VentureBeat/Ideogram
The investing world has a significant problem when it comes to data about small and medium-sized enterprises (SMEs). This has nothing to do with data quality or accuracy it’s the lack of any data at all. Assessing SME creditworthiness has been notoriously challenging because small enterprise financial data is not public, and therefore very difficult to access…….Continue reading….
By: Taryn Plumb
Source: VentureBeat
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Critics:
In any given national economy, SMEs outnumber large companies by a wide margin and also employ many more people. On a global scale, SMEs make up 90% of all companies and more than 50% of all employment. For example, in the EU, 99% of all businesses are SMEs. Australian SMEs makeup 98% of all Australian businesses, produce one-third of the total GDP (gross domestic product) and employ 4.7 million people.
In Chile, in the commercial year 2014, 98.5% of the firms were classified as SMEs. In Tunisia, the self-employed workers alone account for about 28% of the total non-farm employment, and firms with fewer than 100 employees account for about 62% of total employment. United States’ SMEs generate half of all U.S. jobs, but only 40% of GDP.
Developing countries tend to have a larger share of small and medium-sized enterprises. SMEs are also responsible for driving innovation and competition in many economic sectors. Although they create more new jobs than large firms, SMEs also suffer the majority of job destruction/contraction.
According to the World Bank Group’s 2021 FINDEX database, there is a $1.7 trillion funding gap for formal, women-owned micro, small, and medium-sized enterprises. Additionally, over 68% of small women-owned firms lack access to finance. SMEs are important for economic and social reasons, given the sector’s role in employment.
Due to their size, SMEs are heavily influenced by their Chief Executive Officer (CEOs) or managing director. The CEOs of SMEs are often the founders, owners, and managers of the SMEs.
The duties of the CEO in a SME mirror those of the CEO of a large company: the CEO needs to strategically allocate their time, energy, and assets to direct the SMEs. Typically, the CEO is the strategist, champion and leader for developing the SME or the prime reason for the business failing.
The European Union sees SMEs as playing a crucial role in powering economic growth, innovation and transition to more knowledge-based economic structures. At the employee level, Petrakis and Kostis (2012) explore the role of interpersonal trust and knowledge in the number of small and medium enterprises. They conclude that knowledge positively affects the number of SMEs, which in turn positively affects interpersonal trust.
The empirical results indicate that interpersonal trust does not affect the number of SMEs. Therefore, although knowledge development can reinforce SMEs, trust becomes widespread in a society when the number of SMEs is greater.
Medium- or mid-sized enterprises which have grown beyond the scale of a “small business” may have different support needs from those of small businesses, and their contribution to the local and national economy where they operate may also be quite distinct from the contribution of a smaller business.
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