Micro, small and medium-sized enterprises (SMEs) come in all different flavours and forms, from traditional artisans and retailers with few or no paid employees, to mid-sized manufacturing firms and high-growth firms offering innovative goods, services or business models. Entrepreneurs are also driven by different motivations, broadly ranging from those who aim to seize an opportunity to those who lack alternatives to earn an income.
MED economies increasingly recognise the social and economic role of SMEs and entrepreneurs, and devise actions to support them. The SME Policy Index for the MED region has documented these actions in 2008 and 2014. This interim assessment constitutes an update of major reforms implemented between 2014 and 2018 and identifies pending areas for action. Its conclusions are intended to inform MED governments and their partners of the priorities ahead. The report is also an effort to continue and strengthen the co-operation among MED partners, the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU).
Major takeaways from this report, corresponding to each of the policy areas covered, are as follows:
MED economies continue putting into place the building blocks of SME and entrepreneurship policy (definitions, statistics and institutions), although with very different levels of advancement. For example, Morocco has had for several years a legal and strategic framework for SME policy benefiting from a relatively effective system of consultation and coordination mechanisms. Tunisia, to mention another case, is building such a system based on the strong dialogue ethos build over the past few years through its political and economic transition.
MED economies could in general do more to maximise the resources already devoted to SME and entrepreneurship support by enhancing co-ordination among the many policy actors. This could include mechanisms comprising co-ordination at the highest political level, technical collaboration among national and sub-national agencies, and inclusive public-private dialogue platforms that are representative of the diversity of SMEs and entrepreneurs.
MED economies can also improve SME definitions and statistics by adopting international practices (e.g. definitions officially recognised and uniformly used) and increasing efforts to disseminate data and information. The SME Observatories being established across the region are a useful initial effort in that respect.
Whereas most MED economies have undertaken efforts to improve the business environment by simplifying business start-up and bankruptcy procedures, more can be done to simplify the regulatory environment.
Regulatory impact analyses (RIAs) exist, to varying degrees, in Egypt, Israel, Jordan and Tunisia. However, no economy yet implements the “SME test” (a system for assessing the impact of laws and regulations on SMEs). The introduction and expansion of RIA and the SME test remain a priority.
There are also varying levels of effort to facilitate procedures for enterprise creation, particularly through the introduction of single identification numbers and online registration, in five MED economies (Algeria, Egypt, Israel, Morocco and Tunisia). However, more work is needed to establish and expand one-stop-shops for business creation.
Egypt, Jordan, Israel, Morocco and Tunisia have adopted new bankruptcy laws. However, the Doing Business indicators on Resolving Insolvency indicate that this is one of the most difficult areas in the business environment across the region. Hence, the full implementation of the new regulatory frameworks will be critical.
Major reforms have been undertaken to improve the legal and regulatory framework for access to finance in most MED economies. The most notable example is that of the recent reforms by PA, which has established a registry of moveable assets and passed a secured transactions law. Because of these reforms, PA now performs at a higher level than its regional peers in this area in Doing Business. Furthermore, initiatives to increase the availability of equity finance were introduced, especially in Lebanon and PA.
In this area, the region could in general continue bridging information asymmetries by creating and expanding credit bureaus and registries of moveable assets so that SMEs and entrepreneurs can access credit more easily.
MED economies could also work towards a greater diversity and reach of different sources of finance (credit, equity and hybrid instruments). This could include encouraging private sector participants to take on a greater role in the financing of SMEs and entrepreneurship. Indeed, the state continues to be the main actor, especially in terms of credit guarantee schemes but also in equity investments.
A number of measures have been introduced to foster SME growth and entrepreneurship. These include the expansion of business development services in Lebanon and PA and the introduction of a comprehensive programme for entrepreneurship in Morocco. They also include several actions in almost all MED economies to facilitate SME access to public procurement and to promote exports.
MED economies could further ease access to information on all the different support services and programmes by consolidating that information and disseminating it. This can be done in many ways, including the publication of leaflets and the establishment of consolidated web portals. SME Observatories could play an important role in this regard.
More could be done to implement e-procurement systems and track the extent to which specific measures have actually benefited SMEs. Procurement observatories could be a useful tool in order to assess the effectiveness of these measures.
All MED economies have progressed well in developing policy frameworks to develop entrepreneurial human capital. However, challenges remain, including 1) the implementation of policies by partnerships including all relevant stakeholders and 2) data collection and analysis on training provision and its effectiveness.
Building entrepreneurship as a key competence is the next challenge for policy makers and schools. It is about cultivating an entrepreneurial attitude characterised by a sense of initiative and agency, and proactivity in achieving projects. MED economies need also to move from project-based initiatives to a systemic approach by inserting entrepreneurial learning into the national curricula at all levels of education.
Momentum is growing in women’s entrepreneurship. MED economies need to develop comprehensive policy responses in the economic context (beyond the social, gender-equality agenda) and to move beyond individual policy measures and actions. Development measures to build skills and competence should go beyond general SME training courses and include mentorship, coaching, network support – and the creation of enabling systems for women’s entrepreneurship that foster growth and innovation of women-led and women-owned enterprises.
More developed data on SME training, particularly in terms of export potential, is required in all countries. Further, trade and SME policies require alignment to ensure training meets external trade interest, to include a closer interface with the vocational training environment, and particularly to address quality improvements in sectors with improved export potential.
