Scribd
Upload
21 views

Background

Small and mid-size enterprises (SMEs) play an important role in economies globally. SMEs make up 98% of businesses in Kenya and contribute 30% of jobs and 3% of GDP. They are also a large employer and driver of economic growth in other countries like Canada and the US, creating over 75% of new jobs.

Uploaded by

Wambua Joseph
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
21 views

Background

Small and mid-size enterprises (SMEs) play an important role in economies globally. SMEs make up 98% of businesses in Kenya and contribute 30% of jobs and 3% of GDP. They are also a large employer and driver of economic growth in other countries like Canada and the US, creating over 75% of new jobs.

Uploaded by

Wambua Joseph
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 11

Small and Mid-size Enterprise

(SME)?

Small and mid-size enterprises


(SMEs) are businesses that
maintain revenues, assets or a
number of employees below a certain
threshold. Each country has its own
definition of what constitutes a small
and medium-sized enterprise (SME).
Certain size criteria must be met and
occasionally the industry in which the
company operates in is taken into
account as well.

Though small in size, small and mid-


size enterprises (SMEs) play an
important role in the economy. They
outnumber large firms considerably,
employ vast numbers of people and
are generally entrepreneurial in
nature, helping to shape innovation.
Kenya’s 2017 overall GDP growth is
projected at 6.4 percent with SMEs
contributing 3 percent.
A recent National Economic Survey
report by the Central Bank of Kenya
(CBK) indicate that SMEs constitute
98 percent of all business in Kenya ,
create 30 percent of the jobs annually
as well as contribute 3 percent of the
GDP.
According to the 2014 survey, 80
percent of the 800,000 jobs created
in the year came from the informal
sector which is dominated by the
SMEs.
“Overall, these businesses help many
Kenyans from suffering
unemployment while boosting their
incomes. Yes, there are challenges
but we create jobs as well for others,”
observed Sheila Njuki, a business
owner in Nairobi’s Jevanjee area
where she sells items for interior
décor and related items.
Understanding Small and Mid-size
Enterprise
(SME)
In the United States, there is no
distinct way to identify small and mid-
size enterprises (SMEs). The
European Union (EU) offers clearer
definitions, characterizing a small-
sized enterprise as a company with
fewer than 50 employees and a
medium-sized enterprise as one with
less than 250 employees. In addition
to small and mid-size companies,
there are micro-companies, which
employ up to 10 employees.
Just as the requirements for the
categories differ per nation, so do the
names and abbreviations. SME is
commonly used by the EU, the
United Nations (UN), and the World
Trade Organization (WTO), whereas
in the United States these firms are
frequently referred to as small-to-mid-
size businesses (SMBs). Elsewhere,
in Kenya, they go by the name
MSME, short for micro, small, and
medium-sized enterprises, and in
India, it is MSMED, or micro, small,
and medium
enterprise development. Despite the
differences in nomenclature,
countries share the commonality of
separating businesses according to
size or structure.

Special Considerations
Small and mid-size enterprises
(SMEs) are often considered to be
the heartbeat of both emerging and
developed economies. They are
responsible for providing many jobs
and in the U.S. contributed 46% of
private non-farm gross domestic
product (GDP) in 2008.
Jobs and GDP
Many people in emerging economies
find work in small and mid-size
enterprises (SMEs). SMEs contribute
roughly 45% of total employment and
33% of GDP in these countries,
according to the Organisation for
Economic Co-operation and
Development (OCED).
The importance of small and mid-size
enterprises (SMEs) is not limited to
emerging
nations. Between 2002 and 2012,
small and mid-size enterprises
(SMEs) created 77% of new jobs in
Canada, nearly the same percentage
as in most emerging economies.
These companies are vastly
important to the country's well-being,
both in terms of creating jobs and
generating tax revenues. The same is
true in the U.S., where small
businesses accounted for 64% of the
net new jobs created between 1993
and 2011.
Government Incentives
Life as a small and mid-size
enterprise (SME) isn’t always easy
though. These businesses generally
struggle to attract capital to fund their
endeavors and often have difficulty
paying taxes and meeting regulatory
compliance obligations.
Governments recognize the
importance of small and mid-size
enterprises (SMEs) in the economy
and regularly offer incentives,
including favorable tax treatment and
better access to loans, to help keep
them in business.
They also offer education programs,
coaching small and mid-size
enterprise (SME) business owners on
how to make their businesses grow
and survive, as well as special audit
programs to target high-risk areas
and boost tax compliance.

You might also like