DRAFT NATIONAL STRATGEGY FOR

ENTREPRENEURSHIP AND SMALL, MICRO AND MEDIUM

ENTERPRISE (SMME) DEVELOPMENT IN JORDAN 2013-
2017

Draft February 4, 2013

Prepared for the Jordan Enterprise Development Corporation (JEDCO)

Submitted by Lois Stevenson

Under contract for the project “Providing Long-Term Technical Assistance to Jordan Enterprise Development
Corporation to Support the Implementation of the Support to Enterprise and Export Development Programme
(SEEDP)”

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Table of Contents

ABBREVIATIONS AND ACRONYMS.............................................................................................vi

FOREWORD.....................................................................................................................................viii
EXECUTIVE SUMMARY..................................................................................................................ix

CHAPTER 1: CONTEXT FOR THE DEVELOPMENT OF ENTREPRENEURSHIP AND SMMEs 1

Context for Private Sector and SMME Development in Jordan.........................................................2
Rising levels of economic freedom................................................................................................2
Declining global competitiveness..................................................................................................3
Diminishing performance on ease of doing business rankings.......................................................4
Rationale for a National Strategy on Entrepreneurship and SMME Development............................6

CHAPTER 2: CURRENT STATUS OF THE SMME SECTOR..........................................................9

Statistical Review of the SMME Sector...........................................................................................10
Number of SMMEs and Distribution by Employment Size.........................................................10
Growth in the Number of SMMEs...............................................................................................11
SMME Contribution to Employment...........................................................................................12
SMMEs and Employment by Sector............................................................................................13
Scale of SMME Revenues and Exports.......................................................................................13
Self-Employment Trends.............................................................................................................14
Entrepreneurial Activity Rates.....................................................................................................14
Level of Informality.....................................................................................................................15
Constraints Facing the Development of Entrepreneurship and SMMEs..........................................16
1. Weak entrepreneurial culture...............................................................................................17
2. Lack of entrepreneurial/ management skills and adequate business support........................18
3. Lack of access to capital and finance, including start-up capital..........................................18
4. Lack of innovation and technology know-how and access to modern technology...............19
5. Access to markets................................................................................................................19
6. Legal, regulatory and administrative challenges..................................................................20
Challenges faced by new start-ups and young enterprises in the first three years of operation....21
Challenges affecting women’s entrepreneurship..........................................................................22

CHAPTER 3: THE LANDSCAPE OF ENTREPRENEURSHIP AND SMME SUPPORT

PROGRAMMES, INITIATIVES AND DELIVERY MECHANISMS...............................................24
Overview.........................................................................................................................................24
Assessment of Business Support Provision.....................................................................................25
Assessment of SMME Financing Assistance...................................................................................27

CHAPTER 4: OUTLINE OF THE STRATEGIC FRAMEWORK FOR ENTREPRENEURSHIP

AND SMME DEVELOPMENT..........................................................................................................30
SMME Definitions..........................................................................................................................30
Guiding Principles of the Strategy...................................................................................................31
Strategy Vision................................................................................................................................32
Strategic Goals.................................................................................................................................32
Strategic Objectives.........................................................................................................................32
Target Groups..................................................................................................................................32
Critical Focus Areas........................................................................................................................33

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 Implementation Mechanisms...........................................................................................................33

CHAPTER 5: ARTICULATION OF THE STRATEGIC FRAMEWORK.........................................35

I. Target Groups – Objectives and Approach..............................................................................35
1. New entrepreneurs...............................................................................................................35
2. Microenterprises..................................................................................................................39
3. Small and medium enterprises.............................................................................................40
4. High-growth potential and innovative SMMEs....................................................................41
II. Key Focus Areas –Objectives and Action................................................................................43
1. Improving the legal and regulatory environment.................................................................43
2. Entrepreneurship awareness and culture-building................................................................46
3. Entrepreneurial/management skills and business development support...............................48
4. Financing access..................................................................................................................51
5. Innovation capacity and technology adoption/development.................................................55
6. Market access.......................................................................................................................57

CHAPTER 6. GOVERNANCE AND IMPLEMENTATION MECHANISMS..................................69

Effective oversight and coordination...............................................................................................69
1) Interministerial Council on Entrepreneurship and SMME Development.............................69
2) Role of JEDCO....................................................................................................................70
3) Formation of public-private sector entrepreneurship and SMME development support
networks......................................................................................................................................71
Adequate Business Support Infrastructure and Effective SMME Support Services.........................71
Communications Plan and Creation of an SMME Web Portal........................................................71
Monitoring and Evaluation..............................................................................................................72

CHAPTER 7: IMPLEMENTATION ACTION PLAN.......................................................................75

REFERENCES....................................................................................................................................77

ANNEXES..........................................................................................................................................81
Annex 1. Changes in rank on “Doing Business” indicators from 2007 to 2013, Jordan..................82
Annex 2.SMME Sector Statistics....................................................................................................83
Annex 3. Matrix of major entrepreneurship and SMME support providers and programmes in
Jordan..............................................................................................................................................96

List of figures

Figure 1. Jordan’s comparative rank with other Arab countries on “Doing Business” from 2007 to
2013.......................................................................................................................................................5
Figure 2. Distribution of non-agricultural enterprises by employment size, 2011...............................10
Figure 3. Entrepreneurship and SMME Development Framework......................................................34
Figure 4. Programmatic framework for entrepreneurship and SMME development............................65
Figure 5. Structure of the Interministerial Council on Entrepreneurship and SMMEs.........................70
Figure A2.1. Changes in the number of private enterprises by size, 2000-2010..................................87
Figure A2.2. Share of enterprises of different sizes varies from year to year, 2000-2010……………87
Figure A2.3. Growth in the number of enterprises slowed down in the second half of the decade,
2000-2010.................................................................................................................................88

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Figure A2.4. Number of private enterprise workers by enterprise-size category, 2000-2010..............88
Figure A2.5. Share of private enterprise employment by enterprise size, 2000-2010..........................89
Figure A2.6. Growth in private sector employment by enterprise-size category, selected periods from
2000 to 2010..............................................................................................................................89
Figure A2.7. Jordan has relatively low self-employment rate
Figure A2.11. Early-stage entrepreneurial activity rates by gender

List of tables

Table1. Economic freedom in MENA countries....................................................................................3

Table2. Changes in economic freedom scores, Jordan, 2008 to 2013....................................................3
Table 3. Net change in number of private enterprises and their employment by enterprise size, 2000-
2010...........................................................................................................................................13
Table A2.1. Legal structure of enterpises by enterprise-size...............................................................83
Table A2.2. Number of active establishments by governorate and employment size, Jordan 2011.....85
Table A2.3. Active establishments by employment size, 2006 and 2011............................................87
Table A2.4. Number and share of private enterprises by sector and size, 2010...................................91
Table A2.5. Number and share of private enterprise employees by sector and enterprise size, 2010. .92
Table A2.6. Active establishments by revenue size and distribution, 2006 and 2011..........................93

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ABBREVIATIONS AND ACRONYMS
BDC Business Development Centre
BDU Business development units
BTI Bertelsmann Transformation Index
DEF Development and Employment Fund
DOS Department of Statistics
EJABI Euro-Jordanian Advanced Business Institute
EU European Union
FDI Foreign direct investment
FTA Free Trade Agreement
GCI Global Competitiveness Index
GDP Gross domestic product
GEM Global Entrepreneurship Monitor
GEW Global Entrepreneurship Week
GPA Government Procurement Agreement
HCST Higher Council for Science and Technology
HGPIE High-growth potential and innovative enterprise
ICT Information and communications technology
IT Information technology
ITC International Trade Centre
JD Jordanian dinar
JEDCO Jordan Enterprise Development Corporation
JFBPW Jordan Forum for Business and Professional Women
JHDR Jordan Human Development Report
JIC Jordan Innovation Centres
JSMP Jordan Services Modernization Programme
JUMP Jordan Upgrading and Modernisation Programme
KAB Know About Business
ME Microenterprise
MENA Middle East and North Africa
MFI Microfinance institution
MIT Ministry of Industry and Trade
NES National Employment Strategy
MNE Multinational enterprise
MOPIC Ministry of Planning and International Cooperation
NE New entrepreneur
NGO Non-governmental organisation
PSUT Princess Sumaya University for Technology
QIZ Qualifying Industrial Zone
QRCE Queen Rania Centre for Entrepreneurship
R&D Research and development
RSS Royal Scientific Society
SBA Small Business Administration
SDP Supplier development programme
SME Small and medium enterprise

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SMME Small, micro and medium enterprise
TEA Total early-stage entrepreneurial activity
USAID United States Agency for International Development
WTO World Trade Organisation
YEA Young Entrepreneurs Association

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 FOREWORD
Development of a coherent national SMME development strategyfor Jordan was one of the
components to be supported under the European Union (EU)-funded project with the Jordan
Enterprise Development Corporation (JEDCO), “Providing Long-Term Technical Assistance to
Jordan Enterprise Development Corporation to Support the Implementation of the Support to
Enterprise and Export Development Programme (SEEDP)”. An external consultant was contracted
under the terms of the EU-JEDCO project to review the current state of the SMME sector in Jordan,
examine the existing structure for entrepreneurship and SMME support (e.g. policy measures,
financial and non-financing assistance programmes, support organisations), conduct analysis of
international SMME development strategies and practices,and draft a national SMME development
strategy. A local legal consultant was contracted to draft the terms of a national SMME Law. Both of
these initiatives, the national SMME strategy and the SMME Law, are firsts for Jordan.
Input for development of the strategy was obtained from several sources:
 Study mission to Jordan in February 2012, which involved interviews with 46 officials in 24
stakeholder organisations (ministries, government agencies, financial institutions, business
associations, chambers of commerce and industry, incubators, business support providers,
economic development organisations, etc.) to gain information about their entrepreneurship
and SMME development activities, and to capture their views on the major SMME and
entrepreneurship development challenges in Jordan, the specific needs of SMMEs (including
start-ups), the policy and programme gaps that should be addressed in a national SMME
strategy, and the concept of having an SME Law.

 Two consultation roundtable workshops attended by 23 representatives of sector and business

associations, organised and hosted by JEDCO on February 26, 2012 for the purpose of
seeking input on the major SMME development challenges, priorities to be addressed in the
national SMME development strategy, and issues to be covered by an SME Law.

 Interviews with relevant ministries responsible for laws affecting the development of SMMEs
and examination of the related laws (e.g. Sales Tax Law, Income Tax Law, Companies Law,
Social Security Law, Customs Law, Traditional Crafts and Industries Law, Investment
Promotion Law, Chambers of Commerce and Industries laws, the JEDCO Act, etc.) (carried
out by the local consultant).

 Review of statistical data on SMMEs, self-employment and entrepreneurial activity in Jordan.

 Mapping of the existing business support environment (e.g. organisations, entrepreneurship

and SMME support programmes and services).

 Review of the literature, including studies, related government strategies, donor and
government reports and documents.

 Consultations with JEDCO officials during the process of drafting the national strategy and
the SMME law.

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EXECUTIVE SUMMARY
Small, micro and medium enterprises (SMMEs) are routinely described as the backbone of a nation’s
economy. In countries around the world, SMMEs comprise 90% or more of all private enterprises and
a global average of 45% of formal, permanent, full-time jobs, increasing to 66% if informal
employment is included. Studies also find that small firms generate the most new jobs, with the
highest growth in job creation coming from young firms that are five years old or less. The dynamic
effect of the entry and exit of enterprises also drivescompetition and innovation, and is considered
essential to the process of a country’s economic renewal. Furthermore, studies find that SMMEs
produce innovations with significantly higher productivity and cost-effectiveness than large firms.The
flexibility of SMMEs, their simple organisational structure, their low risk and receptivity are seen as
the essential features facilitating them to be innovative. SMME are also a vehicle for the diffusion of
entrepreneurial spirit and skills, and help to reduce economic disparities between urban and rural areas
through their employment impacts.

Although SMMEs dominant in most economies their smaller size places them at a
disadvantagerelative to large firms. The SMME sector is generally more vulnerable to market failures
and external shocks, especially in environments where the policy and institutional framework
conditions are not favourable. In cases where market forces are not properly allocating resources and
institutional structures are not appropriately meeting the development needs of SMMEs, government
actions to remedy the situation are justified as an uneven playing field for the growth of SMMEs will
hinder investment and employment and lead to lower pro-poor growth.

The development of SMMEs is increasingly recognised as important to the economic, social and
human development of Jordan anda clear priority of the government. Supporting SMMEs is identified
in the National Agenda 2006-2015 as one of the elements of a holistic approach to stimulate economic
development and improve social welfare and security. The Executive Development Plan 2011-2013
states “empowering and building the capacity of SMMEs” and “stimulating new start-ups” as short-
term objectives for enhancing the competitiveness of the national economy, noting that the challenge
is to increase investments in high-valued sectors in order to create more job opportunities. SMME
development is also a tool for alleviating some of the economic and social disparities between the
various regions of Jordan.

The Current Status of the SMME Sector

The first major observation is that the density of SMMEs (25.6 per 1,000 inhabitants) in Jordan is low
compared to the global average and for a country at Jordan’s level of economic development.
Secondly, an analysis of SMME sector trends reveals very slow growth in the net stock of non-
agricultural enterprises over the past five years – an annual average increase of only 1.3% from 2006
to 2011. Net growth in the number of enterprises is the end product of a dynamic that reflects the
entry of new businesses (start-ups) and the survival rates of new and existing businesses.
Unfortunately, due to the lack of relevant statistical data on this dynamic in Jordan, it is not possible
to assess the underlying factors in the slow growth rate in the stock of enterprises. However, it is
noted that the net growth in number of enterprises was lowest for those with 1-4 employees (annual
average of just over 1%). On the other hand, the net stock of enterprises with 10-19 employees, 20-49
employees and more than 100 workers has increased by an average of about 4% a year in each of the
size categories. This could indicate a slower rate of new business start-ups (since it might be assumed
that start-ups generally fall in the 1-4 employee enterprise category) and/or the movement of
enterprises from one size class to another. Furthermore, growth in the net stock of enterprises slowed

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considerably in the second half of the decade, compared to the 2000-2005 period, a trend that would
be threatening to Jordan’s future growth if it was to continue.

Thirdly, employment in non-agricultural private enterprises grew by an annual average of 2% from

2005 to 2010, again at a much slower growth than during the 2000-2005 period (annual average of
6.5%). This is also a trend of concern. The share of employment in enterprises with 100 or more
employees has been increasing while the share of employment from enterprises with fewer than 50
employees has been shrinking. However, the end result is that the average firm size has increased
from 3.9 employees in 2000 to 4.6 employees in 2010.

Fourthly, over the 2000-2011 period, the number of self-employed persons increased by an annual
average of 1.3%, again at a very slow rate. Overall, self-employment rates have dropped from 17.1%
of employment in 2000 to 15.2% in 2011 and the actual number of self-employed persons has been on
the decline since 2009. This suggests that self-employment is growing at a slower pace that overall
employment. Women make up less than 5% of self-employed persons, which is exceedingly low
compared to their participation in self-employment activity in other countries. However, over the past
ten years, although their numbers are very small, Jordanian women have been becoming self-
employed at more than three times the rate of men, suggesting that self-employment is becoming a
more attractive employment option for Jordanian women.

Fifthly, the prevalence rate of early-stage entrepreneurs in the adult population(percentage of adults in
the process of trying to start a business combined with the percentage of adults who own a young
business of no more than 42 months old) is lower than might be theoretically expected for a country at
its level of development. This suggests room for boosting entrepreneurship promotion efforts.

Constraints to entrepreneurship and SMME development

Although SMMEs are dominant in Jordan, their small size distribution, particularly the dominance of
enterprises with fewer than five workers, places them at a disadvantage relative to large enterprises.
They have fewer internal resources and less capacity to complete in global markets and suffer from a
lack of management skills, financing, and technology that limits their survival and growth potential.
The majority of SMMEs focus on the production of traditional, low value-added goods with mediocre
quality, serving local markets, and competing on the basis of price. Very few have the capacity to
compete in international markets. The vast majority do not have any quality control systems in place
or follow quality control procedures that are in compliance with international quality certification
systems. They do not invest heavily in technologies that will add value to their products and overall
economic performance, and exhibit low levels of technology utilisation.

Apart from internal constraints, the ability of SMMEs to function effectively is also impacted by
external factors. These include the markets in which they operate (e.g. entry barriers, competition);
policies, laws and regulations affecting business activities, which do not sufficiently consider the
impact on smaller enterprises in their development and implementation; and the organisational and
institutional arrangements surrounding the enterprise (e.g. business support entities and services,
financial mechanisms, etc.), with an uneven availability of these supports at the regional level.

There are few empirical studies of Jordanian SMMEs, however, consultations with business and
sector associations, government officials and SMME support providers reveal consensus on the major
obstacles acting as barriers to SMME development are:

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  A weak entrepreneurial culture;
 Lack of financing;
 Lack of entrepreneurial and management skills and capacity, coupled with inadequate access
to business development, advisory and diagnostic support services, especially in the
governorates;
 Market access;
 Lack of innovation and technology adoption/development; and
 Legal, regulatory and administrative challenges.

These barriers are magnified for new enterprises, which can have a deleterious effect on business
start-up rates and the survival and growth opportunities of new entrepreneurs. Women and young
people starting businesses are even more seriously impacted because of their lack of experience,
management skills, participation in formal business networks, and credibility.

In addition, Jordan stakeholders emphasise the high input costs (e.g. cost of energy); the lack of
appropriately skilled labour due to an education and training system that is not adequately preparing
graduates with “employability skills”; and the low commitment/investment of SMMEs in training
their workers, all of which reduce their productivity and competitiveness.

The Current Entrepreneurship and SMME Support Landscape

The entrepreneurship/SMME support system in Jordan is comprised of a number of government and

non-governmental organisations offering project-based programmes to address the financial and
business support needs of SMMEs. A large number of these organisations and programmes were put
in place since 2000, many only since the mid half of the first decade, so are relatively recent.
However, there is a number of existing good support initiatives to promote and support
entrepreneurship and SMME development at various stages of the business cycle. These include
entrepreneurship education and culture-building initiatives; start-up support; training and counselling;
consultancy and upgrading assistance; innovation support; export development assistance; and
financing support.

On the other hand, it appears that most programmes have limited reach in terms of beneficiaries and
access in many parts of Jordan. Access to support programmes isoften through a competitive process
and non-selected, but promising applicants have few other avenues for professional guidance. There is
no mechanism for coordinating the range of service providers and programme efforts, which can
result in sporadic and geographically unevensupport offerings, as well as hinder policy learning and
the capacity to identify and fill gaps and scale-up good initiatives.In addition, a number of the
organisations delivering SMME support initiatives are dependent on donor or other project-based
funding, which affects the continuous, sustained delivery of their programmes and services.Only a
few organisations and/or programmes target the development of women entrepreneurs.

Missing in the entrepreneurship/SMME support system is a single-entry point, “walk-in” business

resource centre where potential and new entrepreneurs and existing SMMEs can readily access
general business information, support services and referral guidance to different service providers
based on their individual needs. The closest example in Jordan is the IRADA network of 32 offices in
the governorates, but their mandate limits them to working with micro and small enterprises with less
than JD 100,000 of investment. More open access to business development centre networks are
commonly supported by governments in countries around the world in order to provide accessible and

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seamless access to a larger number of entrepreneurs and SMMEs. This gap needs to be filled in
Jordan and would lead to more streamlined support and access to assistance, plus expanded reach.

In spite of efforts to improve SMMEs’ access to financing through microfinance, loan guarantees,
government grant and subsidy schemes to boost SMME activity, and the launch venture capital funds,
the financial market for SMMEs is severely underdeveloped. The unmet demand for microfinance is
estimated at JD 150 million to JD 200 million, bank lending to SMMEs comprises less than 10% of
the business loan portfolio, the volume of loan guarantees to GDP is only 0.07% (below the
benchmark in several other developing MENA countries), and new venture capital funds are only
sizeable enough to make a few investment.

Until now, the government’s efforts to develop the SMME sector have not been guided by a coherent
national SMME policy framework and there is no central mechanism inside government for designing
and monitoring the development of a holistic SMME policy. Policies affecting development of
SMMEs are embedded in other policy frameworks, but the lack of a coordinating policy body leads to
fragmentation of policy effort and programme development. Thus, there is currently no clear policy
direction for SMME development in the Kingdom.

The draft National Strategy for Entrepreneurship and SMME Development in Jordan 2013-2017
provides a framework and guidance for the government’s future actions and also for those of other
relevant stakeholders. The strategy establishes a set of goals and objectivesthat will lead to the growth
and strengthening of the SMME sector so that it can meet its full potential for creating employment,
adding value, innovating, and contributing to Jordan’s economic growth.

The Strategy

Strategy Vision

The vision for the strategy is “to create an environment conducive for SMMEs to grow and
entrepreneurship to flourish, in both urban and rural areas, in order that they may contribute more
fully to the generation of jobs, economic wealth and the socio-economic well-being of the Kingdom”.

For the purposes of the strategy, a unified definition is proposed for a micro, small, and medium
enterprises, which has been lacking in Jordan.

 Microenterprise – Fewer than 10 permanent workers and no more than JD 200,000 in

turnover

 Small enterprise –10-49 permanent workers and/or between JD 200,000 and JD 2.5 million
in turnover

 Medium enterprise -50-300 permanent workers and/or between JD 2.5 million and JD 15
million in turnover

Guiding Principles of the Strategy

The National Strategy for Entrepreneurship and SMME Development in Jordan 2013-2017 is drafted
in accordance with the following guiding principles.

 It is consistent with and contributes to the national strategic directions for the Kingdom and
builds on the existing SMME support infrastructure and delivery system, with provisions for
expanding its reach and capacity and improving its coordination.

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  It is a national strategy and provides guidance about appropriate actions for all public and
private stakeholders.
 It addresses the priority needs of SMMEs and the market and systemic failures impeding their
sustainability and growth.
 It is inclusive of SMMEs in all economic sectors.
 Policy measures are tailored to meet the specific needs of SMMEs of different sizes
(including microenterprises) and in different stages of the entrepreneurial and business
development from pre-start-up to start-up to early-stage survival and growth to launching into
export markets.
 Entrepreneurship development is a central part of the strategy, in recognition of the
importance of new start-ups to SMME sector growth.
 It seeks regional balance in the delivery of entrepreneurship promotion and SMME support
programmes, services and facilities in the governorates.
 It recognises the importance of inclusive participation of all relevant public and private sector
bodies to ensure an effective, coordinated and integrated implementation approach.
Promotion and development of entrepreneurship and SMMEs is a shared competency,
spanning a range of ministerial boundaries and policy areas and different levels of
government, as well as private sector organisations, educational institutions and NGOs.
Implementation of the strategy will engage efforts of all public and private sector actors
involved in entrepreneurship and SMME promotion and development.
 It recognises the important role of the entrepreneurship development of women and young
Jordanians in the growth and development of the SMME sector and the unique challenges
they face.
 Its ongoing developments are to be informed through a process of regular dialogue with
entrepreneurs and SMMEs on their needs and proposed solutions.
 There must be a clear delineation of roles, responsibilities and accountabilities of
implementation partners.
 Monitoring of the strategy’s implementation is to be measured against quantifiable objectives
and targets.

Strategic Goals

The main goal of the strategy is to foster job creation and income generation through promoting the
entry of new start-ups and improving the performance and growth of existing SMMEs to elevate the
contribution of the SMME sector to Jordan’s economy.

The macro level strategic goal is to increase the SMME sector contribution to GDP by:

1. Increasing the net stock of formal private sector SMMEs by at least 15% by the end of 2017;
2. Increasing the SMME share of non-agricultural employment;
3. Raising the level of SMME productivity and competitiveness; and
4. Increasing the SMME share of exports.

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Strategic Objectives

The core objectives of the strategy are to:

1. Increase the rate of new enterprise formation, including among educated young people and
women;
2. Increase the proportion of high-growth and innovative SMMEs;
3. Increase the number of SMMEs, including microenterprises, benefiting from upgrading and
quality enhancement programmes to improve their productivity, growth and ability to
compete in international markets, both domestically and abroad;
4. Facilitate access to financing and top quality, comprehensive business development services
in all governorates.

