Poverty and economic inequality are the greatest challenges of the 21st Century and the surest route to dealing with these issues is by government, especially those of emerging economies, taking steps to grow and develop Small and Medium Enterprises (SMEs).
Experts explain that emerging markets are often defined by marked levels of economic inequality, adding that while governments have a responsibility to try to close the income gap, SMEs can have a profound impact in ensuring economic growth as reflected by GDP growth.
“SMEs represent about 90 percent of businesses and more than 50 percent of employment worldwide,” Soromfe Uzomah, head, Strategic Partnerships, Microsoft 4Afrika, stated in his presentation on The Race Against Economic Inequality Within Emerging Markets: A Case For SMEs, in Lagos recently.
According to Uzomah, formal SMEs contribute up to 40 percent of national income (GDP) in emerging economies, and these numbers rise significantly if informal SMEs are included, estimating that 600 million jobs will be needed by 2030 to absorb the growing global workforce, which is why SME development should be a priority for many governments.
“In emerging markets, most formal jobs are generated by SMEs,” he said, quoting the Organisation for Economic Cooperation and Development (OECD), which states that SMEs are essential for delivering more inclusive globalisation and growth.
He also quoted the World Bank, which notes that SMEs play a major role in most economies, particularly in developing countries, by generating employment, adding value, making moderate to significant impacts to the GDP growths of economies, and driving innovation.
“It has been identified that SMEs are of overwhelming importance for developing countries, because they account for more than 90 percent of all firms outside the agriculture sector.
“We can see the benefits of a robust SME sector clearly in a study of the ASEAN (Association of Southeast Asian Nations) countries. SME development is an important point of consideration for the ASEAN Economic Community Blueprint, which aims at increasing the contribution of SMEs to the overall economic growth and development of ASEAN as a region,” he said.
SMEs have been directly correlated to economic growth in many thriving Asian economies, including Korea, Singapore and Thailand, and they have also played a very significant role in the rapid industrialisation and development of China and of India, two of our BRICS partners, he noted.
There is a connection between the levels of poverty, hunger and economic well-being of a society and the general condition of SMEs in that country, he said, pointing out that, in most developing and developed economies, over 90 percent of SMEs improve the employment rate.
But there are challenges. Across the world, particularly in emerging markets, many SMEs struggle with lack of access to affordable finance, trade and investment barriers, and lack of access to global markets.
There are also challenges of poor physical and ICT infrastructure, which often prevent SMEs from operating efficiently or accessing international markets at competitive costs. “Digitisation offers SMEs new opportunities to participate in the global economy, but many are lagging in digital transformation and access to the internet remains unattainable for many in the region,” Uzomah said.
There are good news however as he revealed that, in Nigeria, Microsoft has partnered with First Bank of Nigeria, Vodacom Business Nigeria and MTN Nigeria, to provide their SME customers with access to technology, skills development resources, business networks and an educational platform.
Additionally, First Bank is building the capacity of local SMEs and accelerating their digital transformation by providing them with exclusive and tailored non-financial solutions, giving them access to technology at discounted rates and in local currency, while providing access to business networks and education through the Microsoft Virtual Academy.
