries into the marketplace due to their size. Also, very early in their life, most successful startups are scratch-to-business businesses creating by small ideas and large entrepreneurship spirit transforming into widely well-known global enterprise. Innovation is a way for SMEs to contribute towards economic progress and as well competitive nature of the resituate industry.
Furthermore, promotion of economic diversification can largely be attributed to SMEs. Small-Medium enterprises (SMEs) play a role in the national economy by helping diversify economic activities, operations from different sectors mean less dependence on few key stakeholders and distribute overall risk across country. Its economy is thus less susceptible to shocks from outside and it contributes for the most part to minimizing its economic-crisis vulnerability.
They also support regional development and de- decentralization efforts. SMEs are generally distributed throughout the country, which means they operate in rural and remote areas as well, unlike most large corporations who mostly concentrate themselves within urban centers. SMEs establish business in these areas that create jobs and generate economic activity in regions where work is scarce. This helps in checking the urbanization and balancing the regional development.
In addition, SMEs are major contributors to exports and international trade in general. Most small and medium-sized companies are indirectly or directly involved in exports through different value chains. SMEs help to earn foreign exchange for the country by exporting goods and services abroad thereby enhancing its global competitiveness. It is also helping to drive forward, maintain, and strengthen trade relationships with other countries by SMEs.
Although they contribute extensively to economic development, SMEs are upset with challenges that impede their growth and sustainability. They face a number of challenges such as lack access to finance, absence in possessing the technical and managerial skills required for running their business ventures efficiently and profitably. regulatory burdens inadequate infrastructure needs to operate integrated with limited market. Overcoming these challenges is key to unleashing the potential of SMEs and realizing their optimal benefits for economic growth.
In ensuring that SMEs survive these tough times, Governments and policymakers should promote policies and programs to address the challenges faced by SMEs, hence creating a friendly business environment. These services include financial assistance through grants and loans, wider access to credit and other financial services, better infrastructure linkages from smallholders to markets which could be supported by mobile solutions as a means of reducing the cost of trading e.g. transportation costs monitoring system that identifies truckers with unused cargo identity numbers, teaching programs such training extension products simplifying regulatory procedures (through fit-for-purpose seed regulations) facilitating market opportunities support for trade fairs promoting exports etc.
Finally, we know that Small and Medium Enterprises have a crucial role in the economic development of any country. They drive job creation, innovation, economic diversification and regional development; they are key players in exports and international trade. Even though they have been struggling with issues, if given the desired support and enabling environment for them to thrive by having government align in supporting their growth story then there no stopping these set of SMEs been engine of economic prosperity. When properly promoted and supported, SMEs can reach their full potential as drivers for sustainable economic development in countries.
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