Target Groups

The strategy recognises that a “one size fits all” approach is not adequate to respond to the needs and
requirements of entrepreneurs and SMMEs at different stages of development. Thus, it differentiates
between the needs of potential entrepreneurs, new entrepreneurs and start-ups, enterprises in the early-
stages of business development (i.e. microenterprises, start-ups within the first two to three years of
operation), existing SMMEs that need strengthening, and SMMEs with high growth potential (e.g.
innovative, export potential SMMEs). This implies setting objectives and targets for the different
categories of SMMEs and tailoring support to meet the different needs of entrepreneurs as they go
through the various stages of the entrepreneurial and business development processes from “thinking
about starting a business” to expanding into export markets. Consequently, the strategy targets
development of four different segments of the SMME sector:

Target Group Objectives

1. New entrepreneurs  Contribute to growth in the stock of SMMEs by:

a. Developing a coordinated entrepreneurship eco-system

that can develop greater interest in becoming an
entrepreneur by addressing issues of awareness,
orientation, training, incubation and financing;
b. Stimulating a pipeline of new entrepreneurs, including
young people and women, with the knowledge and
capacity to start enterprises with an enhanced likelihood of
survival and growth;
c. Creating a more dynamic start-up market.

2. Microenterprises  Improve the productivity of microenterprises by ensuring they

have access to business advisory services, training, up-to-date
technology, and competency building, including in financial
literacy, management skills and marketing;
 Ensure microenterprises have access to financing to upgrade
and modernise their facilities and processes, including
integration of information technology (IT);
 Increase efforts to move the smallest microenterprises up the
value chain and enable the largest microenterprises to grow

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3. Small and medium
enterprises
4. High-growth potential
and innovative SMMEs
Critical Focus Areas
The six focus areas of the strategy are selected to address the major barriers to entrepreneurship and
SMME development in Jordan.
Focus Areas
1. More conducive legal and
regulatory environment for
start-ups and SMMEs
2. Entrepreneurship awareness
and culture-building
3. Elevated level of
entrepreneurial/management
skills and provision of business
development support
4. Improved access to credit and
into the category of small enterprises;
 Increase the proportion of microenterprises with 5-9 employees
from 5% to 10%.
 Improve the productivity and competitiveness of SMEs.
 Improve their access to financing.
 Improve their management and marketing skills and production
capacities.
 Improve their access to markets through supply and value chain
linkages, public procurement policies and export support
programmes.
 Expand the number of high-growthand innovative enterprises.
Objectives
 Accelerate reforms to the legal and regulatory
environment in order to create more favourable
conditions for the start-up of new enterprises and the
operation and growth of existing SMMEs;
 Adopt a “Think Small First” approach to the legal and
regulatory regime to reduce the regulatory and
compliance burden on SMMEs.
 Create a more entrepreneurial society by:
a. Exposing more Jordanians to the option of becoming
an entrepreneur and starting an enterprise as a viable
and attractive career and employment opportunity;
b. Celebrating entrepreneurial success and promoting
entrepreneur role-models;
c. Fully integrating entrepreneurship as a curriculum
component at all levels of the education system.
Enhance the abilities and know-how of potential and nascent
entrepreneurs, including young people and women, in
order to affect better informed approaches that will lead
to higher value-added start-ups with greater probabilities
of survival and growth;
Improve the management ability and capacity of existing
SMMEs in order to affect a higher level of performance
in terms of productivity, turnover, employment, quality,
and innovativeness.
 Address market failures in the allocation of formal
financing to SMMEs in order to increase their access to
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 equity financing credit and equity finance, including for start-ups;
 Double the volume of bank lending going to SMMEs
from 10% to 20%;
 Increase the amount of seed and venture capital funding
available to promising start-ups and early-stage growth
enterprises.

5. Increased innovation capacity  Increase the innovation and technological capacity and
and technology activities of new enterprises and existing SMMEs,
adoption/development including microenterprises.
 Foster the creation of innovative enterprises.

6. Broadened market access  Create markets for SMMEs by:

a. opening up their access to public procurement

opportunities;
b. improving their capacity and propensity to export;
c. increasing their participation in the supply chains of
large enterprises; and
d. promoting the franchising model as an approach to
building markets.

Implementation Mechanisms

New structures and actions are required for effective implementation of the strategy. The main
elements of institutional support are:

 Creation of a mechanism for effective oversight, coordination, partnership development and

capacity building to take the form of an Interministerial Council on Entrepreneurship and
SMME Development, JEDCO as the lead coordinating body, creation of an SMME Advisory
Council and regional committees for enterprise creation and SMME development.

 An adequate business support infrastructure and effective SMME support services.

 A statistical database and dedicated SMME information web-portal.

 A monitoring, evaluation and progress reporting system.

Articulation of the strategy components is detailed in Chapters 5 and 6.

Strategy directions and actions

The strategic actions under the strategy are organised by the six focus areas, but are intended to apply
appropriately to each of the four target groups.

xvi
1. Actions to improve the legal and regulatory environment Relevant target
group
1.1. Further simplify the registration process for new businesses and establish New
one-stop shops (including in the governorates) to expedite the steps entrepreneurs
required to complete the process. Fully implement an e-registration system.
1.2. Allow licensing of home-based enterprises in urban and rural areas across New
the Kingdom. entrepreneurs
1.3. Provide new (registered) businesses with exemptions from tax and social New
security charges for the first three years of operation. entrepreneurs
1.4. Provide tax exemption for microenterprises with turnover of less than JD Microenterprises
100,000. This will alleviate the administrative burden of tax remittances
and increase the cash flow available to reinvest in the development of the
business.
1.5. Provide incentives to encourage formalisation of informal microenterprises. Microenterprises
Offering tax exemptions provides one incentive, but this should be
accompanied by reductions in social security charges for formally hired
workers.
1.6. Expand, and accelerate, the Guillotine Regulatory and Impact Assessment All
Reform Project process to examine all laws and regulations directly
affecting the start-up and operation of SMMEs, including but not limited to
the General Sales Tax Law, the Social Security Law, the Companies Law,
the bankruptcy law, and the Venture Capital Law.
1.7. Implement a Regulatory Impact Assessment (RIA) regime, applying an All
“SME Test” to assess the impact on SMMEs of all new legislative and
regulatory proposals.
1.8. Design and implement training for the legal departments of the various
relevant public institutions on their role in implementing the National
Entrepreneurship and SMME Development Strategy, including in good
regulatory practices in favour of SMME, such as consultation mechanisms
and impact assessments (e.g. use of the SME Test on new laws and
regulations affecting the private enterprise sector).
1.9. Review business bankruptcy/insolvency laws and procedures to make it New
possible for “failed entrepreneurs” to have a second chance to start a new entrepreneurs
business.
1.10. Reduce the complexity and administrative costs of changing the legal status All
of an enterprise from one form to another (to enable more individual
enterprises to become limited liability companies).

2. Actions to enhance entrepreneurship awareness and culture-building Relevant target

group
2.1 Design a broad-based entrepreneurship awareness programme that includes All
“road-shows” in the governorates in partnership with universities and the
major business support organisations in each governorate to provide
information on the opportunities for starting a business and feature
presentations from successful entrepreneurs and start-ups; initiate
campaigns to profile entrepreneur success stories in the media and to

xvii
 publicly recognise the entrepreneurial achievements of Jordanian
enterprises and entrepreneurs.
2.2. Expand the offer of INJAZ (particularly the Business Entrepreneurship New
Programmes) and Know About Business courses in educational institutions entrepreneurs
to further infuse an entrepreneurial culture and mind-set among Jordanian
youth and build entrepreneurial skills and know-how.
2.3. Include“entrepreneurship” as a core curriculum component in the primary, New
secondary and vocational educational system (Ministry of Education). entrepreneurs
2.4. Integrate courses on entrepreneurship and small business management as New
part of the credit curriculum in Jordanian universities, making them entrepreneurs
available on a cross-disciplinary basis so that all university students are
exposed to this field of knowledge. Develop degree programmes in
entrepreneurship approved by the Minister of Higher Education).
2.5. Engage with partners to support and sponsor business plan competitions in New
schools and universities. entrepreneurs

3. Actions to improve entrepreneurial/management skills and business Relevant target

development support group
3.1. Follow-up on interest from the road shows by providing basic New
entrepreneurship training modules (in the governorates), dealing with the entrepreneurs
start-up process, the functional areas of business management (e.g.
marketing, finance, organisation, etc.), how to develop a business plan, and
how to access financing. There are already good entrepreneurship training
programmes in Jordan that could be adapted for this purpose (e.g.
EMPRETEC, Know About Business, training programmes of the Queen
Rania Centre for Entrepreneurship, etc.).
3.2. Launch components of the strategy specifically targeting the New
entrepreneurial development of women and young people, i.e. integrated entrepreneurs
Women’s Entrepreneurship Development Programme and Young
Entrepreneurs Programme.
3.3. Develop a financial literacy programme for microenterprises to improve Microenterprises
their knowledge and skills in basic financial management.
3.4. Expand provision of IRADA training, advisory, and consultancy services to Microenterprises
microenterprises to improve their management, production and marketing
skills.
3.5. Develop and deliver modernisation and upgrading programmes to Microenterprises
microenterprises to foster productivity and growth. Such programmes could
consist of basic training modules delivered to groups of microenterprises on
a sector basis, followed up by individual consultancies and coaching
services (on a subsidized basis) to assist each microenterprise with
implementation of its upgrading and modernisation plan. In addition,
financing should be made available to the microenterprises for
implementation of the modernisation/upgrading activities. This could
include the integration of IT in their operations.
3.6. Provide funding to enable more SMEs to participate in EJABI management SMEs and high-
and certification training programmes. growth potential,
innovative SMEs
3.7. Expand the Kaizen Quality Improvement Programme delivered through SMEs

xviii
 JEDCO.
3.8. Launch “enterprise growth” training programmes to help SMMEs develop SMMEs and high-
growth strategies and plans. growth potential,
innovative SMEs
3.9. Establish Business Development Units (BDUs) in the governorates to All
provide a unifying platform for information, advisory, consultancy, and
referral services.
3.10. Expand the number of incubators and number of incubator spaces in the New
business incubator system to enable the incubation of a larger number of entrepreneurs and
start-ups on an annual basis. high-growth
potential,
innovative SMEs
3.11. Establish business accelerators in various regions of Jordan to facilitate the High-growth and
rapid growth of high potential SMEs. innovative SMEs
3.12. Invest in capacity building and professional development of SMME All
advisors, mentors, coaches and consultants to ensure a qualified supply.
3.13. Develop cluster initiatives as a vehicle for enabling SMEs to pursue high- SMEs and high-
growth and value-added opportunities. growth potential,
innovative SMEs

4. Actions to improve access to financing Relevant target

group
4.1. Operationalise the private Credit Bureau; require MFIs to provide credit All
data on their clients to the Credit Bureau.
4.2. Implement the recommendations of the National Microfinance Strategy. Microenterprises
4.3. Increase the scale of available microfinance through lines of credit to New
qualified microfinance institutions; expand microfinance facilities to serve entrepreneurs and
microenterprises in all parts of the Kingdom (prioritising income- microenterprises
generating projects that can enhance employment opportunities); activate
the role of a Credit Bureau where data on microfinance clients can be
reported; insure all financed projects against risks and provide life
insurance for project owners; and provide follow-up and monitoring on
microfinance clients, including advisory services; promote use of the loan
guarantee scheme negotiated between DEF and the JLGC in August 2012.
4.4. Require banks to open SMME windows; provide training to banks on the All
merits of lending to SMMEs and methodologies for serving the SMME
market, including use of risk assessment tools (the BDC has some
experience in this type of training).
4.5. Provide additional incentives to banks to encourage them to direct more All
loan funds to SMMEs (e.g. negotiate links of credit for banks through the
international financial institutions at special interest rates, which is often
the practice in the developing MENA countries).
4.6. Provide subsidy funding support to enable the BDC to reach more SMMEs Microenterprises
with its “Global Financial Bridge” training programme on how to build and SMEs
financial statements, interpret their financial needs and present themselves
to financial institutions to secure financing.

xix
4.7. Expand the JEDCO SME Banking Window to provide services to a larger All
number of SMMEs, including in the governorates.
4.8. Make seed grants available to start-ups by young entrepreneurs and women New
who have more difficulty accessing start-up financing from the banks due entrepreneurs
to lack of credit histories and collateral.
4.9. Establish a seed fund that can used to prime access to capital for incubating New
enterprises in the Jordan Innovation Centre (incubator) Network. entrepreneurs
4.10. Provide more extensive provision of loan guarantees to improve the access All
of SMEs to bank financing by expanding the capacity of the JLGC in the
area of “productive loan” guarantee offers, and implementing the JEDCO
SME Financing Programme. Structure the guarantee funds to achieve a
higher leverage on the amount of bank lending to SMMEs.
4.11. Further develop the availability of early-stage seed capital and venture High-growth
capital to meet the capital expansion needs of high-growth SMEs, potential,
specifically by increasing the size of the Capital for Growth Fund innovative SMEs
(attracting additional fund investors) to enable investments in more
projects.
4.12. Provide fiscal incentives (such as tax credits) to encourage private investors New
to make angel investments in early-stage enterprises and to contribute to entrepreneurs and
equity investment funds targeting SMMEs. high-growth
potential,
innovative SMEs
4.13. Provide funding support for the formation of business angel networks and New
capacity building programmes; the capacity building programmes to be entrepreneurs and
targeted to improving the skills and know-how of nascent angel investors high-growth
and to increasing the knowledge of SMMEs regarding the merits of seeking potential,
angel investment and their skills in preparing and negotiating investment innovative SMEs
proposals.
4.14. Implement measures to ensure that women entrepreneurs are able to access Women-owned
financing from banks and equity funds. SMEs and high-
growth potential,
innovative SMEs
4.15. Provide soft loans and grants to support the R&D and innovation-related Innovative SMEs
activity of SMMEs.

5. Actions to enhance innovation capacity and technology Relevant target

adoption/development group
5.1. Provide funding programmes to enable SMMEs to assess how integration All SMMEs
of modern technologies, including ICT, could improve their business
operations, followed by financing to acquire and install the new technology
and technical solutions.
5.2. Provide incentives to stimulate SMMEs to undertake R&D and innovation- All SMMEs
related activities (e.g. soft loans and grants, R&D tax credits, co-funding
through an SME Innovation Fund, etc.).
5.3. Improve access to sources of scientific and technical expertise and linkages All
to research and technical institutes, technology innovation centres, and
technology transfer centres by introducing an innovation vouchers
programme for SMMEs, including start-ups.

xx
5.4. Establish a pre-commercialisation Innovation Fund to subsidise the costs of New
proof-of-concept, prototypes, market studies, etc. entrepreneurs,
SMEs and high-
growth potential,
innovative SMEs
5.5. Expand the pool of seed and venture capital available for high-potential, High-growth
early-stage innovation projects initiated by SMMEs. potential,
innovative SMEs
5.6. Develop the appropriate systems to foster innovative, technology-based New
start-ups (e.g. innovation centres, technology incubators, technology entrepreneurs and
accelerators, technical expertise, seed funds, etc.). high-growth
potential,
innovative SMEs

6. Actions to improve market access Relevant target

group
Public procurement markets
6.1. Develop an action plan, in collaboration with the appropriate government All SMMEs
procurement entities, for reform of procurement laws and regulations to
include provisions on SMME participation. This would ideally include
establishing a minimum quota for the value of public procurement contracts
to be awarded to SMMEs, but regardless, should include actions such as:
 Active promotion among SMMEs of public procurement opportunities
to expand their markets;
 Packaging bids to encourage SMMEs to apply, such as by dividing large
contracts into several lots to allow for increased SMME participation;
 Providing technical assistance and support mechanisms to SMMEs to
assist them with bidding processes;
 Easing the financial and technical requirements of the bidding process to
increase the pool of local SMME bidders;
 Pursue E-procurement to include all government procurement contracts
and to enable uniform access to notices, electronic tendering and online
registration to SMMEs.
Export markets
6.2. Open an SME Window in the Ministry of Industry and Trade; actively All
disseminate information about export market opportunities and export
regulations to SMMEs.
6.3. Organise seminars and workshops where experienced exporters share their All
strategies and lessons learned with potential and novice SMME exporters.
6.4. Develop co-funded SMME “export readiness” programmes for potential All SMMEs
exporters that include training and counselling on the steps in the exporting
process, finding markets, developing an export strategy, and the firm-level
requirements for adapting to the needs of export markets. This could be
facilitated by providing funding for the expansion of the Jordan Exporters
Association’s Export Development Programme.
6.5. Provide an expanded grant or subsidy scheme to support SMMEs’ costs of All SMMEs
conducting research to explore export market opportunities and participate
in trade missions.
6.6. Enable SMMEs to access financing for the implementation of their export All SMMEs

xxi
 strategies/plans, including the costs associated with adapting their products
for export markets and meeting international product standards and
requirements.
6.7. Provide support to enable high-growth SMEs to identify export market High-growth
opportunities and to pursue those opportunities. potential,
innovative SMEs
6.8. Provide incentives for the formation of SMME export consortia by offering All SMMEs
programme grant funding support for their creation, development, and
international promotion and marketing activity.
6.9. Further simplify exporting procedures. All SMMEs
6.10. Expand the availability of export credit guarantees for SMMEs. All SMMEs
Supplier development markets
6.11. Based on international best practices, design and implement a All SMMEs
comprehensive SMME supplier development programme with components
directed to microenterprises and to SMEs to facilitate their integration into
supply chain of larger firms and build their markets.
Franchise markets
6.12. Examine the potential for a National SME Franchise Support Programme to High-growth
provide technical and financial support to Jordanian SMEs that want to potential,
develop franchised outlets as part of their growth strategy. innovative SMEs

7. Actions with respect to institutional support mechanisms

Effective oversight and coordination

7.1. Establish an Interministerial Council on Entrepreneurship and SMME Development
7.2. Form an Entrepreneurship and SMME Advisory Committee
7.3. Create an Entrepreneurship and SMME Development Department/Unit within JEDCO
7.4. Establish SMME focal points in all relevant ministries
7.5. Form a network of regional committees for enterprise creation and SMME support
7.6. Prepare an annual Entrepreneurship and SMME Development work plan
Adequate business support infrastructure and effective SMME support services
7.7. Implement capacity-building and professional development programmes for business service
providers
Communications
7.8. Launch a national awareness campaign to inform SMMEs and other stakeholders about the
National Strategy
7.9. Develop and launch a comprehensive SMME information web-portal
Monitoring and evaluation
7.10. Realign DOS reporting on enterprise and employment distributions according to size bands
consistent with those outlined in the National Strategy
7.11. Develop a statistical system to track the annual entry and closing of enterprises (in cooperation
with the Jordan Chamber of Industry and Jordan Chamber of Commerce)

xxii
7.12. Develop a management information system that is capable of collecting data on each of the
initiatives and programmes included under the National Strategy (such as number of clients
served, types of services and programmes accessed, etc.)
7.13. Carry out impact studies assessing the effect of assistance programmes on the performance of
assisted SMMEs
7.14. Provide funding for annual Global Entrepreneurship Monitor studies in Jordan to monitor
changes in entrepreneurial perceptions, attitudes and entrepreneurial activity rates
7.15. Prepare an annual report on the state of entrepreneurship and SMMEs and progress in
implementing the National Strategy
Funding
7.16. Provide adequate funding for implementing the National Strategy through creation of a National
SMME Fund

Keys to the success of the strategy are the following:

 Gaining national level “buy-in” for the Strategy through establishment of the Interministerial
council consisting of relevant ministries and agencies, along with creation of
entrepreneurship/SMME focal points in each of these entities;
 Designation of a Coordination Unit that is accountable for implementing the Strategy with
other key stakeholders, including formation of a Regional Partners Network;
 Formation of an institutionalised mechanism for on-going consultation with SMME sector
stakeholders;
 Commitment to a programme of professional development to build the capacity of SMME
support professionals and business resource and support centres across the Kingdom;
 Creation of an information system to capture data from SMME service providers,
programmes, services and initiatives;
 Development of a tracking system to monitor performance of the Strategy’s implementation
against indicators for each of the goals and objectives;
 Improving the quantity, quality, and timeliness of data, statistics, and research evidence on
trends and performance of the SMME sector, and producing annual performance reports.

xxiii
 THE DRAFT NATIONAL STRATEGY FOR ENTREPRENEURSHIP
AND SMME DEVELOPMENT IN JORDAN 2013-2017

CHAPTER 1: CONTEXT FOR THE DEVELOPMENT OF

ENTREPRENEURSHIP AND SMMEs
Small, micro and medium enterprises (SMMEs) are routinely described as the backbone of a nation’s
economy. In countries around the world, SMMEs comprise 90% or more of all private enterprises.
Globally, they generate an average of 45% of formal, permanent full-time employment, which
increases to 66% if informal jobs are included 1. Studies also find that small firms generate the most
new jobs, with the highest growth in job creation coming from young firms that are five years old or
less.2The dynamic effect of the entry and exit of enterprises also drivescompetition and innovation,
and is considered essential to the process of a country’s economic renewal. Furthermore, studies find
that SMMEs produce innovations with significantly higher productivity and cost-effectiveness than
large firms.The flexibility of SMMEs, their simple organisational structure, their low risk and
receptivity are seen as the essential features facilitating them to be innovative. SMME are also a
vehicle for the diffusion of entrepreneurial spirit and skills, and help to reduce economic disparities
between urban and rural areas through their employment impacts.

Although SMMEs dominant the enterprise sector in most economies, their smaller size places them at
a disadvantagerelative to large firms. They have fewer internal resources and less capacity to compete
in global markets. Apart from theinternal factors limiting the survival and growth potential of
SMMEs, such as lack of management skills, financing, and technology, external factors also affect the
ability of SMMEs to function effectively, such as the product-markets in which they operate, the
policies, laws and regulations affecting business activities, and the organisational and institutional
arrangements surrounding the enterprise. The SMME sector is generally more vulnerable to market
failures and external shocks, especially in environments where the policy and institutional framework
conditions are not favourable. In cases where market forces are not properly allocating resources and
institutional structures are not appropriately meeting the developmental needs of SMMEs,
government actions to remedy the situation are justified as an uneven playing field for the growth of
SMMEs will hinder investment and employment and lead to lower pro-poor growth. 3

The trends towards globalisation, liberalisation and rapid advancements in information and
communications technology (ICT) are compelling driving forces for change. These factors are
creating new dynamics of international competition, production and enterprise development,
presenting both challenges and opportunities at the country level. Domestic enterprises must be able
to compete on an international levelwith the products imported into the market from other countries
and the export opportunities presented by Free Trade Agreements (FTAs). In addition, governments
around the world have had to deal with the external shocks of the 2008-2009 global financial crises on
their economies, which caused a slow-down in general economic activity. Middle East and North
Africa (MENA) countries have also been impacted by the 2011 Arab Spring and its aftermath,
although Jordan not nearly as much as in countries such as Egypt, Syria, Tunisia and Yemen.

1
IFC (2013), IFC Jobs Study, p. 11.
2
Ayyagari et al. (2011),”Small vs. Young Firms across the World: Contribution to Employment, Job Creation, and Growth”,
World Bank.
3
OECD (2004), Accelerating Pro-Poor Growth through Support for Private Sector Development: An Analytical Framework.
The development of entrepreneurship and SMMEs unfolds within the context of a country’s overall
economic framework.This must support the main levers of private sector growth - enhancement of the
business environment for domestic and foreign investment by removing administrative barriers and
stimulating entrepreneurship, which is a precondition for rapid private sector development.

