Government support and effective policies are key to SME growth, survey says

A majority of small businesses are also seeking support to upskill their teams and for improved telecom infrastructure, according to Mastercard

Dubai set up several initiatives last year to offset the effect of the Covid-19 pandemic on small businesses. The emirate launched stimulus measures worth Dh1.7 billion. Pawan Singh / The National

Government support and the setting up of effective policies are key to helping small and medium enterprises across the Middle East and Africa recover from the pandemic, position for growth and contribute to economic prosperity, new research has found.

About 88 per cent of the region’s SMEs ranked these factors as “important” for future growth, while 50 per cent rated them as “must-haves”, the inaugural Mastercard MEA SME Confidence Index showed.

This sentiment was especially pronounced among SMEs in the Middle East and North Africa, where 92 per cent categorised them as important factors, the research found.

“The contribution of small businesses to regional economies is ultimately about much more than the immediate gains to livelihoods – it’s also about the sustainable development of an ecosystem that can advance inclusive growth and prosperity for all,” said Valerio Murta, senior vice president of core products for the Middle East and Africa at Mastercard.

The SME sector in the UAE accounted for about 94 per cent of all companies and employed more than 86 per cent of the private sector workforce at the end of 2019, Ministry of Economy data showed. SMEs make up about 95 per cent of all companies in Dubai, employ 42 per cent of the workforce and contribute 40 per cent of the emirate’s gross domestic product, government agency Dubai SME said.

On June 28, Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, announced new initiatives aimed at supporting family companies, helping start-ups and attracting more skilled workers to the UAE. They include an entrepreneurial academy (Skill-Up Academy) and a new platform to support the growth of start-ups (Scale-Up Platform), among other measures.

Besides effective regulatory support, 92 per cent of SMEs in MEA are also looking for support to upskill their teams and 88 per cent want improved telecom infrastructure, the Mastercard research found.

“Collaboration is the key to developing a commercial landscape that is fit for future growth. Through effective partnerships, the public and private sectors can together create a supportive environment where SMEs can thrive,” Mr Murta said.

Through effective partnerships, the public and private sectors can together create a supportive environment where SMEs can thrive

Valerio Murta,
senior vice president of core products for Middle East and Africa at Mastercard

Six in 10 SMEs in the region said private sector initiatives and partnerships would benefit businesses and the markets in which they operate, Mastercard said.

One in three SMEs said collaborating with governments and businesses outside their markets could affect their growth. In southern Africa, this was especially pronounced with more than half (56 per cent) agreeing, the report found.

A public policy paper titled Reimagining support for small businesses, released by the Mastercard Policy Centre for the Digital Economy in partnership with global consulting firm Kearney, recommends how effective policy and innovation can address many of the challenges faced by SMEs serving the business-to-business market.

Recommendations include providing ongoing working capital stability for SMEs, removing barriers that hinder women-owned businesses’ ability to receive capital by allowing different types of collateral and ensuring a safe, secure operating environment for SMEs in terms of cyber security, trust and transparency.

Etihad Credit Insurance extended Dh420 million worth of trade credit to SMEs in the first 11 months of 2020 to help companies protect liquidity amid the pandemic-driven slowdown. Silvia Razgova / The National

The Mastercard research found that more than half of all SMEs across MEA said government-led initiatives could have a positive effect on supporting their businesses.

Federal and local governments in the UAE launched initiatives over the past year to soften the effect of the Covid-19 pandemic on small businesses. Dubai provided stimulus measures worth Dh1.7 billion and Abu Dhabi Executive Council allocated Dh3bn to an SME Credit Guarantee Scheme.

The UAE Ministry of Finance teamed up with Dubai SME, a Dubai Department of Economic Development agency, to support entrepreneurs and SMEs by registering smaller businesses as suppliers to compete in government tenders.

Elsewhere in the region, the Central Bank of Egypt made it easier for SMEs to access capital by encouraging banks to raise their share of loans to micro, small and medium enterprises. The South African government launched a six-month debt relief finance scheme for small, medium and micro enterprises, the researchers said.