Small and mid-size enterprises (SMEs) maintain revenues, assets, or several employees below a certain threshold. Each country has its definition of what constitutes a small and medium-sized enterprise.
SMEs must meet certain size criteria, and occasionally the industry in which the company operates is also taken into account. Small and mid-size enterprises can exist in almost any industry, but they are more likely to reside within industries requiring fewer employees and smaller upfront capital investments.
Small SMEs play an important role in the economy. They outnumber large firms considerably, employ vast numbers of people, and are generally entrepreneurial, helping to shape innovation.
The creation of employment has always been the central challenge of most governments of African countries for the past decades. However, such a challenge is gradually fading out due to the efforts of Small and Medium Enterprises.
The creation of job opportunities in most African countries is from SMEs. SMEs are seen to contribute immensely to reducing the rate of unemployment and poverty.
In developing countries such as Kenya, small and mid-size enterprises go by the name MSME, short for micro, small, and mid-size enterprises.
Many people in emerging economies find work in small and mid-size enterprises (SMEs). SMEs contribute roughly 50% of total employment and 40% of GDP in these countries, according to the Organization for Economic Co-Operation and Development (OCED).
A common form of intervention to improve access to finance for SMEs is a public credit guarantee scheme. Credit guarantee schemes provide third-party credit risk mitigation to lenders by absorbing a portion of the losses on the loans made to SMEs in case of default in return for a fee.
CGS are popular partly because they combine a subsidy element with market-based arrangements for credit allocation. This allows less room for distortions in credit markets, unlike more direct forms of intervention, such as state-owned banks.
Credit guarantee schemes are present in more than half of developing countries. Their numbers are growing. Governments have become interested in CGSs in the aftermath of the global financial crisis and amid the international community’s emphasis on SMEs as an engine for growth and job creation in developing countries. However, to be effective, CGSs need to be designed and implemented in a financially sustainable manner.
Development towards the economy is seen in various ways like the nurturing of young entrepreneurs, absorbing about 70 percent of the total population of the country on employment, therefore, reducing the rate of criminal activities and unemployment rate in the country, supporting and creating an enabling environment for building up some systematic, productive capabilities for resilient economic systems through interconnections and linkages among themselves (SMEs).
Small-medium enterprises have a huge potential to address the socioeconomic challenges facing developing economies but have yet to be fully maximized.
Small and medium enterprises have the opportunity to offer more contributions towards the development of emerging economies continually.
Subsequently, a roadmap for various stakeholders and successive governments should offer more governmental assistance that these small and medium enterprises would need to ensure the smooth flow of such contributions.