Context for Private Sector and SMME Development in Jordan

Governments in the MENA countries, including Jordan,are relative late-comers in the implementation
of policies and programmes to reduce barriers to SMME development and growth. 4The focus on
advancement of SMMEs is concomitant with the political decision to move towards a more open and
market-driven economy and some MENA countries have made more progress in this direction than
other, Jordan being one of them.Of the eight developing MENA countries included in the
Bertelsmann Transformation Index (BTI) in 2012, Jordan ranked second only to Lebanon on “market
economy status” with a score of 6.1 (out of 10). 5

Rising levels of economic freedom

For the first time, Jordan was assessed as a “mostly free” economy in the Heritage Foundation’s 2013
Index of Economic Freedom,ranking 33rd out of 177 countries and 4th among 13 MENA countries
(Table 1).6Jordan’s economic freedom score has progressed considerably over the past six years,
rising from 63 (out of 100) in 2008 (and a global rank of 58) to 70.4 in 2013. This is positive for
Jordan because of the links between the level of economic freedom and productive entrepreneurial
activity.7 In countries with low economic freedoms, people who want to start businesses will face
more risk and uncertainty and may be discouraged or channelled into informal activity. In other
words, the quality of institutions matters greatly. 8

Since 2008, the Jordan’s greatest gains have been achieved in investment freedom (free flow of
capital, especially foreign capital); reductions in government spending; business freedom (ability to
create, operate, and close an enterprise quickly and easily); labour freedom (composite measure of the
ability of workers and businesses to interact without restriction by the state); and fiscal freedom
(amount of tax burden) (Table 2). Moderate gains have been made in property rights (ability of
individuals to accumulate private property, secured by clear laws that are fully enforced by the state)
and trade freedom (openness of the economy to imports and the ability of citizens to interact freely as
buyers and sellers in the international marketplace with an absence of tariff and non-tariff barriers).
On the other hand, there has been only a minimal change in monetary freedom (measure of price
stability with an assessment of price controls), and a worsening of the freedom from corruption index
(perception of corruption in the business environment, including levels of governmental legal,
judicial, and administrative corruption), and no changes in financial freedom (measure of banking
security as well as independence from government control).

4
Stevenson (2010), Private Sector and Enterprise Development: Fostering Growth in the Middle East and North Africa.
5
http://www.bti-project.org/home/index.nc
6
Heritage Foundation (2012), 2013 Index of Economic Freedom.
7
Higher levels of productive entrepreneurial activity are specifically are particularly associated with, a smaller government
sector (e.g. low tax rates and levels of public investment and consumption), a better legal structure, secure property rights
and less regulation of credit, labour and business. See discussion in Stevenson (2010), Private Sector and Enterprise
Development: Fostering Growth in the Middle East and North Africa, Chapter 7.
8
Amorós (2009), “Entrepreneurship and the Quality of Institutions: A Developing-Country Approach”.

2
 Table1. Economic freedom in MENA countries
Status Country Rank (out of 177 Economic Freedom Change in score from
countries) score - 2013 2012
Mostly free Bahrain 12 75.5 +0.3
Qatar 27 71.3 -2.5
UAE 28 71.1 +1.8
Jordan 33 70.4 +0.5
Moderately free Oman 45 68.1 +0.2
Kuwait 66 63.1 +0.6
Saudi Arabia 82 60.6 +1.9
Mostly unfree Morocco 90 59.6 -0.6
Lebanon 91 59.5 -0.6
Tunisia 107 57.0 -1.6
Yemen 113 55.9 +0.6
Egypt 125 54.8 -3.1
Repressed Algeria 145 49.6 -1.4
Notes: Scores are out of 100. Scores from 70-79.9 indicate a “mostly-free” economy; 60-69.9 a “moderately-free” economy;
50-59.9 a “moderately-unfree” economy; and below 50 a “repressed” economy.
Source:2013 Index of Economic Freedom (Heritage Foundation 2012).

Table2. Changes in economic freedom scores, Jordan, 2008 to 2013

Scores Jordan (2008) Jordan (2013) Change
Economic freedom (overall) 63.0 70.4 +7.4
Property rights 55.0 60.0 +5.0
Freedom from corruption 53.0 45.0 -8.0
Government spending 53.2 68.8 +15.6
Fiscal freedom 83.7 93.6 +9.9
Business freedom 55.4 69.2 +13.8
Labour freedom 64.8 75.5 +10.7
Monetary freedom 80.4 82.0 +1.6
Trade freedom 74.8 79.6 +4.8
Investment freedom 50.0 70.0 +20.0
Financial freedom 60.0 60.0 No change
Notes: Scores are out of 100.
Sources: Heritage Foundation, 2008 Index of Economic Freedom; 2013 Index of Economic Freedom.

While recent reforms in Jordan have made it easier to start and operate a business, regulatory
processes have become relatively efficient and competitive, and the financial sector is relatively
stable, the Heritage Foundation recommends that deeper institutional and systemic reforms are
necessary to strengthening the foundations of economic freedom. Licensing requirements are still
costly, the labour market remains rigid, non-tariff barriers add to the costs of trade, and issues within
the judicial system hinder adequate enforcement of the rule of law and widespread corruption. 9

Declining global competitiveness

Jordan’s rank on the Global Competitiveness Index (GCI) is slipping. In 2012-2013, it placed 64th out
of 144 countries,10 up from a rank of50 among 133 countries in the 2009-2010 report, although its
competitiveness score improved slightly to 4.29 (out of 7) in 2012-2013 from 4.19 in 2011-2012, and
it remains in the top half of rated countries.

Its drop in the rankingssignals a weakening of the competitive environment with declines in several of
the individual competitiveness indicators, including those related to institutions, infrastructure, labour
9
http://www.heritage.org/index/country/jordan
10
Schwab (2012), The Global Competitiveness Report 2012–2013, World Economic Forum.

3
market efficiency, and innovation. Its lowest rankings are on a number of the macroeconomic
environment indicators (e.g. government budget balance, government debt to GDP); trade tariffs;
extent and effect of taxation; hiring and firing practices; the ratio of women to men in the labour
force; the legal rights index; the quality of scientific research institutions; company spending on
research and development (R&D); and university-industry collaboration in R&D.

The GCI report indicated that further efforts are needed to stabilise the macroeconomic environment
and continue to advance growth enhancing structural reforms. Specifically, there is significant room
for improvements in terms of labour market efficiency and exploiting the full potential of ICT for
productivity improvements. Relatively high tariff barriers (rank of 104) and regulatory barriers to
foreign direct investment (FDI) (rank of 70) suggest that Jordan could benefit from more openness to
international trade and investment to trigger efficiency gains in the domestic economy as well as the
transfer of knowledge and technology. The innovation performance of the country is hampered by a
lack of availability of venture capital, the low level of R&D investment and an inefficient labour
market that is not utilising the talent available for the most productive use. In order to reverse the
trend of declining competitiveness as well as increase its innovation capacity, the public sector will
need to invest in enhancing the skills and capacities of individuals and enterprises and reduce the
budget deficit and size of government debt so these do not have negative consequences for the future
competitiveness of the economy.

According to results of its Executive Opinion Survey, the World Economic Forum reports that the top
ranked problematic factors for doing business and hindering the performance of business in Jordan
are: 1) restrictive labour regulations, 2) tax rates; 3) access to financing, 4) inefficient government
bureaucracy, 5) political instability, and 6) an inadequately educated workforce. 11

Diminishing performance onease of doing business rankings

Jordan’s relative performance on the World Bank “ease of doing business” indicators has deteriorated
over the past six years, moving in the global ranking from 78 out of 175 countries inDoing Business
200712 to 106 out of 185 countries in Doing Business 201313 (and down 11 ranking spaces since the
Doing Business 2012 report). This change in rankings is affected both by the number of reforms
carried out in Jordan and the rate of reforms carried out in other countries. Figure 1, for example,
shows that a number of other MENA countries, such as Morocco, Tunisia and the UAE have
outperformed Jordan in improving their rankings.

The government has undertaken many reforms to address issues in Doing Business reports, but to date
has achieved more progress on some specific indictors than others. 14 From 2007 to 2013, its rankings
improved on “starting a business”, “registering property”, and “trading across borders”, and
deteriorated on the rest (see comparison of indicators in Annex 1). Reducing the minimum capital
requirement from JD 30,000 toone dinarhas significantly reduced the cost to register a limited liability
company and the establishment of a one-stop shop for company registration at the company registrar
has eased bureaucratic procedures (e.g. fewer registration procedures and time required to process
registration details).15 An improved ranking on “registering property” has been achieved by reducing
11
Schwab (2012), TheGlobal Competitiveness Report 2012-2013, World Economic Forum, p. 214.
12
World Bank and IFC (2006), Doing Business 2007: How to reform.
13
World Bank and IFC (2013), Doing Business 2013: Smarter Regulations for Small and Medium-Size Enterprises.
14
The World Bank presents a summary of noted doing business reforms in Jordan at:
http://www.doingbusiness.org/reforms/overview/economy/jordan
15
The Executive Development Plan 2011-2013 established targets to reduce the number of days to register a business
through the Jordan Investment Board window to six by 2013 and to three days in the Development Zone Commissions
(MOPIC 2011a).

4
the transfer fees for registering property. The number of procedures and days to export and import
have been reduced by implementing a risk-based inspection regime of post-destination clearance for
preapproved traders; reducing the share of containers subject to physical inspection to 30%; and
implementing new software allowing online submissions of customs declarations, which reduced the
customs clearance times by two to three days for exporters and importers.

Figure 1. Jordan’s comparative rank with other Arab countries on “Doing Business” from 2007 to 2013
183

157

2013
131

105

79

53

27

1
SaudiDoing UAE
Business 2007
Tunisia Doing Business
Morocco 2008
Jordan Doing
EgyptBusiness 2009 Yemen
Lebanon Doing Business
Syria 2010
Algeria
Arabia
Doing Business 2011 Doing Business 2012 Doing Business 2013

Source: World Bank “Doing Business” reports.

Jordan has carried out additional “doing business” reforms, but these are yet to result in improved
rankings on the World Bank’s annual reporting. The process for dealing with construction permits has
been eased by extending the services of the one-stop shop in Greater Amman to medium-size
commercial construction projects, which has reduced the number of days required to obtain a
construction permit but has not reduced the per capita income cost. In 2010-11, the government set up
a regulatory framework for establishing a private credit bureau and lowered the threshold for loans to
be reported to the public credit registry. This will eventually improve the credit information system
but the private credit bureau is yet to be implemented. The government has also abolished certain
taxes, simplified the number of forms needed for filing and made it possible for online filing and
payment of income and sales tax returns electronically, but, to date, with limited impact on reducing
the hours of a business owner’s time to deal with tax payments. The process for enforcing contracts
has been facilitated by setting up special commercial courts and equipping them with computer-aided
case management systems, but again, this has not as yet improved Jordan’s overall ranking on this
indicator.

Although legislative reforms governing the investment environment, provision of advanced

infrastructure, particularly the establishment of special development zones and industrial and free
zones, and entering into several bilateral and multilateral trade agreements, have reflected positively
on economic growth and the volume of exports, much of the contribution has derived from FDI with
limited impacts on the creation of high-value jobs and employment opportunities for Jordanians.
Neither has the presence of foreign firms located in the free zones led to any significant transfer of
technology and know-how to Jordanian enterprises, as might be expected. In addition, economic

5
reforms have not generated notable productivity growth in most economic sectors because of the lack
of emphasis on broad-based upgrading of enterprises. 16

Rationale for a National Strategy on Entrepreneurship and SMME Development

The development of SMMEs is increasingly recognised as important to the economic, social and
human development of Jordan anda clear priority of the government. Supporting SMMEs is identified
in the National Agenda 2006-2015 as one of the elements of a holistic approach to stimulate economic
development and improve social welfare and security. 17The Executive Development Plan 2011-2013
states “empowering and building the capacity of SMMEs” and “stimulating new start-ups” as short-
term objectives for enhancing the competitiveness of the national economy, noting that the challenge
is to increase investments in high-valued sectors in order to create more job opportunities. 18The Plan
set targets for increasing the share of SMMEs in gross domestic product (GDP) to 40% by 2013, from
a baseline of 30% of GDP in 2009 (in line with the stated aim in the National Agenda 2006-2015 to
increase the SMME share of GDP to 47% by 2017); and for increasing the ratio of the workforce
employed in SMMEs to 76% by 2013, from a baseline of 70% in 2009. 19However, these targets are
deficient in two respects: 1) they do not define the parameters for what constitutes an SMME; and 2)
they do not define what is covered by the “workforce”, whether it is referring to only the non-
agricultural workforce employed in public and private enterprises or the total workforce (assuming the
latter).

SMME development is also a tool for alleviating some of the economic and social disparities between
the various regions of Jordan. The government’s goal is to reduce development discrepancies between
governorates and municipalities by increasing the available financing opportunities for micro and
small enterprises, especially in the poorest regions, and encouraging the private sector and non-
governmental organisations (NGOs) to set up development and productive investment projects that
will increase employment opportunities for women and the unemployed in the agricultural sector.
Expanding the number of Development Zones to 10 by 2013, channelling more funds through the
Agricultural Credit Corporation and implementing the Governorates Development Fund are among
strategic actions.

The Jordan Human Development Report 2011(JHDR) examines enterprise development as one of the
most direct tools to expand economic assets, combat poverty and expand human development choices,
positioning SMMEs as instrumental to achieving equitable economic growth (i.e. distribution of
resources to every part of society) and social progress (i.e. improvements in employment, income,
education and health services).20

Due to the high structural unemployment rate, especially among young educated Jordanians and
women, the low female labour force participation rate, and a period of strong economic growth that
has not translated into jobs for Jordanians, the National Employment Strategy (NES) 2011-2020
emphasises job creation as a pressing priority for the country. It points to strengthening of the private
sector to enable enhancement in productivity and growth as the primary solution to create more jobs
for Jordanian workers. One of the strategic goals of the NES is to move the private sector up the value
chain and increase value-added production and the ability to export products and services. It proposes
16
Abugattas (2012), “Model Reformer without Upgrading: The Jordanian Experience”, unpublished draft.
17
MOPIC (2006), National Agenda 2006-2015: The Jordan we strive for.
18
MOPIC (2011a), “Executive Development Plan 2011-2013”.
19
MOPIC (2011a), p. 35.
20
The Jordan Human Development Report 2011 defined small enterprises as those with fewer than 20 employees and
medium enterprises as those with between 20 and 99 employees.

6
that this would be achieved by promoting a competitive, export-oriented economy and facilitating the
entry, operation and existence of SMMEs. They specifically recommend introducing tax incentives to
encourage job creation and expanding SMMEs’ access to credit.

Jordan is also facing other critical demands in terms of reducing regional disparities, improvingthe
productivity and competitiveness of its SMMEs to compete in international markets through
upgrading and modernisation, and acceleratinginvestment and economic growth. Actions are needed
to address weaknesses in the institutional and business environment framework, the position of
Jordanian products in world markets, and the basic infrastructure which supports industrial,
technological, touristic and agricultural investments.

At the macro level, strengthening of the SMME sector requires political and macroeconomic stability,
clear and transparent regulations, secure property rights, rule of law, andstable and well-functioning
financial markets. These form the fundamental operating environment within which private sector
actors make the decision to invest, start businesses and create jobs. In addition, the policy, legal and
regulatory environment must be cognizant of any adverse effects on SMMEs. For example, it is well
known that SMMEs are disproportionally burdened by a heavy and costly regulatory environment,
often discouraging smaller enterprises from entering the formal sector, and thus, limiting their
contribution to the productive economy. However, while macro level reforms are essential for a
healthy and vibrant SMMEs sector, they are insufficient to unleash the full productive potential of
SMMEs. Micro level actions are also necessary. SMME agencies and programmes need to be
established in parallel with efforts to improve the policy, legal and regulatory environment in which
SMMEs operate. Across government, there needs to be a process for ensuring coordination, coherence
and complementarity in the design and implementation of instruments for SMME development. This
includes well-functioning markets and institutions providing business development services for
SMMEs.

To address the multiplicity and interaction of factors that underpin the growth and competitiveness of
SMMEs, there needs to be a more holistic and integrated approach to SMME development. To
achieve maximum usefulness and impact, this should be guided by a coherent policy framework,
which has been missing in Jordan. In the absence of a coherent SMME policy framework, the
globalisation of production and opening of domestic markets can have an adverse effect on the
structure of the SMME sector, with SMMEs losing ground in terms of competitiveness and leading to
a predominance of micro-scale and necessity-driven, “survivalist enterprises” in the structure of the
economy. To a great extent, this has been happening in Jordan.

Until now, the government’s efforts to develop the SMME sector have not been guided by a coherent
national SMME policy framework and there is no central mechanism inside government for designing
and monitoring the development of a holistic SMME policy. Policies affecting development of
SMMEs are embedded in other policy frameworks, such as the National Microfinance Strategy, the
National Employment Strategy, the Industrial Policy, and the Services sector strategies, as well as in
actions under the guillotine regulatory review process. Essentially, SMME development is a cross-
ministerial issue, but the lack of a coordinating policy body leads to fragmentation of policy effort and
programme development. While JEDCO appears to have a mandate as the implementing body for
enterprise support, its primary focus is on delivering programmes, many of which are dependent on
donor funding and therefore structured, in some respects, to respond to donor interests and
requirements. Thus, there is currently no clear policy direction for SMME development in the
Kingdom.

7
The draft National Strategy for Entrepreneurship and SMME Development in Jordan 2013-2017
provides a framework and guidance for the government’s future actions and also for those of other
relevant stakeholders. The strategy establishes a set of goals and objectivesthat will lead to the growth
and strengthening of the SMME sector so that it can meet its full potential for creating employment,
adding value, innovating, and contributing to Jordan’s economic growth.

8
CHAPTER 2: CURRENT STATUS OF THE SMME SECTOR
This chapter summarises the state of the non-agricultural SMME sector in Jordan, supported by
illustrative tables and figures in Annex 2.21The major observation from an analysis of SMME sector
trends is the very slow growth in the net stock of non-agricultural enterprises over the past five years
– an annual average increase of only 1.3% from 2006 to 2011. Net growth in the number of
enterprises is the end product of a dynamic that reflects the entry of new businesses (start-ups) and the
survival rates of new and existing businesses. Unfortunately, information on this dynamic is not
available from Jordan statistics, so it is not possible to assess the underlying factors in the slow
growth rate in the stock of enterprises. However, it is noted that the net growth in number of
enterprises was lowest for those with 1-4 employees (annual average of just over 1%). On the other
hand, the net stock of enterprises with 10-19 employees, 20-49 employees and more than 100 workers
has increased by an average of about 4% a year in each of the size categories. This could indicate a
slower rate of new business start-ups (since it might be assumed that start-ups generally fall in the 1-4
employee enterprise category) and/or the movement of enterprises from one size class to another.
Without statistical data, it is impossible to know precisely what is happening. It is also noted that
growth in the net stock of enterprises slowed considerably in the second half of the decade, compared
to the 2000-2005 period, a trend that would be threatening to Jordan’s future growth if it was to
continue.

The second observation is that, based on analysis of trends from the annual establishments surveys,
employment in non-agricultural private enterprises grew by an annual average of 2% from 2005 to
2010, again at a much slower growth than during the 2000-2005 period (annual average of 6.5%).
This is also a trend of concern. The share of employment in enterprises with 100 or more employees
has been increasingwhile the share of employment from enterprises with fewer than 50 employees has
been shrinking. However, the end result is that the average firm size has increased from 3.9
employees in 2000 to 4.6 employees in 2010.

The third observation is that, over the 2000-2011 period, the number of self-employed persons
increased by an annual average of 1.3%, again at a very slow rate. Overall, self-employment rates
have dropped from 17.1% of employment in 2000 to 15.2% in 2011 and the actual number of self-
employed persons has been on the decline since 2009. This suggests that self-employment is growing
at a slower pace that overall employment. Women make up less than 5% of self-employed persons,
which is exceedingly low compared to their participation in self-employment activity in other
countries. However, over the past ten years, Jordanian women have been becoming self-employed at
more than three times the rate of men, suggesting that self-employment is becoming a more attractive
employment option for Jordanian women.

The fourth observation is that the prevalence rate of early-stage entrepreneurs in the adult
population(percentage of adults in the process of trying to start a business combined with the
percentage of adults who own a young business of no more than 42 months old) is lower than might
be theoretically expected for a country at its level of development. This suggests room for boosting
entrepreneurship promotion efforts.

21
For a copy of the full SMME sector diagnosticprepared for JEDCO as input to the strategy, see: Stevenson (2012a),
“Context for MSME Development in Jordan and Diagnostic Assessment of the MSME Sector”.

9
Statistical Review of the SMME Sector

Number of SMMEs and Distribution by Employment Size

According to the Establishments Census 2011, the number of non-agricultural enterprises in Jordan
had reached 156,728. Almost 97% of these enterprises have fewer than 10 employees(Figure 2),a
disproportionately high representation compared to the average across EU countries of 92.2% 22. Even
more significantly, almost 92% of the enterprises in Jordan have fewer than five employees
(accounting for 95% of the enterprises with fewer than 10 employees), confirming that Jordan is a
nation of very small enterprises. In fact, only 8.5% of its private enterprises have more than four
workers, reflecting a serious structural deficiency.

Figure 2. Distribution of non-agricultural enterprises by employment size, 2011

2% 5%
1% 0% 0% 0% 0%

1-4
5-9
10-19
20-49
50-99
100-249
250-300
> 300
91%

Source: Establishments Census 2011 data, Department of Statistics.

The Establishment Census does not include many

informal enterprises. A 2012 World Bank report
indicated that in 2009 there were 262,094
informal SMMEs (original source of the data not
identified).23 Adding to the number of active
private enterprises reported by the Department of
Statistics for that year, would suggest there were
at least 408,537 enterprises in Jordan in 2009,
with informal SMMEs accounting for 64% of
them. If the same multiplier of 1.8 informal
enterprises per registered enterprise held true for
2011, then the total number of private enterprises
in 2011 would be estimated at 436,700.
Jordan’s enterprises are also relatively young. Over 70% of the enterprises covered in the
Establishments Census 2011 were started within the previous 10 years. 24 This suggests that if Jordan
wants to increase its stock of enterprises, it must focus on promoting entrepreneurship and
encouraging new start-ups.

22
ECORYS (2012), “EU SMEs in 2012: at the crossroads – Annual report on small and medium-sized enterprises in the EU,
2011/12”.
23
Afram and Goussous (2012), “Jordan MSME Financing TA Gap Analysis and Preparation of TA Plan”,World Bank, p. 83.
24
DOS (2012), Establishments Census 2011, Table 6.

10
The 2011 Establishments Census also reveals regional disparities in the number and density of private
enterprises across governorates (Table A2.2, Annex 2). Just over 77% of all active establishments are
located in Amman, Irbid and Zarqa, governorates where about 71% of the Jordanian population lives.
The density of SMMEs (enterprises with fewer than 250 employees) per 1,000 inhabitants is 25.6.

The majority of Jordanian enterprises are structured as

sole proprietorships (86.7%); 9% are partnerships; and
only about 3% are limited liability companies or
limited partnerships.25 Ninety-two per cent of all of the
sole proprietorships are enterprises with fewer than
five employees.26 This increases to 99% when
enterprises with 5-19 employees are included. As the
size of enterprises increases, so does the propensity to
incorporate. Fewer than 1% of enterprises with 1-4
workers is incorporated as a limited liability company,
compared to 8% of enterprises with 5-19 workers, over
29% of enterprises with 20-49 workers, almost half of
enterprises with 50-99 workers, and 63% of enterprises
with 100 or more workers. There are very few
cooperative societies, but of these, almost 90% have
fewer than 20 workers. (See Table A2.1, Annex 2.)
This is low relative to World Bank data reporting an average density of 31 SMMEs per 1,000
inhabitants across 132 countries.27The SMME density is highest in Amman (29.7), Zarqa (26.2) and
Aqaba (26.1) and lowest in Mafraq (16.5).

Growth in the Number of SMMEs

Comparing data from the 2011 Establishments Census with results from the 2006 Establishments
Census reveals that Jordan experienced a 6.6% increase in the number of establishments over the five-
year period, an annual average growth of only 1.3% (TableA2.3, Annex 2). The largest growth was in
enterprises with 10-19 employees (average annual increase of 4.2%), followed closely by enterprises
with 100 or more workers (4%), and those with 20-99 employees (3.8%). The slowest growth was in
the smallest group of enterprises (1-4 workers), which achieved an average annual growth of just over
1%.

