Small and medium-sized enterprises (SME s)

Abstract

Small and medium-sized enterprises are useful for both society and a country’s economy. If the governments pay enough attention to these types of enterprises, we will witness great growth and development in countries and this is the main reason why we talk about the importance of governments’ role. Governments play a significant role in developing these enterprises by giving different types of facilities to them; subsidies, technical help, giving promotions and many are the facilities which can be given by governments. We can categorize the enterprises by different scales like the number of employees, capital amount and …. The number of employees in enterprises is a common criterion of categorizing them and the number is various in different countries.

Introduction

Various definitions have been presented for small and medium-sized enterprises but generally, industries that don’t need a big amount of capital for the beginning are called small and medium-sized enterprises or SME s. SMEs also contain fewer complexities than other types of industries. From an economic point of view, these enterprises are so useful. Growth and development of entrepreneurship and innovation, creating new job opportunities, and economic growth are the advantages of SMEs. These enterprises don’t need so many employees to launch. If governments pay enough attention to these industries, make a good political decision and give them various facilities, there will be a great improvement in economy and society living. Helping these enterprises should be on governments’ agenda because helping SMEs leads to economic growth.

Categorizing Small and Medium-Sized Enterprises

The number of employees, the amount of capital owned by enterprises, debts, and annual turnover are the criteria for categorizing these enterprises. The first one, number of employees, is one of the most common criteria in the world but the number is also different in various countries. Based on the World Bank definition, Micro businesses have less than 10 employees and the maximum revenue or annual sales is less than 100 thousand dollars, small businesses or enterprises have about 10 to 50 employees. The maximum annual amount of sales in these businesses is between 100 thousand and 3 million dollars. The maximum amount of income in medium-sized businesses is more than 3 million dollars and less than 15 million dollars and the number of employees in the last category, medium-sized enterprises, is between 50 to 300 people. Numbers and data in European Union are different from the World Bank’s categories. Despite the difference, the number of categories is the same; Micro businesses, Small and medium-sized enterprises. Based on the European Union’s definition, in micro-businesses, the number of people who work is less than 10 which is the same as the definition of the World Bank and the turnover is less than 2 million euros. The number of employees in small enterprises is less than 50 people and the turnover is less than 10 million Euro. Also, the number of employees in medium-sized businesses is less than 250 and the turnover is less than 50 million Euro.

SMEs’ Important Role

Small and medium-sized enterprises are useful for both society and a country’s economy for various reasons.

Creating job opportunities, employing people, creating opportunities for women, families with low income, and decreasing poverty are the results of supporting small and medium-sized enterprises. SMEs play an important role in equitably distributing the income.
In developing countries, these enterprises help to allocate the resources and this process will get done in a more efficient way.

These enterprises support entrepreneurship and the related skills and also improve and develop the processes. Compared to big industries, SMEs have an advantage in geographical scattering which is the main reason for enlarging entrepreneurship. It even prevents economic inequality and decreases it. This is why we say that SMEs help governments to allocate resources in a better way.

Supporting SMEs And The Ways OF Supporting Them

If the governments pay enough attention to these types of enterprises, we will witness great growth and development in countries and this is the main reason why we talk about the importance of governments’ role. Governments play a significant role in developing these enterprises by giving different types of facilities to them; subsidies, technical help, giving promotions and many are the facilities which can be given by governments.

Educational Courses and services are one of the ways to support SMEs; Education, consulting, marketing help, and related services. Services relating to Information Technology (IT) are also helpful for enterprises.
By developing the supply chain, the SMEs connect to big industries. In this connection, the SMEs are the provider or the distributor.
Using and employing local materials and people instead of foreigners is following the local policies. In this type of policy, managers use local materials and employ local people. For instance, consider a local-based company; if the managers and CEOs decide to follow the local supporting policy, they provide their resources by local providers and employ people from that place or area. Generally, they will follow the procedure in a way to use local services.
Governments should also follow women’s leadership policies. Supporting the SMEs managed by women managers is one of these policies.

Conclusion

Small and medium-sized enterprises are a type of industry which do not need a great amount of capital or wealth for beginning or the high number of employees. In addition to those advantages, the small and medium-sized enterprises are helpful for the economy and society and they play a significant role in economic growth. But what is the governments’ role? They can comfort the situation of these enterprises by giving various types of facilities. Supporting the SMEs leads to their growth, development, and enlargement of these industries. Implementing various policies like local content strategy, supporting strategy of SMEs that are managed by women CEOs, developing the supply chain and so many others.