When the news reports on the business environment, most people imagine that reporters are talking about the big corporate brands that we see on billboards and TV, but businesses come in all sizes. For example, a family-owned delivery company with a few trucks and a staff of 20 local employees may not match what you think of as a corporate enterprise, but running a company of that size requires solid strategy, good customer relations, management skill, and financial knowledge—the same expertise needed for any business. And as we shall discuss here, small and medium-sized enterprises (SMEs) contribute as much to the local and national economies as larger businesses.

What makes an SME?
National governments around the world, as well as organizations such as the World Bank, the European Union, and the World Trade Organization, all use the term small and medium-sized enterprises, but the definition varies.

In Europe, for example, small enterprises have up to 50 employees while medium-sized enterprises have up to 250 employees [1]. In the U.S., the criteria are based on revenue and number of employees, as well as other considerations like ownership structure, but generally, U.S. SMEs are those with fewer than 500 employees [2].

In Egypt, the Central Bank of Egypt (CBE) considers enterprises with a business volume between EGP 1 million and 50 million to be small and those with a volume from EGP 50 million to 200 million to be medium-sized. [3] 

Why do we need an SME category?
SMEs are easy to overlook. Even though we rarely hear about them, SMEs vastly outnumber large corporations. For this reason, it is important to understand their economic impact and business needs, and to make sure that SMEs are captured in statistics and recognized in policies and plans. 

For companies that provide business services, such as banks, accountancies, law firms, even employment agencies, it is important to recognize SMEs as potential customers and to tailor products and services for them. 
More significantly, most national governments recognize the special needs of SMEs. They assess lower corporate tax rates on SMEs and give them less onerous regulations to comply with. In the same way that governments often support certain industries or economic sectors, many governments also recognize the value of SMEs to the economy and employment and offer SMEs specific support programs. 

SMEs Globally
SMEs vastly outnumber large companies and also employ many more people. There are 28 million SMEs in the U.S., and they account for nearly two-thirds of new private-sector jobs [4]. The E.U. has approximately 25 million SMEs, which contribute 56% of the economy and employ 66% of the workforce [5]. In Australia, SMEs make up 98% of all businesses and produce one-third of the national gross domestic product [6].

But SMEs are important for more than their economic contribution. Due to their small size, SMEs are more strongly influenced by their owners and leaders. As a result, SMEs are more flexible, and many consider them to be responsible for driving innovation and competition across industries. 

SMEs in Egypt
Egypt has a dearth of SMEs. Most of Egypt’s businesses representing 97% are micro-sized. employing fewer than 10 workers [7]. Enterprises with 10 to 50 employees account for only 2.7% of total businesses [8] while 70% of Egypt’s 2.4 million businesses have only one or two employees.

Given the crucial role SMEs play in creating jobs, improving the ability of SMEs to access loans and grow their businesses has been a top priority for Egypt’s government. In 2016, the CBE announced an initiative to encourage medium and long-term loans to SMEs [9]. Banks were required to allocate 20% of their total credit portfolios to financing projects by SMEs. The target was for banks to offer EGP 200 billion to finance 350,000 companies and create 4 million new jobs. In response, banks in Egypt have extended more loans to small and medium-sized firms, and by 2019, the value of loans extended to SMEs grew to EGP 146 billion [10].

The benefits of the CBE’s program go beyond helping the financial footing of SMEs. Offering loans to SMEs results in a better understanding of the role of banking and financing among SMEs. Companies who access loans must regularize their accounting and business management practices. In many cases, the first time an SME applies for a loan is the first time it creates a business plan. And of course, SMEs who grow their businesses increase employment and reduce poverty. 

SMEs and your economic contribution
Do you work for an SME? You may have thought that working for a small company means that your contribution to the economy and the prosperity of Egyptians is not even worth counting. The opposite is true! If you operate or work for an SME, you are the backbone of the economy given the out-sized role that small and medium-sized enterprises play in employment, it is likely that you do. 


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