Compared to the situation as reported in the 2006 Establishments Census, by 2011, Tafiela and Jarash
experienced the highest overall growth in the number of enterprises (about 27% and 22%
respectively), although these are among the smallest governorates. The lowest growth rates were in
Amman (overall net decrease of 5% in the number of enterprises), Ma’an (1.5% overall net increase)
and Mafraq (only a 0.5% increase). (See Table A2.2, Annex 2).

Data from annual establishment surveys allow a closer look at changes in the number of enterprises
on an annual basis over the past decade. In 2010, there were 147,543 non-agricultural private
enterprises in Jordan, an increase from 117,793 in 2000 (an average annual increase of 2.5%). The
number of enterprises has remained relatively static since 2006 (see Figure A2.1, Annex 2). However,
growth was significant during the first half of the decade, the number of enterprises rising by 19%
from 2000 to 2005 (annual growth rate of almost 4%), with a particularly sharp rise in the number of
enterprises between 2002 and 2003, compared to only about 1% annual growth from 2005 to 2010.

25
DOS (2012), Establishments Census 2011, Table 4.
26
MOPIC and UNDP (2011), Jordan Human Development Report 2011: Small Businesses and Human Development.
27
Kushnir et al. (2010), “Micro, Small and Medium Enterprises Around the World: How Many Are There, and What Affects
the Count?” World Bank/IFC. The count is based on formal enterprises employing up to 250 workers.

11
The distribution of enterprises by size varies a bit from year to year, but consistently, the number of
enterprises with fewer than 50 employees exceeds 99% of all private enterprises, and enterprises with
100 or more workers never more than 0.5%. However, the distribution of enterprises by employment
size has been gradually shifting. The proportion of enterprises with fewer than five workers dropped
from over almost 93% in 2003 to 89% in 2010, while the share of enterprises with 100 or more
workers increased from 0.24% in 2003 to 0.5% in 2010, still a low proportion, but a significant
growth rate (see Figure A2.2, Annex 2). This reflects a great deal of variability in growth rates among
the different employment-size categories over two five-year time periods.

From 2005 to 2010, both the number of enterprises with 5-19 workers and with 20-49 workers
decreased, after realising significant gains in the first half of the decade (Figure A2.3, Annex 2). On
the other hand, the number of enterprises in the 50-99 employees category achieved faster growth in
the second half of the decade than in the first half. Over the ten-year period, the growth rate among
the smallest enterprises was the slowest (23.2%), an annual average of 2.3%. Although from a small
base of only 341 in 2000, the number of enterprises with 100 or more workers almost doubled over
the decade, growing at an annual average of 9.3%. The impact of this has been an upward trend in the
average employment size of Jordan enterprises.

SMME Contribution to Employment

In 2010, non-agricultural private enterprises employed approximately 671,575 workers; 68.7% of all
workers in public and private enterprises in Jordan. 28Private enterprise employment has been
increasing steadily since 2000 (Figure A2.4, Annex 2), although with its share of all public and
private enterprise workers remaining relatively constant at between 65% and 70%. Also the
distribution of private sector employment has been shifting in favour of larger enterprises over time
(see Figure A2.5 in Annex 2). In 2000, about 46% of private enterprise employment was in
enterprises with fewer than five workers, 72% in enterprises with fewer than 50 workers, and almost
22% in enterprises with 100 or more workers. In 2010, only about 35% were employed in enterprises
with fewer than five workers, 58% were employed in enterprises with fewer than 50 workers, and the
employment share of enterprises with 100 or more employees had risen to 34%. So even though large
enterprises are few in number, they contribute substantially to employment share and this share has
been increasing.

This is consistent with a rise in average employment size from 3.9 in 2000 to 4.6 in 2010. (This
compares to an average of 6.24 employees per enterprise in across the EU countries. 29)The average
number of workers in firms with 20-49 employees and 50-99 employees has remained relatively
constant, while the average employment size of 1-4 employee enterprises has decreased slightly and
the average size of enterprises with 100 or more employees has increased by 50 workers over the 10
year period.

Overall, total employment in private sector enterprises increased by 46% from 2000 to 2010, an
average annual increase of 4.6% (Figure A2.6, Annex 2). Growth has been variable across enterprise-
size groupings and time periods. The largest overall growth in employment has been in enterprises
with 100 or more workers (130.8%, or an annual rate of 13%), followed by enterprises employing 50-
99 workers (71% increase, or annual increase of about 7%). Breaking the 10-year period into two
five-year periods reveals that enterprise employment growth slowed considerably in the second half of
the decade, declining from 33% in the first half (average annual growth of 6.6%) to 10% in the

28
Total employment in public and private sector enterprises in 2010 was reported by the Department of Statistics as 977,715.
29
ECORYS (2012), “EU SMEs in 2012: at the crossroads”.

12
second half (average annual growth of 2%). Employment growth in enterprises with 5-19 workers
showed the largest decline.

In summary, there was a net increase of 29,750 enterprises between 2000 and 2010. Growth in the
number of enterprises with 1-4 workers accounted for over 80% of this increase; however, these
smallest enterprises were responsible for only 12.5% of the net increase in private sector jobs during
that period (Table 3). While private enterprises with 100 or more workers were responsible for only
1.2% of the increase in the total stock of private enterprises, they accounted for 61.2% of the net
increase in employment. The conclusion is that the larger enterprises (100+ workers) have had higher
employment growth rates and accounted for the majority share of the net employment increase.
Enterprises with 5-19 workers have had the least impact on net job creation.

Table 3. Net change in number of private enterprises and their employment by enterprise size, 2000-2010
Enterprise size Net increase in Share of increase Net job increase Share of net new
(by number of number of in net stock of jobs
workers) enterprises firms
1-4 24,717 83.0% 26,405 12.5%
5-19 3,573 12.0% 13,679 6.4%
20-49 790 2.7% 21,251 10.0%
Subtotal 29,080 97.7% 61,335 28.9%
50-99 313 1.1% 20,992 9.9%
100+ 357 1.2% 129,643 61.2%
Total 29,750 100% 211,970 100%
Source: Calculations based on data from the Department of Statistics (non-agricultural enterprises only).

SMMEs and Employment by Sector

Enterprises with fewer than 50 workers account for 99% of all private enterprises and well over 90%
in all sectors except Financial intermediation (84.5%) and Electricity, gas and water supplies (50%)
(Table A2.4, Annex 2). In fact, enterprises with fewer than five workers make up 89% of the
enterprises: 96.4% of the enterprises in the Community, social and personal services sector, 95% of
Wholesale & retail trade, repair, 91% of Real estate, renting and business activities sector, and even
77% of manufacturing sector enterprises.

Because the average employment size of the under-50 worker-enterprises is so much smaller than that
of larger firms, they account for lower shares of employment in each sector. For example, enterprises
with fewer than 50 workers account for almost 98% of all private enterprises in the Manufacturing
sector, but only 42.6% of all manufacturing sector employment (Table A2.5, Annex 2). The bulk of
manufacturing is cottage industry with low capital accumulation and technological absorptive
capabilities.30 Larger enterprises (100 or more workers) make up only 1.3% of all manufacturing
enterprises, but just over half of all employment in the sector. 31 In the Construction sector enterprises
with fewer than 50 workers account for 91% of the private enterprises, but only 39% of Construction
sector employment. Large enterprises (100 or more workers) represent only 3.8% of all Construction
enterprises, but 42.5% of its jobs. As well, while the smallest enterprises (under five employees)
account for almost 95% of all enterprises in the Wholesale and retail trade/repair sector, they are
responsible for about two-thirds of employment in that sector.

30
Abugattas 2012.
31
It is also noted that three sectors account for a quarter of manufacturing value-added – tobacco, garments and
pharmaceuticals.

13
Scale of SMMERevenues and Exports
SMMEs are also small in revenue size (Table A2.6,Annex 2). In 2011, about 60% of all enterprises
produced revenues of less than JD 10,000, although this was a significantly smaller share than in
2006(74.4%), with almost 30% fewer enterprises generating revenue of less than JD 5,000. This
suggests that the average revenue size of enterprises has increased. However, almost 96% of
enterprises earn revenue of JD 100,000 or less, a percentage that has changed only minimally since
2006. In 2011, only 0.6% of all private enterprises (1,004 firms) generated revenues exceeding JD 1.5
million.

Official statistics on the contribution of SMMEs to Jordanian exports are not readily available, but
estimates reported in the 2011 JHDR suggest that this is does not exceed 5%. 32The majority of
SMMEs sell their products and services in local markets.

Enabling growth in the scale of micro and small enterprises (through expansion of market access and
skills enhancement) and their ability to access export markets (e.g. upgrading product quality,
developing production capacity, developing linkages with export markets) are critical elements in
realising economic and employment gains from the SMME sector.

Self-Employment Trends
The percentage of working adults that is self-employed in Jordan is low compared to other developing
MENA countries. The average self-employment rate for 15 MENA countries is 20.2%, compared to
15.9% in Jordan(Figure A2.7, Annex 2). However, a relatively high proportion of the self-employed
in Jordan (41%) fall into the “employers” category, compared to an average of only 25% in other
developing MENA countries.

Jordan’s self-employment rate has been slowly declining over the past decade, from 17.4% of the
employed in 2000 to just over 15% in 2011 (Figure A2.8, Annex 2).Although the self-employment
rate dropped, the number of self-employed workers actually grew from 64,120 to 73,270, an increase
of 14.3%, or an average annual increase of 1.3%. However, this rate of growth was only about half of
the rate of growth for all employed persons (28.4%, or an annual average of 2.6%); the actual number
of self-employed persons has been dropping since the peak level in 2009 (Figure A2.9, Annex 2).

The male self-employment rate is almost four times higher than the female self-employment rate
(17.4% versus 4.5%), a significant gender gap. Consequently, women’s share of self-employed
workers is very low, although over the 11years, has increased slightly from 4.5% to 4.97% of all self-
employed workers. The number of self-employed women has been growing at a faster rate than the
number of self-employed men: an increase of 25.5% in the number of self-employed women (annual
average increase of 2.3%) compared to 13.7% for self-employed men (annual average increase of
1.2%). A much larger decline in the number of self-employed men is also noted since 2007, a trend
that mirrors the slowdown in growth of the enterprise population in general.

It is also worthy of note that 86% of the increase in self-employed women has been due to the
increase in the number of employers among them. Only 48% of the increase in the number of self-
employed men has been due to an increase in the number of the “employing self-employed”.

32
MOPIC and UNDP (2011), Jordan Human Development Report 2011: Small Businesses and Human Development.

14
Entrepreneurial Activity Rates
According to results from the 2009 Global Entrepreneurship Monitor (GEM) study in Jordan, 5.9% of
the adult population (18-64 years of age) was actively trying to start a business (nascent
entrepreneurs), 4.9% already owned a business that was less than 42 months old (owner of a young
business), and 5.3% owned a business that was more than 42 months old (established business
owner).33The early-stage entrepreneurial activity (TEA) rate in Jordan (combination of the prevalence
among adults of nascent entrepreneurs and owners of young businesses) is 10.2%. 34 This is slightly
below average for the efficiency-driven economies included among the GEM study countries in 2009
and among MENA countries is about mid-way between the lowest TEA rate (in Saudi Arabia) and the
highest (in Yemen) (see Figure A2.10, Annex 2).

The TEA rate for Jordanian men is over 3.5 times the rate for women, rendering one of the highest
gender gaps in MENA countries(Figure A2.11, Annex 2). This gender gap is similar to that for
Jordan’s self-employment rates and among the highest in MENA countries.

Early-stage entrepreneurial activity rates in Jordan vary across age groups and education levels. The
highest propensities to be involved in early-stage entrepreneurial activity are among adults in the 25-
34 age group (14.2%) and among those with a graduate level education (18.8%) (Figure A2.12,
Annex 2). While the 25-34 age group makes up over 40% of the early-stage entrepreneurs (given the
high percentage of this age group in the total population), entrepreneurs from the highest education
group (post baccalaureate degree) make up only 1.5% of early-stage entrepreneurs.

There are several implications from the GEM data analysis for Jordan. The prevalence rate of early-
stage entrepreneurs in the adult population(nascent entrepreneur rate combined with young business
ownership rate) is lower than might be theoretically expected for a country at its level of development,
suggesting room for boosting entrepreneurship promotion efforts. Entrepreneurship support efforts
would be beneficial in terms of ensuring that nascent entrepreneurs actually get the assistance they
need to be successful in launching their enterprises. There is an opportunity to target entrepreneurship
promotion efforts to groups of the population with lower entrepreneurial activity rates. The most
prominent of these groups is women. To improve the level of confidence that women have in their
entrepreneurial abilities, programmes of education, entrepreneurship training and networking may
prove very useful. However, the entrepreneurial activity rates of the 18-24 age group and those with
post-secondary education are also low compared to those in most of the other MENA countries,
suggesting that more promotion efforts should be targeted to these groups as well.

Level of Informality
Although there are no official statistics on the size of the informal sector in Jordan, estimates suggest
that informal economic activities may account for 20% to 25% of GDP. 35 The size of the informal
sector appears to be much smaller than reported in a number of other developing MENA countries

33
For Jordan, this translates into the following: 191,000 18-64 year olds, in average teams of 1.64 persons, were actively
trying to start an estimated 116,000 new businesses (not all of which will, of course, succeed in doing so); another 159,000
18-64 year olds, in average teams of 1.68, were owners of close to 95,000 young businesses that were less than 42 months
old; and about 170,000 18-64 year olds owned about 124,000 established businesses with more than 42 months of operation
(IDRC 2010,Global Entrepreneurship Monitor: GEM-MENA Regional Report 2009, p. 93).
34
The number of young and established businesses exceeds the number of enterprises reported by the Department of
Statistics. This could be due to a number of factors. The main reasons may be that the GEM survey is a survey of the adult
population and does not distinguish between whether the individuals have formal and informal enterprises, whether or not
they are home-based, and includes agricultural enterprises. The DOS data is based on establishments surveys, does not
include home-based enterprises or agricultural enterprises.
35
Bertelsmann Stiftung (2012), “BTI 2012: Jordan Country Report”.

15
and the role played by the informal sectorrelatively low for a country at Jordan’s level of
development. In 2006, the informal economy in Jordan amounted to 17.7% of its GDP, compared to
over 30% of GDP in Algeria (30.7%), Egypt (35.4%), Lebanon (33.4%), Morocco (34.8%) and
Tunisia (36.1%).36 The informal economy contribution to GDP in Jordan was closer to the level in the
more developed MENA countries – Bahrain (17.2%), Saudi Arabia (17.2%), and Oman (18%). This
could indicate either a more favourable environment for the formalisation of enterprises in Jordan or a
lower level of subsistence economic activity generally.

Although there do not appear to be any official statistics on the number of informal enterprises in
Jordan, a 2012 World Bank report indicated that in 2009 there were 262,094 informal SMMEs
(theoriginal source of the data was not identified). 37This is almost 1.8 times the number of active
private enterprises reported in the Department of Statistics (DOS)annual Establishments Survey 2009.
If added together, this would suggest that informal enterprises account for 64% of the total.

Regardless of the number of informal enterprises, informal employment in Jordan is significant. The
2011 study of the informal sector in the Jordanian economy estimated that informal employment
constituted 44% of total employment and accounted for 55% of wage earners in the private sector. 38
The share of informal workers escalates to 92% in enterprises with fewer than five workers. Since
informal workers do not have any social security protection, the level of informal employment points
to a serious policy issue.

Constraints Facing the Development of Entrepreneurship and SMMEs

Although SMMEs are dominant in Jordan, their small size distribution, particularly the dominance of
enterprises with fewer than five workers, places them at a disadvantage relative to large enterprises.
They have fewer internal resources and less capacity to complete in global markets and suffer from a
lack of management skills, financing, and technology that limits their survival and growth potential.
The majority of SMMEs focus on the production of traditional, low value-added goods with mediocre
quality, serving local markets, and competing on the basis of price. Very few have the capacity to
compete in international markets. Eighty-four per cent do not have any quality control systems in
place and only 2% follow quality control procedures that are in compliance with international quality
certification systems.39The local nature of demand and supply may help to explain why Jordanian
SMMEs also show weak levels of innovation. They do not invest heavily in technologies that will add
value to their products and overall economic performance, and exhibit low levels of technology
utilisation. In a survey of micro and small enterprises in 2011, only 52% used a computer, 33% used
the internet, and 13% had a website.40

Apart from internal constraints, the ability of SMMEs to function effectively is also impacted by
external factors. These include the markets in which they operate (e.g. entry barriers, competition);
policies, laws and regulations affecting business activities, which do not sufficiently consider the
impact on smaller enterprises in their development and implementation; and the organisational and
institutional arrangements surrounding the enterprise (e.g. business support entities and services,
financial mechanisms, etc.), with an uneven availability of these supports at the regional level.

36
Schneider et al. (2010), “Shadow Economies All over the World: New Estimates for 162 Countries from 1999 to 2007”,
World Bank.
37
Afram and Goussous (2012), “Jordan MSME Financing TA Gap Analysis and Preparation of TA Plan”, p. 83.
38
MOPIC and UNDP (2012), “The Informal Sector in the Jordanian Economy”. This study used data from the Jordan Labour
Market Panel Survey of 2010. Informal employment was defined as employment not covered by social security.
39
MOPIC and UNDP (2011), Jordan Human Development Report 2011, p.84.
40
MOPIC and UNDP (2011), Jordan Human Development Report 2011, p.85.

16
The National Agenda 2006-2015 laid out a number of the challenges facing SMMEs in Jordan,
specifically highlighting:

 administrative hurdles and system inefficiencies delaying the creation of start-ups and
discouraging investment;
 failures of the financial system to meet the needs of SMMEs (e.g. low response of
commercial banks,limited venture capital) leaving few entrepreneurs with external financing
options;
 an unfavourable taxation structure hindering development of private companies;
 high transportation infrastructure costs and electricity tariffs;
 non-competitive ICT end-use access costs, limiting productivity gains;
 quality of the workforce;
 uneven and insufficient government support;and
 limited funding and ineffective coordination of institutions and programmes that provide
financial support and business development services.

There are few empirical studies of Jordanian SMMEs, however, consultations with business and
sector associations, government officials and SMME support providers reveal consensus on the major
obstacles acting as barriers to SMME development. These were stated as:

 A weak entrepreneurial culture;

 Lack of financing;
 Lack of entrepreneurial and management skills and capacity, coupled with inadequate access
to business development, advisory and diagnostic support services, especially in the
governorates;
 Market access;
 Lack of innovation and technology adoption/development; and
 Legal, regulatory and administrative challenges.

These barriers are magnified for new enterprises, which can have a deleterious effect on business
start-up rates and the survival and growth opportunities of new entrepreneurs. Women and young
people starting businesses are even more seriously impacted because of their lack of experience,
management skills, participation in formal business networks, and credibility.

In addition, Jordan stakeholders emphasised the high input costs (e.g. cost of energy); the lack of
appropriately skilled labour due to an education and training system that is not adequately preparing
graduates with “employability skills”; and the low commitment/investment of SMMEs in training
their workers, all of which reduce their productivity and competitiveness.They also stressed the low
productivity and diversification of micro and small enterprises in the agriculture and agri-business
sectors, which are important contributors to employment and development in the rural areas of Jordan.

1. Weak entrepreneurial culture

Several key informants and stakeholders stressed the weak entrepreneurial culture in Jordan as an
impediment to SMME development. While this is difficult to measure, the GEM results for Jordan
offer some insights. In the 2009 GEM study, although over 80% of Jordanian adults perceived
entrepreneurship as a good career choice, this was the third lowest among nine MENA countries
participating in the research project.41 Jordan ranked fifth among the MENA countries on the
41
IDRC (2010), Global Entrepreneurship Monitor: GEM-MENA Regional Report 2009.

17
perception that successful entrepreneurs have high status and respect in the country. Over half of
Jordanian adults perceived that they have the knowledge, skills and experience to start a business, but
this ranked Jordan 6th among the nine countries). Only Palestinians and Yemenis reported a higher
fear of failure that would prevent them from starting a business. In addition, fewer Jordanians than
adults in seven of the countries saw “good opportunities for starting a business in the next six
months”. It is also noted that Jordanian women are much less likely than Jordanian men to believe
they have the knowledge, skills and experience to start a business (40% of women versus 74% of
men), one of the highest gender gaps on this indicator. As well, a higher percentage of women than
men report that a fear of failure would prevent them from starting a business (47% of women versus
32% of men).42 These are influencing factors in the much lower prevalence rate among adult women
on “intent to start a business in the next three years”, with twice as many men as women reporting this
intention (38.8% of men and 19.5% of women).

Furthermore, young Jordanians would much prefer paid employment in the public sector than to work
in the private sector or to become self-employed, assuming similar pay and working conditions.
According to results from the Gallup survey of young Arabs (15-29 year olds) in 2009, 54% of young
Jordanians would prefer to work for the government (compared to an average of 49% in the Arab
League countries), 23% would prefer to be self-employed, but only 13% were “planning to start a
business within the next 12 months”, compared to an average of 26% of youth in Arab League
countries.43 The education system does not reinforce the value of entrepreneurship or, until very
recently, introduce the concept of entrepreneurship as a career option.

2. Lack of entrepreneurial/ management skills and adequate business support

The vast majority of Jordanian SMMEs lack management skills, including growth-enabling skills;
marketing skills and know-how; financial management skills 44; strategic planning skills, and
knowledge about how to start a business.

Basically, new entrepreneurs are starting their businesses with limited entrepreneurial know-how. In
the 2009 GEM survey in Jordan, only 3.7% of the adult population reported that they had received
any education or training in starting a business at primary or secondary school, although this increased
to 4.7% for adults who were actually engaged in early-stage entrepreneurial activity. Slightly more
received some training following their official schooling – 11% of the general adult population and
15.5% of early-stage entrepreneurs. Fewer than about 3% of Jordan’s start-ups and early-stage
entrepreneurs make use of professional advisors in the development of their enterprises. This includes
lawyers, accountants, business advisory services provided by public agencies and NGOs, and business
associations.45 Instead, they rely largely on their personal networks of family and friends.

The low usage of professional advisory services may be related to a lack of availability of these
services, a low level of awareness of the existence of these services, affordability, difficulties in
accessing the services which are available (e.g. cumbersome application processes), or lack of
comfort in making an approach, all circumstances that need to be addressed.

42
IDRC2010, p. 58.
43
Silatech (2009), The Silatech Index: Voices of Young Arabs.
44
Only 7.8% of all active private enterprises make use of accounting records, a total of 12,213 enterprises. See DOS
(2012) Establishments Census 2011, Table 23.
45
IDRC (2010), Global Entrepreneurship Monitor: GEM-MENA Regional Report 2009.

18
3. Lack of access to capital and finance, including start-up capital
Jordanian SMMEs have difficulty obtaining formal external financing for the start-up and expansion
of their enterprises. There are serious deficiencies on both the supply and demand side. In the absence
of access to external financing, most Jordanian SMMEs rely on their own personal savings or money
from family and friends to get their businesses started and finance their operations. This affects the
scale of their operations and the growth potential of their enterprises.

A number of microfinance institutions (MFIs) exist in Jordan, but microfinance is not consistently
available across the Kingdom. Some MFIs operate with geographic criteria or only in poverty pockets
where the unemployment rates are highest. In addition, many of the loans are used for domestic
consumption rather than for investment in income-generating activity. 46

Commercial banks do only a minimal amount of lending to SMMEs. According to a 2011 World
Bank report, total bank lending to SMMEs in Jordan represents less than 10% of their loan portfolio. 47
This is low compared to the level in other MENA countries, such as Lebanon, Morocco, Tunisia and
even Yemen. Banks in Jordan, as in many other MENA countries, perceive higher risk in lending to
young and small enterprises due to information asymmetries caused by the lack of credit information.
Although Jordan has passed a law providing for a private credit bureau, this still has not been
established. According to the Doing Business 2013 report, credit information is available on only
1.9% of Jordanian adults. The higher transactions costs on smaller loans and the perceived risk of
lending to smaller enterprises lead to the preference of banks for lending to governments and large,
well-established enterprises. To compensate for information asymmetries, banks impose rigid
collateral requirements that are difficult for smaller enterprises to meet. This is the case even with
loans guaranteed by the Jordan Loan Guarantee Corporation (JLGC). In addition, the lack of a
movable assets registry and lengthy and cumbersome legal processes make it difficult to collect on
secured loan defaults. Other forms of financing for SMMEs, such as leasing and factoring are not well
developed in Jordan.

