Investors say the lack of knowledge must be addressed
An ability to raise finance may be one of the key challenges facing Middle East start-ups but there are others, including a lack of education and financial knowledge on the part of budding entrepreneurs.
An October 2014 report by Wamda Research Lab found a key criticism from more than one third of funders that were approached by new start-ups was that would-be entrepreneurs did not know how to effectively pitch their ideas and had risky business models.
It further claimed that 56 per cent of investors felt that entrepreneurs in Middle East and North Africa (Mena) region generally lack strategic planning and decision-making skills, while 44 per cent pointed to entrepreneurs not having adequate financial literacy skills
It is an issue Shehab Marzan, the founder of the Cairo-based Sahria-compliant crowd-funding firm Shekra, knows well.
“There is a lack of education. There is a lack of formal and informal education providing the base tools needed by entrepreneurs. This refers mainly to financial literacy but also in terms of technical skills and soft skills,” he says.
Despite the launch of a large number of regional initiatives addressing this lack of skills, which include start-up incubators, competitions, non-profit organisations, universities and government initiatives, challenges remain, he says.
Shekra has a mentoring programme for new SMEs, allowing new chief executives to work with both internal and external mentors, which in many cases are not just established businessmen or women but often actually investors in the company.
The World Bank says it is working with public and private sector stakeholders to expand Mena SMEs’ access to public procurement, launching an ambitious regional programme last year with the support of a US$750,000 grant from the micro, small and medium-size enterprise facility of the Arab World Initiative.
The bank – working in cooperation with members of the Arab Administrative Development Organisation – is supporting governments across Mena to establish an innovative training program aimed at encouraging SMEs to participate in public procurement.
A major component of this programme, which is led by the Mena Network of Public Procurement Experts, focuses on capacity building.
Last year, members of training institutes and government officials from Morocco, Tunisia, Egypt, Yemen, the Kurdistan Regional Government of Iraq, Lebanon, Jordan, Djibouti and the Palestinian Territories met in Sharjah to participate in the “training of trainers” event.
At the event, it was agreed that training materials would be customised to meet the specific needs of SMEs in different countries, after which the training would be offered to local SMEs.
The World Bank says SMEs could play a vital role in helping address the youth jobs’ crisis in Mena, where 40 per cent of young adults are neither in full-time education nor employment.
The institution says it is therefore important to explore new avenues, such as public procurement, to support them.
Giving SMEs the chance to bid for government contracts – and win them – could increase the amount of business they do, creating local jobs, it adds. “Local populations could benefit, too, as SMEs are well-positioned to provide goods and services in areas governments find less easy to serve,” the bank says.
* Orlando Crowcroft