On the demand side, the fact that the majority of SMMEs do not keep regular accounting records,
coupled with their lack knowledge of how to properly prepare loan/financing requests are major
constraints to their ability to secure bank financing.

Forms of equity investment capital are underdeveloped in Jordan and efforts to stimulate a private
venture capital industry are very recent.

Many of the financial constraints are further exacerbated for women and young entrepreneurs who are
even less likely to have collateral, track records and credibility.

4. Lack of innovation and technology know-how and access to modern technology

Most Jordanian SMMEs are not currently in a position to be drivers of innovation. The majority are
using outmoded forms of equipment and technology, which is affecting their product and service
quality, productivity, and competitiveness. In general, SMMEs have only weak links with universities
and research/technical centres and do not have the human, technical, and financial resources to pursue
upgrading, R&D and innovation activities on their own.

46
ESC (Economic and Social Council) (2011), “Micro and Small Financing (MSF) in Jordan”.
47
Rocha et al. (2011), “The Status of Bank Lending to SMEs in the Middle East and North Africa Region”, p. 22.

19
The system for innovation support in Jordan is not well developed. Not only is the level of R&D
investment to GDP very low (only 0.42%48), but the majority of research is driven by the public
sector. The private sector contribution to total R&D expenditures is only.4%. 49

5. Access to markets
Most Jordanian SMMEs are selling directly to end-users; 78% sell all of their production /services to
end consumers as opposed to other businesses. They are not sufficiently linked into the supply chains
of larger companies, sector value chains, and public procurement markets, linkages which would
increase their access to markets.

SMMEs have difficulty accessing information on market opportunities due the absence ofmarket
information and competitive analysis databases. This applies to sector analysis reports indicating
market trends and opportunities domestically as well as internationally.

Due to its small domestic market size, Jordan needs to promote exporting activity of its indigenous
enterprises. However, SMMEs lack knowledge about the exporting process and are in need of skills
training and access to services that can help them become export-ready. Due to the low quality of
their products and production processes,many SMMEs cannot meet the quality standards or
certification requirements of export markets in the US and the EU and not enough is being done to
help micro and small enterprises acquire quality certifications to meet the standards and quality
criteria for accessing international markets. In addition, they lack financing to cover the investment
costs associated with exploring and entering export markets.

6. Legal, regulatory and administrative challenges

It is well known that the time, complexity and cost of registering a business, obtaining the necessary
licenses, and complying with other regulatory matters of business operation creates disproportionate
burden on smaller enterprises relative to large enterprises, thus having a greater impact on their
productivity levels.

The review of existing laws and regulations affecting the development of entrepreneurship and
SMMEs that was carried out as input to the strategy identified a number of legal provisions that
constitute barriers to investors both in terms of the provisions of the laws or their application. 50 This
review covered the Income Tax Law, the General Sales Tax Law, the Companies Law, the Trade
Law, the Social Security Law, the Landlord and Tenants Law, the Investment Promotion Law, the
Customs Law, the Traditional Crafts and Industries Law, the Chamber of Commerce Law and the
Chamber of Industry Law. The review pointed to the following issues:

 Instability of laws governing investment due to the issuing of a large number of amendments;
 Lack of understanding and awareness (i.e. adequate training) of some government employees
regarding the nuances of laws or legal provisions that are subject to judgement, resulting in
their inconsistent application and confusion for SMMEs;
 Requirement to obtain prior approvals from the official authorities or municipalities for the
purpose of registering a business or its operations;
 Absence of a one-stop shop for business registration to reduce the time, effort, and cost of the
business registration process; and the lack of availability of these services in the governorates;
48
World Development Indicators database.
49
Abugattas (2012), “Model Reformer without Upgrading: The Jordanian Experience”.
50
Barakat (2012), “A Report on Identification of the Legislative and Taxing Frameworks of SMMEs and the Impact of
Jordanian Applicable Rules and Regulations on the Development of these Companies”, prepared for JEDCO.

20
  Requirement for enterprises to provide financial guarantees to obtain licenses for certain kinds
of business activity (e.g. tourism, coffee shops, restaurants, etc.);
 Requirement for individuals and companies to provide bank guarantees to the court of 25% of
the disputed value for the purposes of seeking recourse from the courts, which is a barrier to
entrepreneurs/SMMEs who do not have the financial capacity to defend themselves and claim
their rights;
 Very low minimum revenue thresholds for General Sales Tax registration (JD 75,000 for
merchants, JD 60,000 for factories, and JD 30,000 for services) poses a heavy burden on
smaller enterprises and increase the administrative costs of the government compared to the
revenue derived from smaller enterprises;
 Difficulty in understanding the texts of the Sales Tax Law and attached regulations, which
results in honest mistakes by companies and institutions;
 Confusion caused to enterprises by different rules for the treatment of sales tax on products
sold to exempted and non-exempted entities;
 The financial and accounting records required of enterprises under the Sales and Income Tax
laws are the same for both large and small companies. These requirements are viewed as too
onerous for most micro and small enterprises and should be simplified for SMMEs below a
certain size;
 Discrepancies in the application of the Sales Tax Law on the import of goods versus services
(i.e. the import of services is subject to an additional withholding tax);
 Procedures for liquidation of companies and bankruptcy proceedings are very complex and
burdensome;
 The Companies Law requires companies or persons whose capital exceeds JD 100,000 to
appoint a certified auditor and submit audited financial statements, which imposes a financial
hardship on smaller companies;
 Excessive time and cost to change the legal status of an enterprise with the Ministry of
Industry and Trade (JD 5,000 fee);
 Real estate recorded in the names of companies is subject to taxation of any capital gains
when the property is sold, whereas real estate held in the name of individuals is not subject to
similar taxation, leading companies to avoid registration of real estate in the name of the
company;
 The Social Security Act requires a deduction of 6.5% from the employee’s salary and 12.5%
from the employer. The employers’ share is onerous for micro and small enterprises, in
particular, and should be reduced. In the meantime, high social security charges may be one
of the major causes of the high rate of informal employment in Jordan;
 The Chamber of Commerce and Chamber of Industry laws deny the right to vote of members
with registered capital of less than JD 5,000 (Chamber of Commerce Law) or less than JD
30,000 (Chamber of Industry Law), which discriminates against their smallest members (who
are required by law to be members) from proper representation;

These are key examples of the range of legal and regulatory provisions that may have a deleterious
and disproportionate effect on smaller enterprises and are in need of further examination.

Challenges faced by new start-ups and young enterprises in the first three years of
operation
New start-ups and young enterprises in the first three years of operation are subject to additional
challenges. The first of these are legal and regulatory hurdles associated with registering a business

21
and obtaining the necessary licences. The time, costs and bureaucratic red tape associated with these
processes can discourage new businesses from registering at all and push up the proportion of
informal enterprises.There are challenges in obtaining licenses to operate a home-based business,
which is the lowest-risk option for many new enterprises because it reduces their overhead costs and
contractual commitments. Municipal laws in Jordan do not allow entrepreneurs to operate their
businesses from their household premises, except in certain cases, such as for consulting businesses.
As well, many rental agreements state that the tenants cannot operate a business from the property,
which is a deterrent for potential entrepreneurs who do not own their own homes. Changes to the
municipal law in Amman in October 2011 now allow the legal operation of a home-based business in
several types of business activity. Other governorates are being encouraged to make the same change
to their own laws and regulations.With consideration for zoning and other issues (such as parking and
congestion), many other countries allow people to operate businesses from their homes to encourage
productive activity. Success stories of businesses started in garages and kitchens such as Hewlett
Packard, Apple Computers and the Body Shop exemplify the merits of making such allowances.

Secondly, there are administrative and legal challenges to closing a company, especially in the case of
insolvency. Since enterprises in the first three years of businessare the most vulnerable to failure,
especially the first 12 to 24 months, fear of punitive and costly actions if “the business does not work
out”, can act as a deterrent to potential entrepreneurs in pursuing their business ideas in the first
instance, and in the second instance, result in their decision to not officially close the business if it
does not succeed in meeting their expectations. Stringent bankruptcy and insolvency rules can also
prevent the entrepreneurs of bankrupt companies from having a second chance with a new start-up.

Thirdly, new entrepreneurs and start-ups are in need of preparation support. They often do not have
the capacity to undertake feasibility studies on new business ideas. This may mean that they start
businesses without sufficient analysis of the opportunity or strategic planning, which increases the
risks of not surviving. Programmes, such as through IRADA and the Queen Rania Center for
Entrepreneurship (QRCE), do provide some support to new entrepreneurs in assessing the viability of
new business ideas, but more concerted and widespread assistance is needed. Many of the government
support programmes are more focused on assisting SMMEs that are already established in the
marketplace, and insufficient attention is paid to government-supported programmes to foster new
enterprise creation. There are few places for new and start-up entrepreneurs to get proper information
and advice in a simple way without having to go through the competitive application and screening
processes required by most of Jordan’s programmes. This may be one of the factors in the very low
use of professional advisors among start-up entrepreneurs in Jordan.

According to the 2009 GEM study in Jordan, 42% of

start-ups require less than US$10,000 of initial financing
and almost 90% less than US$50,000.51 Almost 70% of
the start-up entrepreneurs will invest less than US$10,000
in their new business and about half will meet these
financial needs from their personal funds. Of the 30% of
start-ups who will seek external financing for their start-
ups, almost three-quarters will depend on someone in
their personal networks, such as a family member of
friend. Of all the start-ups, less than 5% expected to
receive any bank financing. Without bank financing,
entrepreneurs must start businesses on a scale matching
the amount of their own capital. In many cases, this will

51
IDRC (2010), Global Entrepreneurship Monitor: GEM-MENA Regional Report 2009.

22
 mean starting on a micro scale.
Fourthly, it is very difficult for new enterprises to obtain external financing. This is the case for all
micro and small enterprises, but for new businesses without track records and collateral, the situation
is exacerbated. Jordanian stakeholders indicate that there is still a gap in access to start-up financing
of less than JD 20,000 and for new growth-potential enterprises in the JD 50,000 to JD 250,000
range.Access to financing is a particularly difficult process for women and young entrepreneurs trying
to get their first business off the ground.

Challenges affecting women’s entrepreneurship

The participation of women in entrepreneurial activity is very low in Jordan as already noted. This is
influenced by cultural traditions and societal attitudes about women’s role in economic activity and
their overall low rate of labour force participation. The National Agenda and other government policy
documents stress the importance of women’s empowerment and greater integration into the workforce
to Jordan’s social and economic progress. Getting women into the workforce is a path for women into
their own businesses. The government’s Executive Development Programme 2011–2013 reinforces
the role of women in the economy by specifying a special focus on the training and upgrading of
women’s vocational and entrepreneurial skills, in addition to facilitating their access to finance.

According to the JHDR2011, only 10.4% of women

own real estate and only 2.7% of women are
agricultural land-owners.
However, even when in business, many women operate home-based enterprises in traditional sectors
that have limited growth potential, and often on an informal basis. There is lots of evidence that
women have smaller businesses than men.52 There are a number of reasons for this, one being that
women are less likely to own property that they can use as collateral for bank loans to finance their
business operations. They are also less likely to have previous business and management experience
and access to information and established business networks.

On the other hand women-owned

enterprises appear to be much more likely
than male-owned enterprises to employ
other women, making them an important
vehicle for absorbing more women into the
labour market.
According to the JHDR 2011, women entrepreneurs
employ 1.84 female employees for every male
employee (about two-thirds of their employees are
female), while male-owned enterprises have 3.11 males
for every female employed (only about 27% of their
employees are female).

There is a general consensus among

Jordanian stakeholders that more needs to be done to encourage women to become entrepreneurs and
to address the challenges they face in starting and operating their own businesses in the formal sector.

52
MOPIC and UNDP (2011), Jordan Human Development Report 2011.

23
CHAPTER 3: THE LANDSCAPE OF ENTREPRENEURSHIP AND
SMME SUPPORT PROGRAMMES, INITIATIVES AND DELIVERY
MECHANISMS
Overview
The entrepreneurship/SMME support system in Jordan is comprised of a number of government and
non-governmental organisations offering project-based programmes to address the financial and
business support needs of SMMEs. A large number of these organisations and programmes were put
in place since 2000, many only since the mid half of the first decade, so are relatively recent.

The inventory of the key organisations and their programmes and services prepared as input to the
national strategy53revealed a number of existing good initiatives to promote and support
entrepreneurship and SMME development at various stages of the business cycle. These include
entrepreneurship education andculture-building initiatives; start-up support; training and counselling;
consultancy and upgrading assistance; innovation support; export development assistance; and
financing support.

JEDCO, the Development and Employment Fund (DEF), IRADA and the National Fund for
Enterprise Support (NAFES) are the main providers of government support to SMMEs. JEDCO
focuses more on established small and medium enterprises (with 5-249 employees) through the JUMP
and JSMP programmes, which have the goal of assisting them to modernise and become more
productive and competitive (including in export markets), but also provides some programme support
for new entrepreneurs (support for business incubators, seed grants for start-ups). It has launched the
SME Banking Window for JEDCO clients; the SME Financing Programme, which is a loan guarantee
programme; and two venture capital funds. DEF is a major provider of microfinance, both through
direct lending to micro and small enterprises, and indirectly through grants to other MFIs for
relending to microenterprises.IRADA (supported by the government budget under MOPIC) has 32
offices throughout Jordan offering business counselling services to micro and small enterprises in the
governorates. NAFES (under the umbrella of the Higher Council for Science and Technology
[HCST]) provides subsidises to cover up to 80% of the costs of counselling and training services
provided to SMMEs (with 5-100 employees) by qualified local consulting and training organisations,
such as the BDC. In this way, NAFES plays a significant role in enabling micro and small enterprises
to assess affordable competency-building services.

A number of non-governmental organisations are active in the entrepreneurship/SMME support

landscape. The major ones include:

 the BDC, which provides training in entrepreneurship and financial skills as well as
counselling services to potential entrepreneurs (especially young people), and small and
medium enterprises;
 the Euro-Jordanian Advanced Business Institute (EJABI), which provides management
training and consultancy services to SMMEs;
 the network of 10 or so business incubators operated by business associations, universities,
the Royal Scientific Society (RSS), Jordan Industrial Estates, the private sector, and NGOs,

53
Stevenson (2012), “Context for MSME Development in Jordan and Diagnostic Assessment of the MSME Sector”.

24
 some of which are members of the Jordan Innovation Centres (JIC) network supported by
JEDCO, which provides them with operational grants of JD 15,000.
 the Queen Rania Centre for Entrepreneurship (QRCE), which delivers entrepreneurship
training and start-up support to university graduates and young entrepreneurs, including
entrepreneurship boot camps and coaching and mentoring support to promising start-ups
emerging from business plan competitions;
 Endeavor, which targets start-up enterprises led by ambitious entrepreneurs with a package of
learning, mentorship, networking and seed capital support that aims to accelerate their growth
path;
 Oasis500, which operates as an incubation environment for start-ups in the ICT sectors,
identifying entrepreneurs with promising ideas, putting them through an acceleration
programme (e.g. boot camp, training, business plan development), providing seed capital for
the development of the start-up, preparing them for funding by venture capitalists and private
equity funds and linking the entrepreneurs to investor networks; and
 INJAZ Jordan, which focuses on entrepreneurship education programmes in partnership with
schools and universities.

In addition, business associations also play a role in providing support to entrepreneurs and SMMEs.
For example, the Young Entrepreneurs Association (YEA) operates two incubators for young
entrepreneurs and the Jordan Forum for Business and Professional Women (JFBPW) functions as a
resource for women entrepreneurs and operates a women’s business incubator. Both of these
organisations also play an advocacy role in favour of more policy support for the enhancement of
entrepreneurial activity.The Jordan Exporters Association assists SMMEs in the area of export
development and the Chambers of Commerce and Industry provide information and other services to
SMMEs.

On the financing side, the major non-government players are the JLGC, Oasis500, the Bedaya Angel
Investors Network, and a small number of microfinance organisations.

A summary overview of this landscape is presented in Annex 3. This covers initiatives to integrate
entrepreneurship in the education system, facilitate start-ups, provide entrepreneurship training and
business advisory/consultancy services, foster innovation, support exporting activity, and to improve
SMMEs’ access to credit and equity financing. Some of these initiatives are targeting students, while
others target start-ups by young entrepreneurs, high-growth potential and innovative start-ups and
early-stage enterprises, women entrepreneurs, microenterprises, small and medium enterprises, and
start-ups or SMMEs in specific sectors.

Assessment of Business Support Provision

The training and business development services are somewhat segmented by stages of business
development or size of enterprise. In general, Oasis500, the QRCE, and the JICs are focused on pre-
start and start-up stages, the BDC on start-up training and counselling support to small enterprises,
IRADA on micro and small enterprises in the governorates, EJADI on more sophisticated small and
medium enterprises, and JEDCO on small and medium enterprises in the manufacturing and services
sectors with export potential, although this is not organised in a deliberate way.

Although the innovation system in Jordan is not well developed, some of Jordan’s business support
programmes include components that will lead to the increased innovation capacity of SMMEs,
particularly, the JEDCO programmes focused on modernisation, upgrading, and standards

25
certification, as well as the technology business incubators. A number of innovation clusters are also
being supported, with the objective of innovation and wealth creation, however, there is not yet
anyavailable data on the performance outcomes of these cluster initiatives at the enterprise level, or
the spill-over benefits to SMMEs.

Efforts have been underway to increase exports through marketing and export promotion. JEDCO
provides grant and subsidies through theJUMP and JSMP modernisation programmes to support
SMMEs in the development of export plans, and participation in international trade fairs and
economic missions, the Jordan Exporters Association offers programmes to stimulate the export
capacity and activity of SMMEs, the JLGC offers an Export Credit Guarantee, and export consortia,
such as the Union of Dead Sea Traders and Exporters and the Olive Oil Consortiumare supported,
however, these programmes are limited by the number of enterprises they can service. Governments
in many countries also have policies to involve SMMEs in indirect export activity by building their
capacity to act as suppliers to larger exporting firms. There is not much evidence of strategic SMME
supplier development programmes in Jordan at the present time. JEDCO used to offer a National
Linkages Programme, but for some reason it was discontinued. Because of the success of supplier
development programmes in many countries, such programmes should be reintroduced.

The government is currently developing innovation and exporting strategies, which should ideally lay
out more comprehensive efforts to impact on the capacity of SMMEs.

Only a few organisations and/or programmes target the development of women entrepreneurs, for
example the JFBPW; the Aqaba Micro Business Incubator; the Irbid Women Business Development
Incubator, which reaches out to women in 21 villages in Northern Jordan with advisory and
counselling services to help them in starting and developing micro and small enterprises; the
Microfund for Women, which offers counselling and business development services to its
microfinance clients; and the BDC, which tailors programme components to meet the capacity-
building needs of women entrepreneurs.

Most business support initiatives and programmes have limited reach in terms of beneficiaries and
access in many parts of Jordan. Often access to support programmes is through a competitive process
(JEDCO programmes, Oasis500, Endeavor), so non-selected, but promising applicants, may have few
other avenues for professional guidance. Business incubators are generally very small with no more
than 5-10 units each and do not have the capacity to graduate a significant number of new enterprises
on an annual basis. Stakeholders have suggested the need for more incubators with larger incubation
space so they are able to work with and graduate increasing numbers of new entrepreneurs and
enterprises. At the same time, they raise concerns about the overall quality of incubator management
and performance, suggesting that standards should be developed for the qualifications of incubator
managers and staff and operational metrics for provision of incubator services. In addition, a number
of the organisations delivering SMME support initiatives are dependent on donor or other project-
based funding, which affects the continuous, sustained delivery of their programmes and services.

There is no mechanism for coordinating the range of service providers and programme efforts, which
can result in sporadic and geographically unevensupport offerings, as well as hinder the ability to
identify and fill gaps and scale-up good initiatives. Some of the organisations have entered into
bilateral agreements to cooperate in certain areas of entrepreneurship and SMME development
support, which is a first step towards a more integrated approach. For example, DEF, JEDCO and the
Cairo Amman Bank each have an agreement with IRADA to provide business counselling and other

26
technical assistance to their micro and small enterprise client, and JEDCO has an agreement with the
BDC to provide services to JECDO clients.

What is also missing in the entrepreneurship/SMME support system is a single-entry point, “walk-in”
business resource centre where potential and new entrepreneurs and existing SMMEs can readily
access general business information, support services and referral guidance to different service
providers based on their individual needs. The closest example in Jordan is the IRADA network of 32
offices in the governorates, but their mandate limits them to working with micro and small enterprises
with less than JD 100,000 of investment. More open access to business development centre networks
are commonly supported by governments in countries around the world in order to provide accessible
and seamless access to a larger number of entrepreneurs and SMMEs. In some cases, these centres are
operated as public bodies and in others the governments approve and then financially support a
network of private providers of the service (e.g. chambers, NGOs, etc.) to offer the national brand of
services. Such systems reduce the fragmentation and improve the coordination, quality and
accessibility of appropriate business support depending on the needs of SMME client groups. This
gap needs to be filled in Jordan and would lead to more streamlined support and access to assistance,
plus expanded reach.

Noted are significant advancements in efforts to introduce students in the public schools and
universities to entrepreneurship since 2005. The Ministry of Education has been supporting requests
from INJAZ and the BDC to bring entrepreneurship curriculum into the educational system. The
Ministry has requested INJAZ to expand into more schools and to train teachers on how to teach in a
more entrepreneurial way, using more student-centred and participative learning approaches. INJAZ
also has agreements with each university to deliver its business entrepreneurship Company
Programme, mostly tothird and fourth year students. The BDC has introduced the ILO Know About
Business (KAB) modules as a pilot in vocational schools and is seeking approval of the Ministry of
Education to train public school teachers to deliver KAB curriculum in schools and vocational
centres. There are a few efforts to introduce entrepreneurship courses as part of university curriculum.
The BDC and the QRCE have both been developing university-level entrepreneurship courses for use
that have been piloted at Yarmouk University and the Princess Sumaya University for Technology
(PSUT) and organises business plan competitions to stimulate interest in developing business ideas.
INJAZ, BDC and QRCE programmes are building the base of entrepreneurial experience among
young Jordanians which is likely to have an impact on future entrepreneurial activity rates.

All of these are very recent developments and should be encouraged and supported so more students
are exposed to knowledge about entrepreneurship and have the opportunity to develop some
entrepreneurship skills, including funding to support the expansion of INJAZ, BDC and QRCE
initiatives to reach more schools and universities.

Assessment of SMMEFinancing Assistance

Improving SMME access to financing is a priority of the Jordanian government and various public
and non-governmental schemes have been initiated to deal with access to financing issues. In spite of
efforts to improve SMMEs’ access to financing through microfinance, loan guarantees, government
grant and subsidy schemes to boost SMME activity, and the launch venture capital funds, the financial
market for SMMEs is severely underdeveloped. The unmet demand for microfinance is estimated at
JD 150 million to JD 200 million, bank lending to SMMEs comprises less than 10% of the business
loan portfolio,54 the volume of loan guarantees to GDP is only 0.07% (below the benchmark in several
54
Rocha et al. (2011), “The Status of Bank Lending to SMEs in the Middle east and North Africa Region”.

27
other developing MENA countries)55, and new venture capital funds are only sizeable enough to make
a few investment. The scale and scope, in terms of the number of loans and equity investments and
accessibility of the various programmes and instruments to start-ups, early-stage enterprises and
SMMEs, is not adequate to meet the demand requirements.

Although microfinance services are not as developed in Jordan as they are in some of the other
developing MENA countries, such as Morocco and Egypt, the outreach of services grew by an annual
rate of 28% between 2006 and 2010, resulting in an increase in the number of active borrowers from
76,830 to 203,579.56During the same time, the gross loan portfolio rose from about JD 81 million to
JD 111.6 million, but is still far below the latent demand. It is primarily seen as a tool for poverty
reduction and targeted to owners of micro and small enterprises, generally from lower-income
households, that are unable to provide collateral for regular bank loans, lack credit histories and track
records, and whose enterprises are relatively vulnerable. However, many of the microfinance loans
are used for domestic consumption rather than for investment in income-generating activities. As
well, due to lack of capacity and expertise, MFIs do not provide non-financial and follow-up services
to their microfinance clients, increasingly recognised as a critical factor in the
survival and growth of supported enterprises. In this respect, Jordan MFIs are
reliant on cooperation with other public entities for follow-up purposes, as well as
for borrowers’ training, and marketing of products. 57On the other hand, women make up
the majority of borrowers (73% of micro-credit borrowers in 2010) and, thus microfinance provides a
source of financing for women who would otherwise not be able to secure loans to start-up and
support their income-generating activity. This gives women the opportunity to gain experience in
starting and operating a microenterprise, which will help in building their knowledge and skills for
larger ventures in the future.

Loan guarantees are an important instrument to address the reluctance of banks to lend to SMEs and
deal with the issue of SMMEs’ collateral constraints, however, the loan guarantee system in Jordan is
vastly underdeveloped. TheJLGCguarantees only a few hundred SME-related productive loans each
year so the programme is not achieving significant reach – only 516productive loans guaranteed in
2011with a guarantee value of JD 12 million. The ceiling on the size of the guarantee was recently
raised from JD 430,000 to JD 550,000, which may moderately increase the number of loans
qualifying for a JLGC guarantee.To expand the SMME loan guarantee system, in 2012, JEDCO
entered into an agreement with OPIC to launch a US$250 million programme under the new “SME
Financing Programme”. The goal is to guarantee loans for 1,000 SMMEs over four years, including
start-ups(but excluding SMMEs in the retail, wholesale and real estate sectors) and to leverage
US$315 million in bank lending to small and medium enterprises.

In the meantime, the lack of a credit registry is a major contributing factor in the inability of banks to
assess the credit risk of SMME owners and entrepreneurs. Although the government issued the Credit
Bureau Law in 2003, instructions for the establishment of a private credit bureau have not yet been
issued.

Jordan does not have a very well developed system of equity financing for high potential SMEs.This
includes a lack of angel investment networks and private venture capital companies and a lack of
availability of equity funds for early-stage enterprises that have growth-potential. According to
JEDCO officials, the equity gap is largest for young enterprises seeking JD 50,000 to JD
55
Rocha et al. (2011), “The Status of Bank Lending to SMEs in the Middle east and North Africa Region”.
56
MOPIC (2011b), “The Jordanian National Policy Framework for Microfinance: Towards Inclusive Finance”.
57
ESC (2011), “Micro and Small Financing (MSF) in Jordan”.

28
150,000.There have been modest developments to address the equity gaps. The most significant is the
JEDCO launch of two equity funds – a Capital for Growth Fund in early 2012 and an Early-stage
Fund to be launched in 2013, the objectives of which are to make more equity capital available to
early-stage and growth-potential SMEs, and to stimulate the development of a private sector equity
industry focused on these markets by reducing their risk exposure. While these are significant
developments, the funds are relatively small in size and targeting to invest in no more than 7 to 15
enterprises each.

In addition, Oasis500 operates a small seed fund for promising start-ups in ICT, digital media and
mobile technologies that are selected for incubation support.As well, Oasis entrepreneurs are given
the opportunity to pitch to angel investors and venture capitalists at the end of the programme. The
goal is to build a culture around early stage investment in the region and provide a proper platform
that exposes carefully pre-selected start-ups, who are looking for angel capital, to potential angel
investors. Since starting in mid-2010, Oasis500 has made about 60 investments in Jordanian start-ups
and raised a US$6 million fund entirely devoted to its entrepreneurs. The goal is to launch 500 ICT
start-ups over five years.

The forming of business angel networks is a very recent phenomenon in Jordan and in a nascent stage
of development. The only visible angel network is the Bedaya Angel Investors Network that was
formed around promising enterprises spawning from the iPark incubator and recipients of the QRCE
Business Plan Competition.

Jordan does have some initiatives to overcome the weaknesses of SMMEs in preparing their financial
requests to lenders and investors. JEDCO has established the SME Banking Window to provide such
technical assistance to its clients. With the launch of the new SME Financing Programme staffing and
availability of the window service will have to be expanded. IRADA and the BDC also offer some
technical assistance to SMMEs in preparing loan requests. These are all valuable support mechanisms
for SMMEs, but the offers of financial technical assistance should be more systematically available to
a larger number of SMMEs, including expansion of the JEDCO SME Banking Window concept to a
broader segment of the SMME market. This may require building a network of financial consultants
who can be called out to work with a larger number of SMME clients.

This assessment of the SMME support landscape lays the foundation for constructing the framework
for the National Entrepreneurship and SMME Development Strategy. It provides valuable information
in terms of building on good practices and identifying deficiencies that need to be addressed.

29
CHAPTER 4: OUTLINE OF THE STRATEGIC FRAMEWORK FOR
ENTREPRENEURSHIP AND SMME DEVELOPMENT
SMME Definitions
It is an accepted fact that the needs of SMMEs are often different to those of larger businesses, and
that addressing these different needs requires adjustmentsin government policy. As well, the needs of
enterprises will vary according to their size and stage of development. One of the keys to effective
policy development in favour of SMMEs is to define the parameters for which enterprises are to be
included. Jordan does not have a unified definition for a micro, small and medium enterprise.
Different definitions have been in use by various ministries and agencies to direct their support
programmes and initiatives.

For the purposes of the National Strategy for Entrepreneurship and SMME Development and the
proposed Entrepreneurship and SMME Development Law, a unified definition of SMMEs is
essential.First of all, an enterprise is defined as “any entity engaged in an economic
activity,irrespective of its legal form”; the self-employed, family firms, partnerships and other entities
regularly engaged in an economic activity may be considered as enterprises.

In terms of size criteria, based on a review of international practices 58 and the availability of enterprise
data in Jordan, the recommendation is to apply two criteria: number of employees, and turnover.
Therefore, within the context of the National Strategy for the Entrepreneurship and SMME
Development in Jordan 2013-2017, the following definitions are proposed:

 Microenterprise – Fewer than 10 permanent workers and no more than JD 200,000 in

turnover

 Small enterprise – 10-49 permanent workers and/or between JD 200,000 and JD 2.5 million
in turnover

 Medium enterprise -50-300 permanent workers and/or between JD 2.5 million and JD 15
million in turnover

When determining if an individual enterprise falls into the category of micro, small or medium, the
number of employees takes precedence. For example, if an enterprise has fewer than 50 employees,
but revenue over JD 2.5 million, then it would still be considered a “small” enterprise. The criteria
based on number of employees will enable Jordan to benchmark the distribution of enterprises across
employment-size categories) against the trends in many other countries, including the European
Union.

Further, SMMEs are defined as autonomous, privately and independently owned and managed
enterprises. To be considered autonomous, the enterprise cannot hold more than 25% of the capital or
voting rights (whichever is the higher) in one or more other enterprises and/or outsiders cannot have a
stake of 25% or more of the capital or voting rights (whichever is the higher) in the
enterprise.Wholly-owned subsidiaries of holding companies or large enterprises are not considered
SMMEs even if the subsidiary meets the size criteria of an SMME.

58
Stevenson, Lois (2012c),“SME Laws: Scoping Paper on International Practices”, Draft report submitted to JEDCO, May.

30
Guiding Principles of the Strategy
The National Strategy for Entrepreneurship and SMME Development in Jordan 2013-2017 is drafted
in accordance with the following guiding principles.

 It is consistent with and contributes to the national strategic directions for the Kingdom and
builds on the existing support infrastructure and delivery system, with provisions for
expanding its reach and capacity and improving its coordination.
 It is a national strategy and provides guidance about appropriate actions for all public and
private stakeholders.
 It addresses the priority needs of SMMEs and the market and systemic failures impeding their
sustainability and growth.
 It is inclusive of SMMEs in all economic sectors.
 Policy measures are tailored to meet the specific needs of SMMEs of different sizes
(including microenterprises) and in different stages of the entrepreneurial and business
development from pre-start-up to start-up to early-stage survival and growth to launching into
export markets.
 Entrepreneurship development is a central part of the strategy, in recognition of the
importance of new start-ups to SMME sector growth.
 It seeks regional balance in the delivery of entrepreneurship promotion and SMME support
programmes, services and facilities in the governorates.
 It recognises the importance of inclusive participation of all relevant public and private sector
bodies to ensure an effective, coordinated and integrated implementation approach.
Promotion and development of entrepreneurship and SMMEs is a shared competency,
spanning a range of ministerial boundaries and policy areas and different levels of
government, as well as private sector organisations, educational institutions and NGOs.
Implementation of the strategy will engage efforts of all public and private sector actors
involved in entrepreneurship and SMME promotion and development.
 It recognises the important role of the entrepreneurship development of women and young
Jordanians in the growth and development of the SMME sector and the unique challenges
they face.
 Its ongoing developments are to be informed througha process of regular dialogue with
entrepreneurs and SMMEs on their needs and proposed solutions.
 There must be a clear delineation of roles, responsibilities and accountabilities of
implementation partners.
 Monitoring of the strategy’s implementation is to be measured against quantifiable objectives
and targets.

The strategy provides an overarching framework for existing and new entrepreneurship and SMME
support activity and a mechanism for enhanced coordination and cooperation, which is key to
ensuring that decentralised arrangements produce the desired outcomes.

31
Strategy Vision
The vision for the strategy is simply stated as:

“to create an environment conducive for SMMEs to grow and entrepreneurship to flourish, in both
urban and rural areas, in order that they may contribute more fully to the generation of jobs,
economic wealth and the socio-economic well-being of the Kingdom”.

The environment will produce a strong and dynamic start-up market where entrepreneurial potential is
unleashed, better prepared entrepreneurs pursue higher valued opportunities and existing SMMEs
have the right conditions and capacities for expansion and diversification.

Strategic Goals
The main goal of the strategy is to foster job creation and income generation through promoting the
entry of new start-ups and improving the performance and growth of existing SMMEs to elevate the
contribution of the SMME sector to Jordan’s economy.

The macro level strategic goal is to increase the SMME sector contribution to GDP by:

1. Increasing the net stock of formal private sector SMMEs by at least 15% by the end of 2017;
2. Increasing the SMME share of non-agricultural employment;
3. Raising the level of SMME productivity and competitiveness; and
4. Increasing the SMME share of exports.

Strategic Objectives
The strategic objectivesof the strategy are to:

1. Increase the rate of new enterprise formation, including among educated young people and
women;

2. Increase the proportion of high-growth and innovative SMMEs;

3. Increase the number of SMMEs,including microenterprises, benefiting from upgrading and

quality enhancement programmes to improve their productivity, growth and ability to
compete in international markets, both domestically and abroad;

4. Facilitate access to financing and top quality, comprehensive business development services
in all governorates.

Target Groups
The strategy recognises that a “one size fits all” approach is not adequate to respond to the needs and
requirements of entrepreneurs and SMMEs at different stages of development. Thus, it differentiates
between the needs of potential entrepreneurs, new entrepreneurs and start-ups, enterprises in the early-
stages of business development (i.e. microenterprises, start-ups within the first two to three years of
operation), existing SMMEs that need strengthening, and SMMEs with high growth potential (e.g.
innovative, export potential SMMEs). This implies setting objectives and targets for the different

32
categories of SMMEs and tailoring support to meet the different needs of entrepreneurs as they go
through the various stages of the entrepreneurial and business development processes from “thinking
about starting a business” to expanding into export markets. Consequently, the strategy targets
development of four different segments of the SMME sector:

1. New entrepreneurs

2. Microenterprises

3. Small and medium enterprises

4. High-growthpotential and innovative SMMEs

Critical Focus Areas

The six focus areas of the strategy are selected to address the major barriers to entrepreneurship and
SMME development in Jordan.

1. More conducive legal and regulatory environment for start-ups and SMMEs

2. Entrepreneurship awareness and culture-building

3. Elevated level of entrepreneurial/management skills and provision of top quality business

development support

4. Improved access to credit and equity financing

5. Increased innovation capacity and technology adoption/development

6. Broadened market access.

Implementation Mechanisms
New structures and actions are required for effective implementation of the strategy. The main
elements of institutional support are:

 Creation of a mechanism for effective oversight, coordination, partnership development and

capacity building

 Development of an adequate business support infrastructure and effective SMME support

services

 Development of a statistical database and dedicated SMME information web-portal

 Design and implementation of a monitoring and evaluation system

The strategy framework is illustrated in Figure 3.Articulation of the strategy components is detailed in
Chapters 5 and 6.

33
 Figure 3. Entrepreneurship and SMME Development Framework

Creation of an environment conducive for SMMEs to grow and entrepreneurship

Vision to flourish

Increase the net Increase the Raise the Increase the

stock of formal SMME share of productivity and SMME share of
Strategic SMMEs by at least total non- competitiveness of exporting
Goals 15% by the end of agricultural SMMEs
2017 employment

Increase the rate of Expand the number Increase the Facilitate access to
new business of high-growth and number of business
Strategic formation, innovative SMMEs SMMEs benefiting development
including among from upgrading services and
Objectives
university and financing in all
graduates and qualityenhanceme governorates
women nt programmes

New entrepreneurs Micro enterprises Small and medium High-growth potential

Target enterprises and innovative
Groups
SMMEs

Conducive legal and Entrepreneurship Entrepreneurial/

regulatory environment awareness and culture- management skills and top
building quality business
Critical Focus development support
Areas
Innovation capacity and
Financing access technology adoption/ Market access
development

Implementation Mechanisms

Effective Adequate Statistical Monitoring and

Institutional oversight, business support database and evaluation
Support coordination, infrastructure information web- system
partnership and effective portal
development, and SMME support
capacity building services

34
CHAPTER 5: ARTICULATION OF THE STRATEGIC FRAMEWORK
This chapter provides an articulation of the strategy components and approaches to be taken with
respect to target groups, focus areas, and implementation mechanisms, including the underlying
objectives and strategic actions.

I. Target Groups– Objectives and Approach

Although the Entrepreneurship and SMME Development Strategy applies to all Jordanian enterprises
with up to 300 employees, as per the proposed definition, it is very important to tailor specific support
programmes and initiatives to address the distinct needs of entrepreneurs (and potential entrepreneurs)
and SMMEs at different stages of their development lifecycle. The objectives and rationale for each
of the four SMME target groups are outlined below. The specific directions to be taken with respect to
each group are included in section II under each of the six key focus areas. In the implementation of
the strategy, it might be appropriate to cluster initiatives under programmatic streams, for example, a
National New Entrepreneurs Programmme, a National Microenterprise Development Programme, a
National SME Development Programme, and a National Programme for High Growth and Innovative
SMEs. This is a discretionary issue.

1. New entrepreneurs
Objective:

1. Contribute to growth in the stock of SMMEs by:

a. Developing a coordinated entrepreneurship eco-system that can develop greater interest

in becoming an entrepreneur by addressing issues of awareness, orientation, training,
incubation and financing.

b. Stimulating a pipeline of new entrepreneurs, including young people and women, with
the knowledge and capacity to start enterprises with an enhanced likelihood of survival
and growth.

c. Creating a more dynamic start-up market.

d. Increasing the TEA rate from a baseline of 10.2% (of the adult population) in 2009 to at
least 13% (the average TEA rate for efficiency-driven economies in the 2012 Global
Entrepreneurship Monitor59).

Rationale and approach:

During the past decade from 2000-2010, Jordan experienced an annual increase of 2.5% in the
number of private enterprises, and an annual average increase of 4.6% in the enterpriseemployment.
However, the growth rate slowed considerable in the second half of the 2000s. From 2006-2011, the
number of enterprises increased by only 6.6%, an average annual growth of only 1.3%, compared to
an annual average of almost 4% between 2000 and 2005. One of the strategic goals of the strategy is
to increase the growth in the stock of SMMEs by at least 15% by the end of 2017, an annual average
growth of 3%. This will be up from the annual average of 1.3% from 2006-2011, and a step towards
restoring the rate of growth to levels achieved in the first part of the last decade.

There are two ways to increase the stock of SMMEs. One important way is to foster a higher entry
rate of new firms, that is, business start-ups. The other way is to increase the survival rate of existing
59
Xavier et al. (2013), Global Entrepreneurship Monitor: 2012 Global Report, p. 58.
35
SMMEs, that is, to reduce the number of SMMEs exiting from the market on an annual basis due to
voluntary closures or bankruptcies. At the same time, it is important to recognise that exit rates are a
normal part of business dynamics.

In the United States, an average of 750,000 new

establishmentsenters the market annually, 500,000 of
which are new start-ups. These new entries are
responsible for creating 7 million jobs. At the same time,
700,000 businesses close destroying 6 million jobs. This
illustrates the dynamic and entries and exits underlying
net growth in the SMME sector. (Source: Business
Dynamics Statistics, US Census Bureau.)
In countries where it is possible to track the entry rate of new enterprises andthe exit rates of existing
enterprises, the replacement of lower value-added exiting enterprises with more competitive new
enterprises is found to contribute to employment and productivity gains, as well as innovation and
economic renewal. Unfortunately, Jordan does not currently have the statistical systems in place to
report on enterprise entry and exit rates, an issue that needs to be addressed during the process of
implementing the strategy. The major key is to realise a net positive gain in the total number of
SMMEs from the turbulence of entry and exit. This can be achieved through actions to both raise
business start-ups rates and improve the survival rates of competitive enterprises, including new
enterprises, which are most vulnerable within the first two or three years of their existence.

Thus, a critical part of any entrepreneurship and SMME development strategy is promoting measures
to foster higher levels of entrepreneurship and new enterprise creation. A constant stream of new
entrants into the market is needed to replace existing enterprises exiting from the marketplace and the
jobs lost due to these exits as well as to downsizing firms, as well as to accelerate incremental growth
in the number of enterprises and jobs. In Jordan’s case, with a very slow growth in the stock of
enterprises over the past five years, it is essential to build demand for entrepreneurship and develop a
pipeline of future entrepreneurs that are better prepared in starting enterprises. This is the key to
achieving the strategic objective of increasing the rate of growth in the net stock of formal enterprises
and to creating jobs.

Progressively throughout the first decade of the 2000s, governments around the world have been
paying considerably more attention to the implementation of policies that will foster entrepreneurial
attitudes among their populations and provide entrepreneurship development and start-up supports
that will lead to the development of new entrepreneurs and the creation of new businesses. The main
target of entrepreneurship policies is the individual (potential or early-stage entrepreneur), and often
particular sub-sets of the population that are under-represented as business owners, such as young
people, women and ethnic minorities, depending on the population make-up of a country and the
participation level of different sub-groups of the adult population in business ownership activity.

In a systematic way, the main elements of a strategic policy to stimulate entrepreneurship and start-
ups focus on: 60

 promoting entrepreneurship as a feasible and viable career option by profiling successful role-
models, rewarding entrepreneurial achievements, and public-awareness activities;
 integrating entrepreneurship as core curriculum throughout the formal education system;
 providing access to entrepreneurship training and start-up counselling at the local level;
60
Stevenson and Lundström (2002), Beyond the Rhetoric: Defining Entrepreneurship Policy and Its Best Practice
Components.

36
  reducing the administrative, regulatory and taxation barriers to business entry;
 facilitating access to micro-loans, seed capital and other forms of start-up financing;
 fostering the development of network activities and exchanges to promote dialogue, peer
learning, and partnering among potential and existing entrepreneurs.

Evidence also suggests that survival rates of new businesses are higher if the entrepreneur(s) receive
post-creation advisory or mentoring support for at least the first two years of operation and post-
creation support programmes are becoming more common.

There are compelling reasons to focus on two specific sub-groups of the population for
entrepreneurship development: young people and women.

Fostering youth entrepreneurship

Promoting entrepreneurship as an option for young people has become a policy imperative in many
countries where governments are implementing aggressive policy measures to support the
development of young entrepreneurs. There are a number of reasons behind these actions. One of the
most significant of these is the higher than average level of unemployment among the youth segment
of the population. It is also in response to the changing nature of the labour market and the likelihood
that some form of entrepreneurial activity will become an important part of a person’s future career
profile. Entrepreneurship orientation is seen as preparation for transition into the labour market for
students and an employment option for young people who have finished their educations.
Consequently, the promotion of entrepreneurship among young people is gaining ground as a policy
issue.

In 2011, 20-24 year-olds and 25-39 year-olds accounted for over

three-quarters of the unemployed in Jordan (35.9% and 40.9%
respectively).61 Furthermore, 34.2% of the unemployed had a
bachelor’s degree or higher education. This indicates that young
and highly educated Jordanians have much more difficulty
integrating into the labour market. Entry into the labour market for
first-time job-seekers, even educated youth, is increasingly through
informal sector employment, a situation that produces a high level
of underemployment. Every year around 15,000 new university
graduates find themselves without a job.62Entrepreneurship can
offer a more attractive employment option for many of them.
The targeting of young people for entrepreneurship promotion is particularly relevant for Jordan
because of the high proportion of young people in the population and youth unemployment rates well
in excess of the national average.

Several impediments exist to youth entrepreneurship. Paramount among these is the barrier to start-up
financing, but the problem is much bigger than that. There is a relatively weak entrepreneurial culture
among Jordanian youth. More than half of the under 30 age group would prefer to work for the
government if they had the choice, and less than a quarter would prefer to be self-employed. 63 The
percentage preferring to be self-employment was much lower than for young people in Algeria,
Lebanon, Morocco and Tunisia. This indicates the need for a shift in mind-set towards entrepreneurial
opportunities.There is a lack of awareness among youth of the potential of entrepreneurship as a
career, a lack of appropriate education and training for it, and a lack of opportunities for young people
61
DOS (2012c), Statistical Year Book 2011 (http://www.dos.gov.jo/dos_home_a/main/cd_yb2011/Page_details.html).
62
Jordan’s National Employment Strategy 2011-2020, p. 35.
63
Silatech (2009), The Silatech Index: Voice of Young Arabs.

37
to learn the practical issues of starting, achieving sustainability and growing their own enterprises. A
more strategic approach is warranted to promote and support entrepreneurial activity to young
Jordanians, such as through development of a Young Entrepreneurs Programme. Such an integrated
approach would include awareness-raising programmes, promotion of age-relevant role-models,
enhanced educational and learning opportunities, and appropriate start-up support services, such as
information and advisory services, mentoring, seed grants, start-up loans and guarantees programmes,
and access to incubating environments and business networking opportunities.

Fostering women’s entrepreneurship

Women-owned SMMEs comprise a much smaller share of the SMME sector in the MENA region
than they do in any other region of the world. This has a lot to do with cultural factors, such as
inequality in property rights, marital laws and inheritance laws, and traditional views about the role of
women in public and economic life, but also with lack of previous work experience, poor access to
financing and lack of societal encouragement and support. 64 The 2012 OECD/IDRC report on New
Entrepreneurs and High Performance Enterprises in the Middle East and North Africa concludes that
the low level of female entrepreneurial activity in MENA is largely associated with the low female
labour force participation rates; thus, low shares of women in the workforce translates into lower
levels of enterprise creation because it reduces the pool from which new entrepreneurs are likely to
emerge. This smaller pool puts the MENA region at an entrepreneurial disadvantage compared to
other developing regions of the world where women are more economically active. Through enhanced
entrepreneurial and SMME development support for women, the region could benefit from increased
job creation, economic growth and greater social inclusion. This is a basic premise behind the
endorsement of MENA ministers, through the MENA-OECD Investment Programme, of the “Action
Plan on Fostering Women’s Entrepreneurship and Employment in the MENA Region”. 65

The labour force participation rate of Jordanian

women is low even by MENA standards, which has
the lowest female labour participation rates of any
region of the world. In 2011, the labour force
participation rate of Jordanian women 15 years and
older was less than 15%. They make up about 23% of
paid employees, with just less than holding jobs in the
public sector. Women are not very active in self-
employment activity – only 4.5% of working women
are self-employed. Their share of all self-employment
in 2011 was less than 5%. The early-stage
entrepreneurial activity rate among adult women in
Jordan is less than a third of the male rate – 4.5%
versus 15.8%.66 At the same time, the unemployment
rate for women is over 21%, almost double the male
unemployment rate.67 In 2011, women accounted for
30.5% of the total unemployed.68
Women often face structural barriers limiting their full participation in economic activity. Specific
barriers to women’s involvement in entrepreneurial activity relate to their weak access to capital

64
OECD (2012b),Women in Business: Policies to Support Women’s Entrepreneurship Development in the MENA Region.
65
OECD (2009), “2009 Action Plan on Fostering Women’s Entrepreneurship and Employment in the MENA Region and
2007 Declaration on Fostering Women’s Entrepreneurship in the MENA Region”, MENA-OECD Investment Programme
(http://www.oecd.org/dataoecd/12/1/44092571.pdf).
66
IDRC (2010), Global Entrepreneurship Monitor: GEM MENA Regional Report2009.
67
DOS (2012c), Statistical Year Book 2011.
68
DOS (2012c), Statistical Year Book 2011.

38
(often due to collateral constraints), networks, and societal support. Many governments now have as
one of their policy objectives to increase the proportion of women-owned businesses because of the
economic growth potential to be realised from their higher levels of entrepreneurial activity. This is
seen as a vehicle for generating jobs and growth, integrating women into the labour market, and
greater social inclusion. The policy measures to achieve this vary across countries, but can include:

 establishing women’s enterprise development units in government offices;

 designing women-focused self-employment and entrepreneurship training programmes;
 special micro and start-up loans for women entrepreneurs;
 mentoring programmes that match novice women entrepreneurs with experienced mentors in
order to strengthen their management skills and entrepreneurial decision-making;
 advisory services for women entrepreneurs;
 capacity-building for women entrepreneurs’ associations;
 Women in Business Programmes that encourage women to take part in entrepreneurial
activity and to develop the skills needed to improve business performance.

Women in Jordan comprise only a small percentage of all self-employed workers, although over the
past five years (2006-2011), the number of self-employed women has increased by an average of 9%
a year compared to only 2.6% for self-employed men. This may indicate a promising trend and
considerable growth potential in women’s entrepreneurship development in the Kingdom, especially
if targeted with special support efforts. Since women-owned enterprises are also more likely to hire
women as employees,69 there are multiplier effects related to integration of more women into the
private sector labour market. However, another challenge is to diversify the types of businesses that
women tend to start away from the more traditional handicrafts and food-related businesses and
beauty salons into higher value-added activities.

2. Microenterprises
Objectives:

1. Improve the productivity of microenterprises by ensuring they have access to business

advisory services, training, up-to-date technology, and competency building, including in
financial literacy, management skills and marketing;

2. Ensure microenterprises have access to financing to upgrade and modernise their facilities
and processes, including integration of information technology (IT);

3. Increase efforts to move the smallest microenterprises up the value chain and enable the
largest microenterprises to grow into the category of small enterprises;

4. Increase the proportion of microenterprises with 5-9 employees from 5% (2011) to 10%
(2017).

Rationale and approach:

Microenterprises (less than 10 employees, using the new proposed definition) make up 96.4% of all
private enterprises in Jordan; in fact, 91.5% have fewer than five employees. That means that only 5%
of the microenterprises have 5-9 workers. Data is not available on the employment contribution of

69
UNDP and MOPIC (2011), Jordan Human Development Report: Small Business and Human Development.

39
enterprises with fewer than 10 employees because DOS currently does not use “1-9 workers” as a
reporting category. However, enterprises with fewer than 10 workers accounted for 35% of total
employment in non-agricultural private enterprises in 2010, so it might be reasonably assumed that
enterprises with fewer than 10 workers account for at least 40% of the jobs, which is significant. The
job impacts could be even greater if the share of 5-9 workers was to increase.

Microenterprises are not only the most ubiquitous kind of enterprise in Jordan but also the most
vulnerable. Many are single-person operations or enterprises employing only family members, most
of whom are unpaid workers. They serve only local markets and almost 80% have revenue of no more
than JD 20,000 (as per 2011 Establishments Census). They are largely self-financed and make little
use of up-to-date, modern technologies. However, they make up over 75% of enterprises in the
manufacturing sector. Legal and regulatory requirements, including taxation and social security,
imposed on the enterprise sector impose significantly disproportionate burden on microenterprises.
This is one of the reasons why many microenterprises do not become formal.

Effort is need to create a more favourable support environment for microenterprises and to help
improve their productivity, competitiveness and growth potential and raise their performance as
economic generators. While Jordan has schemes to upgrade the competitiveness of SMMEs, they tend
to focus on SMMEs with more than five employees, whereas the majority of SMMEs in Jordan have
fewer than five employees. These microenterprises are also need of upgrading, particularly in the
areas of management and marketing skills, product quality, technology inputs, use of ICT, etc., so
they can become more productive and viable for growth. One of the most efficient ways to work with
these microenterprises may be in cluster groupings, similar to the approach used in other countries.

The strategy seeks to more adequately serve their needs through more widespread access to
microcredit, training and advisory services,and quality and modernisation improvements, including
efforts to support the development of women-owned microenterprises.

3. Small and medium enterprises

Objectives:

1. Improve the productivity and competitiveness of SMEs.

2. Improve their access to financing.

3. Improve their management and marketing skills and production capacities.

4. Improve SMEs’ access to markets through supply and value chain linkages, public
procurement policies and export support programmes.

Rationale and approach:

According to the 2011 Establishment Census, small and medium enterprises (SMEs) make up only
3.5% of all private non-agricultural enterprises in Jordan; 2.8% are small (10-49 employees) and
0.66% are medium (50-300 employees). The total number of SMEs amounts to 5,500. Compared to
developed countries, this represents a seriously large “missing middle” in the structure of the
economy.

Most SMEs are family enterprises that lack sophisticated management structures and professionalism.
They have managed to grow to 10 workers and more but often lack the capacity to move to the next

40
stage of growth. In fact, many of them do not have strong growth ambitions although still play an
important employment role in the economy. They have outgrown the financing limits available
through microcredit, but their loan needs are often too small to be of interest to commercial banks, so
they have difficulty accessing financing for working capital, modernisation and expansion plans. They
also often have weak linkages to supply chain markets and face administrative challenges in accessing
public procurement contracts. Most could benefit from productivity improvements and upgrading of
their quality systems. They also face high compliance burdens in dealing with the legal and regulatory
environment; the smaller the enterprise, the greater the burden.

In order to grow, particularly the small enterprises, they need stronger governance and management
systems, upgrading and modernisation, quality certification to meet international standards required
for export markets, and improved access to external financing.

The policy prescription for strengthening SMEs is quite standard across countries. Generally SME
policies aim to:

 Reduce the legal and regulatory burden on SMEs;

 Ensure that credit-worthy SMEs have access to financing for working capital and investment;
 Strengthen their capacity to take advantage of trade liberalisation;
 Enhance the productivity and efficiency of their business operations, including their
management competencies;
 Improve the quality of their products and processes to meet international standards through
upgrading and modernisation;
 Encourage greater innovation and technology adoption among SMEs, including the use of
ICT and management information systems;
 Create markets for SMEs by improving their linkages to supply chain and access to public
procurement opportunities;
 Improve their access to business support and advisory services, provided by either the public
or private sector; and
 Ensure that they have access to qualified workers.

4. High-growth potential and innovative SMMEs

Objectives:

1. To expand the number of high-growthand innovative enterprises

Rationale and approach:

High-growth firms are a special category of the SMME sector. Although varying definitions for a
“high-growth firm” are in use in different countries, the OECD defines high-growth enterprises as
those with annualised growth in employees (or in turnover) of more than 20% over a three-year
period.70 A sub-category of high-growth enterprises is the “gazelle”. Gazelles are generally defined as
young enterprises that experience rapid growth within the first five years of start-up (average
annualised growth in employment or turnover greater than 20% per annum over a three-year
period).71)

70
OECD (2011), Entrepreneurship at a Glance 2011, p. 74.
71
OECD (2011),Entrepreneurship at a Glance 2011.

41
High-growth enterprises generally comprise a small proportion of all enterprises in any country,
typically between 4% and 6% based on the employment growth criteriaand up to 20% when growth is
measured by gains in annual turnover. Gazelles are even less common, according to the OECD
making up less than one-fifth of the high-growth enterprises. 72

High-growth enterprises are noted for their highly disproportionate contribution to new job creation
given their share of the enterprise population and thus of great interest to policymakers around the
globe. The policy question is how to most effectively increase the percentage of high-growth
enterprises in the population of SMMEs in order to benefit from their accelerated job and wealth
creation.

In cross-country studies high-growth SMMEs can be found in all sectors, including low-technology
and high-technology sectors. However, the rapid growth of new ventures is likely to be driven by the
exploitation of a new technological or market opportunity that has not been previously detected, or at
least not met adequately, while in established enterprises, changes in strategies, actions or behaviours
are likely necessary to propel a period of rapid growth. 73

One of the policy challenges is that it is difficult to identify, at the start-up phase, which enterprises
will grow faster than others. However, evidence suggest that they tend to operate in growth markets or
in underdeveloped market niches, are innovative in nature (whether in terms of technology, business
models, or processes) andare led by entrepreneurs (often in teams) with higher levels of education,
some previous management experience and growth ambitions. With higher levels of human and social
capital (e.g. education, technical knowledge, experience) they have more capacity to realise growth-
potential. In addition, high-growth enterprises tend to be more prevalent in supportive entrepreneurial
environments where there is a high density of SMMEs. High-growth potential enterprises are often
constrained by a lack of know-how, information and financing.

The OECD suggests that an appropriate policy strategy to foster high-growth enterprises would focus
on creating the conditions for any firm to experience rapid growth. This would include the following
policy emphasis:74

 Improving the business environment by removing obstacles to growth and addressing any
regulatory disincentives to growth.
 Encouraging entrepreneurial attitudes (i.e. entrepreneurial mind-set) in order to stimulate
more growth ambitions in new and existing businesses.
 Supporting the provision of training in young and small enterprises to facilitate development
of the management skills necessary to anticipate and manage the process of growth and the
resulting demands on the enterprise’s human, technical and financial resources; and to
promote an openness to change, which appears as a key element in the management of a
growth process in a business of any age and size.
 Improving access to debt financing and seed and venture capital for new and small firms, and
in particular to fund investment in R&D and the acquisition of non-tangible assets.
 Promoting innovation and internationalisation activities of new and small firms due to the
potential role of these activities as factors of enterprise growth, particularly when combined
with other factors such as “growth ambition” of the entrepreneurs.

72
OECD (2010), High-Growth Enterprises: What Governments Can Do to Make a Difference,p. 17.
73
OECD (2010), High-Growth Enterprises: What Governments Can Do to Make a Difference, p. 20.
74
OECD (2010), High-Growth Enterprises: What Governments Can Do to Make a Difference, p. 73.

42
At the country level, OECD case studies have shown that most of the policy initiatives used to
promote the growth of high-growth of firms rely on the facilitation of access to finance, particularly
seed and venture capital, and support for R&D and innovation. For example,many business incubators
and accelerators are geared specifically towards high-growth potential enterprises.However, the
argument is made that policy initiatives in these areas need to be complemented with support to
training and skills upgrading in new and small firms, and with the encouragement of growth
ambitions.75

There are a few existing initiatives in Jordan that specifically target high-growth enterprises. One
example is the launch of JEDCO’s new Capital Growth Fund which aims to provide equity capital to
SMMEs with a significant expansion plan, although it expects to invest in only 7-15 companies. Other
examples are Endeavor Jordan, which offers a programme of training, coaching, mentoring and
strategic advice to high-potential/impact enterprises in theIT sector(according to the Endeavor Jordan
website, they have worked with only 20 companies thus far. 76), and Oasis500, which accelerates high-
growth potential start-ups through a three-month process to reach goals and milestones that would
normally take at least a year.

II. Key Focus Areas–Objectives and Action

To achieve the strategic goals and objectives, six focus areas are of primary concern.

1. Improving the legal and regulatory environment

Objective:

1. Accelerate reforms to the legal and regulatory environment in order to create more favourable
conditions for the start-up of new enterprises and the operation and growth of existing
SMMEs.

2. Adopt a “Think Small First” approach to the legal and regulatory regime to reduce the
regulatory and compliance burden on SMMEs.

Rationale and approach:

It is well known from studies in other countries that laws, regulations and administrative procedures
governing business activities can impose higher compliance costs on smaller enterprises, resulting in
reduced productivity. Research by the US-based Small Business Administration (SBA) revealed that
administrative burden costs small firms with fewer than 20 employees 40% more than large
businesses per dollar of sales, and 33% more per employee. 77 The European Commission reported that
the annual cost of administrative burdens with which European businesses were forced to comply
totalled about 4% of GDP.78The OECD emphasises that regulations directly or indirectly discouraging
the creation and expansion of smaller enterprises and innovative start-ups that are important for
growth and employment need to be modified and reformed. 79 In particular, barriers to market entry,
regulated markets, government regulation, complicated tax systems, and inflexible labour regulations
present obstacles to new entrepreneurs and to young and small firms.
75
OECD (2010), High-Growth Enterprises: What Governments Can Do to Make a Difference, p. 73.
76
http://www.endeavorjordan.org/page.aspx?page_key=entrepreneurs_jordan&lang=en (accessed 12 January 2013).
77
SBA (1995), The Changing Burden of Regulation, Paperwork, and Tax Compliance on Small Businesses: A Report to
Congress,
78
European Commission (1999), Action Plan to Promote Entrepreneurship and Competitiveness.
79
OECD (1999), Regulatory Review for Smaller Firms, p. 5.

43
Based on evidence of this nature, governments have taken a number of direct and indirect steps to
improve the regulatory environment for small firms, including simplification of business registration
procedures and bankruptcy laws. Among the policy solutions, they have established “one-stop shops”
for business registration and implemented mechanisms to provide easier access to information on
government regulations and procedures affecting the registration of new enterprises and the operation
of existing SMMEs. The European Commission further promoted the “Think Small First” principle in
its policy prescriptions for EU member States and embedded it as a major policy thrust in the Small
Business Act for Europe.80Applying the “Think Small First” principle entails considering the interests
of SMMEs at the earliest stages of policymaking to ensure that legislation and programmes are
appropriately adapted totheir situationby way of lighter requirements or case-by-case exemptions. Part
of a “think small first”approach is the adoption of regulatory impact assessment (RIA) tools (SME
Test) that enable an assessment of the impact on SMMEs of legislative and regulatory changes as they
are being proposed. An SMME-oriented RIA regime aims to alleviate the disproportionate burden on
SMMEs, as well as lay the basis for improved monitoring of the effect of new legislation and
regulations on SMMEs.

Although Jordan has carried out a number of reforms to improve the investment climate and business
environment, start-ups and operating SMMEs still encounter many regulatory and administrative
hurdles. Difficulties in registering businesses and employees and the high costs of social security, for
example, can lead to non-complying, unproductive entrepreneurship, such as evident in a high level of
informality.The review of laws and regulations carried out as part of the entrepreneurship and SMME
development consultation process pointed to a number of areas where laws or their application may
have an adverse effect on the entry of new businesses and the operations of existing SMMEs.

With technical assistance from the USAID-Jordan Economic Development Programme, the Jordanian
government recently launched a Regulatory Guillotine and Impact Assessment Reform Project. The
goal of this project is to identify and prioritise reform issues and challenges in order to execute a
comprehensive reform plan that will increase Jordan’s competitiveness. The project, headed by a
public-private Reform Steering Committee, has initially performed the regulatory guillotine process in
the policy areas of Vocational Licensing, Construction Permits and Policy Development Process in
order to systematically review, eliminate and streamline procedures that are not necessary or
inefficient and that prove burdensome to the private sector. 81 Reforms in these areas are expected to
increase the number of new businesses started each year and to generate additional government
revenue in excess of the cost of reforms.

These are important first steps in the regulatory review process but the guillotine methodology must
be applied a much larger range of laws and regulations affecting SMMEs, as noted in the review of
laws and regulations affecting SMMEs conducted as input to the national entrepreneurship and
SMME development strategy. As well, Jordan should implement an institutionalised RIA regime for
assessing the impact on SMMEs of proposed new laws and regulations, using tools, such as the “SME
Test”, which is widely used in European and other countries. 82

80
European Commission (2008), “.Think Small First”: A Small Business Act for Europe”.
81
USAID and MOPIC (2011), “Increasing Jordan’s Competitiveness: Regulatory Guillotine and Impact Assessment Reform
Project. Assessment and Recommendations – Final Report”.
82
See Jacobs (2010), “A Manual for Regulatory Impact Assessment (RIA): Jordan”, prepared for USAID Jordan Economic
Development Program. Also to be noted are the Impact Assessment Guidelines established by the European Commission for
use in performing Commission Impact Assessments, specifically the SME Test (see:
http://ec.europa.eu/enterprise/policies/sme/small-business-act/sme-test/index_en.htm#h2-3). The SME Test comprises three
main steps: preliminary assessment of businesses likely to be affected; measurement of the impact on SMEs (cost/benefit
analysis); and use of mitigating measures, if appropriate.

44
In addition to examining all laws and regulations to determine the impact on the development of
SMMEs, other legal issues are also in need of attention. This includes the more rapid implementation
of the Credit Bureau Law and the Microfinance Law; updating of the securitisation law to be more
responsive to modern needs; amending the Bankruptcy Law to enable failed entrepreneurs a “second
chance” by limiting the discharge time and debt settlement for an honest entrepreneur following
bankruptcy; and drafting of a new law facilitating the growth of venture capital funds.

1. Actions to improve the legal and regulatory environment Relevant target group
M
NE SME HGPIE
E
1.1. Further simplify the registration process for new businesses and
establish one-stop shops (including in the governorates) to
X
expedite the steps required to complete the process; fully
implementan e-registration system.
1.2. Allow licensing of home-based enterprises in urban and rural
X
areas across the Kingdom.
1.3. Provide new (registered) businesses with exemptions from tax
X
and social security charges for the first three years of operation.
1.4. Provide tax exemption for microenterprises with turnover of less
than JD 100,000. This will alleviate the administrative burden of
X
tax remittances and increase the cash flow available to reinvest in
the development of the business.
1.5. Provide incentives to encourage formalisation of informal
microenterprises. Offering tax exemptions provides one incentive,
X
but this should be accompanied by reductions in social security
charges for formally hired workers.
1.6. Expand, and accelerate, the Guillotine Regulatory and Impact
Assessment Reform Project process to examine all laws and
regulations directly affecting the start-up and operation of
X X X X
SMMEs, including but not limited to the General Sales Tax Law,
the Social Security Law, the Companies Law, the bankruptcy law,
and the Venture Capital Law.
1.7. Implement a Regulatory Impact Assessment (RIA) regime,
applying an “SME Test” to assess the impact on SMMEs of all X X X X
new legislative and regulatory proposals.
1.8. Design and implement training for the legal departments of the
various relevant public institutions on their role in implementing
the National Entrepreneurship and SMME Development Strategy,
including in good regulatory practices in favour of SMME, such
as consultation mechanisms and impact assessments (e.g. use of
the SME Test on new laws and regulations affecting the private
enterprise sector).
1.9. Review business bankruptcy/insolvency laws and procedures to
make it possible for “failed entrepreneurs” to have a second X
chance to start a new business.
1.10. Reduce the complexity and administrative costs of changing the
legal status of an enterprise from one form to another (to enable
X X X
more individual enterprises to become limited liability
companies).

45
46
2. Entrepreneurship awareness and culture-building
Objectives:

1. Create a more entrepreneurial society by:

a. Exposing more Jordanians to the option of becoming an entrepreneur and starting an

enterprise as a viable and attractive career and employment opportunity.

b. Celebrating entrepreneurial success and promoting entrepreneur role-models.

c. Fully integrating entrepreneurship as a curriculum component at all levels of the

education system.

Rationale and approach:

Creating entrepreneurship awareness and culture-building consists of two main activities: promotion
of entrepreneurship and entrepreneurship education.

Promotion of the important role played by entrepreneurship in society is seen as critical to building up
its legitimacy as a feasible and desirable economic activity in an economy. In many countries, this
promotion takes the form of media coverage profiling successful entrepreneurs and ventures,
entrepreneurship awards and recognition programmes, high profile entrepreneurship conferences,
entrepreneurship awareness events around the country, etc., often led by government bodies in
partnership with the private sector. There is only minimal evidence of strategic efforts to create
widespread awareness of entrepreneurship among the Jordanian population, a necessity in realising
the objective of creating a more entrepreneurial society.

One of the high profile entrepreneurship promotion activities is Global Entrepreneurship Week
(GEW)-Jordan, hosted by the QRCE since 2009 in partnership with Endeavor, the BDC, the YEA and
other local establishments. The aim of GEW-Jordan is to strengthen the culture of entrepreneurship
and engage youth and other society segments in building a better future for the country. However,
entrepreneurship promotion needs more sustained efforts than concentration in just one week of the
year. Managing officials of the Al Urdonia Lil Ebda Business Incubator developed the
Entrepreneurial Governorate Programmein order to build up more awareness of entrepreneurship at
the governorate level.It accomplishes this by organising promotional events in the governorates using
entrepreneurs as speakers/mentors. Initiatives such as this should be expanded.

The integration of entrepreneurship in the education system is now widely accepted as an important
component of building an “entrepreneurial mindset” and culture in a country and thus of any
entrepreneurship and SMME policy. Such policies are promoted by the OECD, the European
Commission, the World Economic Forum and many other international and government bodies. For
example, the Oslo Agenda for Entrepreneurship Education in Europe 83 recommended the launch of
national strategies for entrepreneurship education, with the overall goal to ensure that young people
can progress coherently in acquiring entrepreneurial competences across all stages of the education
system; the World Economic Forum Global Education Initiative has launched a work stream with the
objective of advancing entrepreneurship education as one of the key drivers of sustained social
development and economic recovery; and the Europe 2020 strategy 84 highlights the need to embed
creativity, innovation and entrepreneurship into education, proposing a number of actions to unleash
83
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/oslo.htm

47
Europe’s entrepreneurial and innovative capabilities. The Euro-Mediterranean Charter for Enterprise
includes a policy dimension for “education and training for entrepreneurship” and the Small
BusinessAct for Europe invites Member States to stimulate innovative and entrepreneurial mind-sets
among young people by introducing entrepreneurship as a key competence in school curricula,
particularly in general secondary education, and ensure that it is correctly reflected in teaching
material.85International good practices in the implementation of entrepreneurship education measures
frequently involve cooperative agreements between the ministries responsible for education/higher
education and the ministries responsible for economic affairs/industry, labour and employment, and/or
science, technology and innovation.

Studies of the impact of entrepreneurship education reveal that students who have taken
entrepreneurship courses during their programme of study (versus those who did not) are much more
likely to participate in a business start-up or become self-employed earlier in their careers, have
higher expectations for the business in terms of employment and turnover growth and have enterprises
perceived as more innovative. Even those students who do not start companies after taking
entrepreneurship courses display more entrepreneurial attitudes, get a job earlier after finishing their
studies, and innovate more even as employees in a firm; thus demonstrating the value of
entrepreneurship education for the workforce more broadly.

There have been significant developments in the advancement of entrepreneurship education in the
Jordanian schools and universities over the past five years. As noted in Chapter 3 and Annex 3,
INJAZ is active in 200 schools and is working with universities across the governorates to introduce
entrepreneurship education components. The BDC is delivering KAB curriculum in cooperation with
vocational schools and technical universities, and the QRCE is developing curriculum modules for
use in university programmes as well as organising student business plan competitions to stimulate
the generation of new business ideas. All of these initiatives need to be expanded to reach more
students at all levels of the educational system, and should be fully supported by the Ministry of
Education, including with a policy to make entrepreneurship a core curriculum component of primary,
secondary and vocational education, the practice in a number of countries, and to give favourable
consideration to requests from universities to offer credit courses and degree programmes in
entrepreneurship.

The longer-term goal should be to expose every student in every school and university to
entrepreneurship-related content. This will be an important key to creating a more entrepreneurial
society and producing a pipeline of better prepared future entrepreneurs and entrepreneurship
supporters.

84
European Commission (2010), Europe 2020: A European strategy for smart, sustainable and inclusive growth, http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2010:2020:FIN:EN:PDF
85
Commission of the European Communities (2008), “Think Small First”: A “Small Business Act” for Europe (http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0394:FIN:EN:PDF).

48
2. Actions to enhance entrepreneurship awareness and culture- Relevant target group
building NE ME SME HGPIE
2.1. Design a broad-based entrepreneurship awareness programme
that includes “road-shows” in the governorates in partnership with
universities and the major business support organisations in each
governorate to build interest in pursuing entrepreneurship as a
career and employment alternative and provide information on the
opportunities for starting a business (building on the X X X X
“Entrepreneurial Governorate Programme” initiative of the Al
Urdonia Lil Ebda Business Incubator); initiate campaigns to
profile entrepreneur success stories in the media and to publicly
recognise the entrepreneurial achievements of Jordanian
enterprises and entrepreneurs.
2.2. Expand the offer of INJAZ (particularly the Business
Entrepreneurship Programmes) and Know About Business
courses in educational institutions to further infuse an X
entrepreneurial culture and mind-set among Jordanian youth and
build entrepreneurial skills and know-how.
2.3. Include“entrepreneurship” as a core curriculum component in the
primary, secondary and vocational educational system (Ministry X
of Education).
2.4. Integrate courses on entrepreneurship and small business
management as part of the credit curriculum in Jordanian
universities, making them available on a cross-disciplinary basis
X
so that all university students are exposed to this field of
knowledge. Develop degree programmes in
entrepreneurshipapproved by the Minister of Higher Education).
2.5. Engage with partners to support and sponsor business plan
X
competitions in schools and universities.

3. Entrepreneurial/management skills andbusiness development support

Objectives:

1. Enhance the abilities and know-how of potential and nascent entrepreneurs, including young
people and women, in order to affect better informed approaches that will lead to higher
value-added start-ups with greater probabilities of survival and growth.

2. Improve the management ability and capacity of existing SMMEs in order to affect a higher
level of performance in terms of productivity, turnover, employment, quality, and
innovativeness.

Rationale and approach:

Entrepreneurs starting a business without training or professional business advice have lower survival
chances and are less likely to be able to exploit the growth and innovation potential of their
enterprises. This lack of start-up know-how and use of professional advice is a serious impediment to
the successful launch and sustainability of SMMEs and needs to be addressed.

The majority of Jordanian entrepreneurs are starting their businesses with limited know-how in terms
of start-up and business management skills and know-how. They have not been exposed to

49
entrepreneurship in the education system or received any training on how to start a business, including
on how to identify promising business opportunities, evaluate the market feasibility, prepare a
business plan, and secure financing. Many do not have prior business management experience and
learn the ropes through trial and error. The majority of SMMEs do not even keep regular accounting
records. In addition, only a small percentage of Jordanian SMMEs seek professional advice from
business support providers in areas that would improve their operational performance and
competitiveness. This lack of know-how is a barrier to business survival and growth and may be one
of the significant factors in the preponderance of very small enterprises (with fewer than five workers)
in Jordan.To address this lack of knowledge and skills in the areas of entrepreneurship and business
management calls for systematic and widespread access to affordable training, coaching, mentoring,
and business advisory services.

In order to enhance their productivity and competitiveness, existing SMMEs benefit greatly from
professional expertise in carrying out diagnostic analysis of their operational and managerial strengths
and weaknesses against external opportunities and threats. By increasing the offer and take-up of
entrepreneurship and business management training and SMME advisory and consultancy services,
Jordan can produce a higher level of capacity of new entrepreneurs and existing SMME owners. This
will lead to more successful start-ups and higher performing SMMEs that can compete at the quality
level required in international markets. Offering more SMMEs the opportunity to participate in
diagnostic and improvement services, at an affordable cost, will lead to improved performance and a
higher level of contribution to economic growth.

While a number of public and private organisations are involved in providing (and/or funding)
training, counselling, consultancy, and diagnostic/upgrading assistance to new entrepreneurs and
existing SMMEs, such as IRADA, the JICs, JEDCO programmes (e.g. JUMP, JSMP, Kaizen Quality
Improvement), EJABI, NAFES, the BDC, the QRCE and others (as per Annex 3), the reach of their
services is somewhat limitedand not evenly accessible in all governorates.

There is currentlyno national network of “store-front” business development offices (with

representation across the governorates) for dispensing business information, advice, counselling, and
specialised referral services to start-up entrepreneurs and existing SMMEs. Such a system is available
in many other countries and is a priority for Jordan.However, in late 2012, with support from the
World Bank, JEDCO initiated a feasibility study to underpin the establishment of Business
Development Units (BDUs) in Ajloun, Jarash, Ma’an, Mafraq, and Tafiela. The objectives of this
project are to: 1) enhance the business environment by providing advisory services to entrepreneurs in
order to improve their ability to start businesses, register, access finance, and prepare business plans
and financial statements; 2) offer new and existing SMMEs capacity building, skills training, and
assistance with marketing plans and management practices, etc.; 3) provide entrepreneurs and
SMMEs with linkages to mentors, investors, new markets and technologies; and 4) offer business
development services to grass-roots and marginalised entrepreneurs (with a focus on women and
youth)and link them to sources of funding. Successful implementation of these BDUs will require
training and capacity building of management and staff, building of networks and partnerships with
other business support resources in each of the governorates, and setting of performance expectations
and metrics.Of particular importance will be developing a roster of qualified business advisors and
consultants to meet the needs of new entrepreneurs (including post-creation support) and SMMEs at
their different stages of development.

3. Actions to improve entrepreneurial/management skills and Relevant target group

business development support NE ME SME HGPIE

50
3.1. Follow-up on interest from the “entrepreneurship road
shows”(action 2.1) by providing basic entrepreneurship training
modules (in the governorates) dealing with the start-up process,
the functional areas of business management (e.g. marketing,
finance, organisation, etc.), how to develop a business plan, and
X
how to access financing. There are already good entrepreneurship
training programmes in Jordan that could be adapted for this
purpose (e.g. EMPRETEC, Know About Business, training
programmes of the Queen Rania Centre for Entrepreneurship,
etc.).
3.2. Launch components of the strategy specifically targeting the
entrepreneurial development of women and young people, i.e.
X
integrated Women’s Entrepreneurship Development Programme
and Young Entrepreneurs Programme.
3.3. Develop a financial literacy programme for microenterprises to
improve their knowledge and skills in basic financial X
management.
3.4. Expand provision of IRADA training, advisory, and consultancy
services to microenterprises to improve their management, X
production and marketing skills.
3.5. Develop and deliver modernisation and upgrading programmes to
microenterprises to foster productivity and growth. Such
programmes could consist of basic training modules delivered to
groups of microenterprises on a sector basis, followed up by
individual consultancies and coaching services (on a subsidized
X
basis) to assist each microenterprise with implementation of its
upgrading and modernisation plan. In addition, financing should
be made available to the microenterprises for implementation of
the modernisation/upgrading activities. This could include the
integration of IT in their operations.
3.6. Provide funding to enable more SMEs to participate in EJABI
X X
management and certification training programmes.
3.7. Expand the Kaizen Quality Improvement Programme delivered
X
through JEDCO.
3.8. Launch “enterprise growth” training programmes to help SMMEs
develop growth strategies and plans. This might be achieved by
X X X
implementing the IFC Business Edge programme in Jordan,
supported by subsidies to defray costs to the entrepreneurs.
3.9. Establish Business Development Units (BDUs) in the
governorates to provide a unifying platform for information,
X X X X
advisory, consultancy, and referral services, expanding to all
governorates as rapidly as possible.
3.10. Expand the number of incubators and number of incubator spaces
in the business incubator system to enable the incubation of a X X
larger number of start-ups on an annual basis.
3.11. Establish business accelerators in various regions of Jordan to
X
facilitate the rapid growth of high potential SMEs.
3.12. Invest in capacity building and professional development of
SMME advisors, mentors, coaches and consultants to ensure a
qualified supply.
3.13. Develop cluster initiatives as a vehicle for enabling SMEs to X X

51
 pursue high-growth and value-added opportunities.

4. Financing access
Objectives:

1. Address market failures in the allocation of formal financing to SMMEs in order to increase
their access to credit and equity finance, including for start-ups.

2. Double the volume of bank lending going to SMMEs from 10% to 20%.

3. Increase the amount of seed and venture capital funding available to promising start-ups and
early-stage growth enterprises.

Rationale and approach:

Financing is a key challenge facing SMMEs in every countrydue to a range of market failures in the
allocation of financial resources. SMMEs in most countries, especially developing countries,
experience limited access to bank credit and an unwillingness or inability of financialinstitutions to
price for risk. These problems generally result from the perception ofhigher risk, the lack of
familiarity of financial institutions with the small business market, the higher relative transaction costs
in making small loans, and the lack of expertise in evaluating the credit risk of SMMEs, particularly
start-ups and new technology businesses. Other factors are at play in the equity financing market.
SMMEs have to overcome issues of higher relative transaction costs (e.g. due diligence processes),
limitedentrepreneurial and management skills, and the preference of venture capital companies to
invest in later-stage and larger enterprises. This assumes that the venture capital industry is even well-
developed, which is not the case in many developing economies.

In the absence of access to external financing, most SMMEs, and greatly so in Jordan, rely on their
own personal savings or money from family and friends to get their businesses started and finance
their operations. This affects the scale of their operations and the growth potential of their
enterprisesWorld Bank studies show a positive relationship between external financing and the
number of start-ups and reveal that access to formal financing sources leads to higher investments in
capital, new technologies, research and innovation, and leverages improved returns. 86These studies
further reveal that lack of access to financing prevents the growth of SMMEs into larger firms and
firms that have access to financing have higher growth rates than firms without it. Consequently,
improving access to capital for SMMEs is a major priorityfor all countries.

Generally, financial assistance programmes are geared to address five key gaps:

1) the inability of micro and small enterprises owners to attract conventional bank financing due
to lack of credit histories, adequate collateral or weak track records in business; this also
applies to young entrepreneurs and women;
2) the reluctance of commercial banks lend to micro and small enterprises because of the
inherent risk, high transaction costs of dealing with small loans and their lack of tradition and
experience in SMME lending;
3) the existence of information asymmetries resulting from a lack of credit history data on
potential clients; and

86
IFC (2013), IFC Jobs Study.

52
 4) thelack of availability of equity capital for start-ups, early-stage and high-growth potential
enterprises due to an underdeveloped private venture capital industry;
5) the lack of knowledge of SMMEs on how to properly prepare and present their loan requests
to lenders.

As noted in Chapter 3, banks in Jordan are reluctant to lend to SMMEs, preferring instead to lend to
the public sector and large enterprises where perceived risks and transaction costs are considerably
lower. Bank lending to SMMEs in Jordan represents less than 10% of the total commercial loan
portfolio, which is low compared to the level in other MENA countries, such as Lebanon, Morocco,
Tunisia and even Yemen.87The higher risks associated with lending to SMMEs, especially new, young
and small enterprises, is further fuelled by information asymmetries largely due to the absence of a
private credit bureau. To compensate for information asymmetries, banks impose rigid collateral
requirements that are difficult for smaller enterprises to meet. The lack of registries for moveable
assets and the lengthy and cumbersome legal processes make it difficult for banks to collect on
secured loan defaults. On the hand, another major constraint to SMME’s access to financing is their
lack of knowledge of how to prepare adequate financing proposals to lenders or investors and to make
their financing approach.

Various public and non-governmental schemes have been initiated in Jordan to deal with access to
financing issues. These include microfinance, loan guarantees, venture capital funds, and other
government programmes with funding components, such as JEDCO’s Start-up Seed grants. However,
the scale and scope, in terms of the number of loans, grants and equity investments offered and
accessibility of the various programmes and instruments to start-ups, early-stage enterprises and
general SMMEs, is not adequate to meet the demand requirements.Unmet demand for microfinance is
estimated at JD 150 million to JD 200 million over the next three to four years, but the absorptive
capacity of MFIs to administer more micro-credit more in the range of JD 36 million to JD 72
million.88The direct impact of microfinance on new start-ups and micro and small enterprises is
estimated to produce one new job per JD 5,000; therefore an additional JD 18 million of credit would
create 3,600 jobs a year.89

A small number of MFIs exist in Jordan as the major source of financing for low-income micro and
small enterprises that are excluded from the financial system, but microfinance is not consistently
available across the Kingdom and not always used for income-generating activity. Default rates
appear to be within a reasonable range, but the efficiency of the microfinance system would be
improved with a more systematic credit information system. The launch of a national credit bureau to
which the MFIs could all register client credit data would be very useful.

The JLGC loan guarantee programme seeks to address the reluctance of banks to lend to SMMEs due
to collateral constraints, however, only a few hundred SMME-related productive loans are guaranteed
each year so the programme is not achieving significant reach– only 516productive loans guaranteed
in 2011. JEDCO’s new $250 million “SME Financing Programme”is an important development in
terms of channelling more bank financing into the SMME sector, but being able to guarantee loans for
1,000 SMMEs over four years, may be modest in terms of meeting the potential demand. As noted in
Chapter 3, the scale of guarantees (as a percentage of GDP) is considerably lower than for a number
of other developing MENA countries.

87
Rocha et al. 2011, p. 22.
88
Jordan’s National Employment Strategy 2011-2020, p. 74.
89
Jordan’s National Employment Strategy 2011-2020, p. 74

53
More efforts are needed to direct banks towards the SMME market. This might be achieved by
providing training to loans officers, promoting credit-scoring and other risk assessment tools to reduce
the transactions costs on smaller loans, encouraging banks to open SME Windows, and of course,
establishing the Credit Bureau.

Jordan does not have a very well developed system of equity financing for high potential SMMEs
(e.g.angel investment networks, private venture capital companies, equity funds for early-stage
enterprises that have growth-potential). The launch by JEDCO of two equity funds – a Capital for
Growth Fund in early 2012 and an Early-Stage Fund to be launched in 2013 is a significant
development, but the funds are relatively small in size and targeting to invest in no more than 7 to 15
enterprises each.An additional investment fund coming on stream is the EUR 20 million Badia Impact
Fund that will target start-ups and expansion investment in technology and ICT ventures. These funds
are heavily invested in by international financial institutions and donors, but in the longer-term should
aim to stimulate a larger private sector venture capital industry. This should be supported by
government risk-sharing or fiscal incentives to private investors.

A growing trend in many countries is the creation of business angel networks – wealthy individuals,
often entrepreneurs themselves, who band together to make equity investments in start-ups and early-
stage ventures. This phenomenon is very nascent in Jordan. Often governments in other countries will
provide incentives to encourage the formation of angel investment networks, such as by offering
grants to cover some of the networks’ core operation costs and additional incentives to encourage
individuals to make investments (e.g. tax exemptions, credits) by reducing or sharing the risk. Such
schemes do not exist in Jordan.

To deal with the issue of SMMEs lack of capacity to prepare bankable financing requests, JEDCO has
established the SME Banking Window to provide technical assistance to JEDCO client firms in
preparing loan request packages. This service will need to be expanded with the launch of the new
SME Financing Programme. IRADA and the BDC also offer some technical assistance to SMMEs in
preparing loan requests, and the BDC offers training for SMMEs on financial management systems,
including on how to present themselves appropriately to a financial institution. These are all valuable
support mechanisms for SMMEs, but the offers of financial technical assistance needs to be more
systematically available to a larger number of SMMEs.

The strategy proposes a number of actions to build on existing, still underdeveloped and relatively
nascent initiatives to facilitate SMMEs’ access to financing.

4. Actions to improve access to financing Relevant target group

NE ME SME HGPIE
4.1. Operationalise the private Credit Bureau; require MFIs to provide
X X X X
credit data on their clients to the Credit Bureau.
4.2. Implement the recommendations of the National Microfinance
X
Strategy.
4.3. Increase the scale of available microfinance through lines of X X
credit to qualified microfinance institutions; expand microfinance
facilities to serve microenterprises in all parts of the Kingdom
(prioritising income-generating projects that can enhance
employment opportunities); activate the role of a Credit Bureau
where data on microfinance clients can be reported; insure all
financed projects against risks and provide life insurance for
project owners; and provide follow-up and monitoring on

54
 microfinance clients, including advisory services; promote use of
the loan guarantee scheme negotiated between DEF and the JLGC
in August 2012.
4.4. Require banks to open SMME windows; provide training to
banks on the merits of lending to SMMEs and methodologies for
X X X X
serving the SMME market, including use of risk assessment tools
(the BDC has some experience in this type of training).
4.5. Provide additional incentives to banks to encourage them to direct
more loan funds to SMMEs (e.g. negotiate links of credit for
banks through the international financial institutions at special X X X X
interest rates, which is often the practice in the developing MENA
countries).
4.6. Provide subsidy funding support to enable the BDC to reach more
SMMEs with its “Global Financial Bridge” training programme
on how to build financial statements, interpret their financial X X
needs and present themselves to financial institutions to secure
financing.
4.7. Expand the JEDCO SME Banking Window to provide services to
X X X X
a larger number of SMMEs, including in the governorates.
4.8. Make seed grants available to start-ups by young entrepreneurs
and women who have more difficulty accessing start-up financing X
from the banks due to lack of credit histories and collateral.
4.9. Establish a seed fund that can used to prime access to capital for
incubating enterprises in the Jordan Innovation Centres X
(incubator) Network.
4.10. Provide more extensive provision of loan guarantees to improve
the access of SMEs to bank financing by expanding the capacity
of the JLGC in the area of “productive loan” guarantee offers, and
X X X X
implementing the JEDCO SME Financing Programme. Structure
the guarantee funds to achieve a higher leverage on the amount of
bank lending to SMMEs.
4.11. Further develop the availability of early-stage seed capital and
venture capital to meet the capital expansion needs of high-
growth SMEs, specifically by increasing the size of the Capital X
for Growth Fund (attracting additional fund investors) to enable
investments in more projects.
4.12. Provide fiscal incentives (such as tax credits) to encourage private
investors to make angel investments in early-stage enterprises and X X
to contribute to equity investment funds targeting SMMEs.
4.13. Provide funding support for the formation of business angel
networks and capacity building programmes; the capacity
building programmes to be targeted to improving the skills and
know-how of nascent angel investors and to increasing the X X
knowledge of SMMEs regarding the merits of seeking angel
investment and their skills in preparing and negotiating
investment proposals.
4.14. Implement measures to ensure that women entrepreneurs are able
X X
to access financing from banks and equity funds.
4.15. Provide soft loans and grants to support the R&D and innovation-
X
related activity of SMMEs.

55
5. Innovation capacity and technology adoption/development
Objective:

1. Increase the innovation and technological capacity and activities of new enterprises and
existing SMMEs, including microenterprises.

2. Foster the creation of innovative enterprises.

Rationale and approach:

Innovation has become widely acknowledged as a key driver of economic growth. Innovation,
broadly defined, could range from simple incremental, non-technological innovations in existing
enterprises, for example, in the areas of management or marketing, to radical technological
innovations that transform whole industries. Evidence from many countries indicate that innovation,
including adoption of new technologies, development of new products/processes, performing more
R&D and exploiting its commercialisation potential lead to enhanced productivity and value-added,
and benefit the economy as a whole by contributing to increasing levels of GDP and/or employment.
Based on this rationale, enhancing the innovation capacity of SMMEs is a priority of governments in
most countries, which are funding programmes to encourage innovation at the firm level.

As well, there has been a growing policy emphasis on fostering “innovative entrepreneurship”, or
“techno-starters”, such as by encouraging start-ups based on R&D commercialisation opportunities or
the spin-off of new businesses based on the market application of R&D outputs. This requires
attention to special policy measures and initiatives: effective technology transfer regimes, the creation
of technology incubators, the protection of intellectual property rights, facilitated patenting processes,
and access to a supply of angel, seed, and venture capital funds.

There are many barriers to SMME innovation. SMMEs are often not that innovative because they lack
information, knowledge, skills, financing, or a longer-term vision for the development of their
enterprises. Investing in R&D can be expensive with no assurance of ending up with a
commercialisable outcome. As well, SMMEs are often not well connected to the sources of
technological innovation and R&D in their countries that might be useful in solving their own
technical problems. Enhancing the capacity of SMMEs entails supporting them to develop new
products and services; identify, adapt to and access new markets; pursue incremental improvements to
their production, management, or marketing processes; develop radically new innovations based on
R&D and technological advancements; and link appropriately to sources of technologicaland
scientific expertise resident in universities and research/technical institutes.

Technological innovation in all aspects of a business is a key factor in enhancing their productivity
and competitiveness, and SMMEs in all countries face barriers in this regard. In addition to
addressing these issues in the context of their product and service development and operational
processes, SMMEs also need to increase their understanding and utilisation of ICT and management
information systems. In fact, widespread use of ICT may be the strongest enabler of productivity and
innovation in an economy and is applicable to all SMMEs, including microenterprises. From a policy
perspective, it may even be more important than developing an ICT industry. 90

Developing technological ideas and turning them into commercially-viable ventures or projects is
both costly and risky. Governments in many countries see value in supporting highly-innovative

90
Atkinson et al. (2012), The Global Innovation Policy Index.

56
projects because of their wealth creation and high value-added job creation spinoffs. Governments are
heavily involved in the financing of innovation-related activity through the use R&D grants to risk-
share in the costs of pre-commercialisation activities, such as development of proof-of-concept,
prototypes, acquiring patents, researching market applications and related activities. They are also
involved in incentive schemes to stimulate more private sector investmentin innovative ventures
which are in the early stages of commercialisation, such as seed and early-stage venture capital.
Without this funding support, many innovative SMMEs and start-ups would not be able to garner the
resources to take their innovations to market. This funding is often coupled with access to training,
knowledge resources, coaching and mentoring.

One of the most important actions to take, apart from ensuring SMMEs can access financing to
support their innovation activity, may be to foster stronger linkages between SMMEs and innovation
networks,such as with universities and research institutes and labs. Solutions for achieving this vary
from introducing innovation vouchers to establishing technology and innovation centres and special
R&D facilities targeted to SMMEs.

The system for innovation support in Jordan is not well developed. Some of Jordan’s business support
programmes include components that will lead to increased innovation capacity of SMMEs,
especially those focused on modernisation, upgrading, and standards certification, in addition to the
technology business incubators. However, the reach of these programmes is somewhat limited.
Although there is a considerable level of technological expertise in Jordan’s many research centres
and institutes, linkages with SMMEs are very weak. Certainly more needs to be done to link SMMEs
with the knowledge and outputs from the various research institutes coordinated by the RSS and other
bodies; foster stronger relationships between researchers, technologists and SMMEs; offer incentives
to encourage more investments in innovation-related activity; and make technical support available to
innovating SMMEs. The use of innovation vouchers, which have proven to be a successful approach
in encouraging SMMEs to seek professional and technical assistance in solving technical problems
that will lead to innovation, may be an appropriate model for Jordan. However, the introduction of an
innovation voucher system will require willingness of the research institutes and centres to cooperate
with JEDCO in accepting the vouchers and providing the technical services and advice. Expanding
business innovation centres and accelerator programmes to serve technology-driven and innovative
start-ups is also a strategy option for Jordan and would be consistent with international practice. In
addition, it is important for Jordan to create more pre-seed and seed funding
programmes to support the innovation activities of SMMEs.

There is an important role in the Jordan National Entrepreneurship and SMME Development Strategy
to promote SMMEs’ innovation, but some of the necessary actions to achieve this in an integrated
manner may have to be implemented in cooperative dialogue with the HCST. Since the HCST is also
in the process of developing a National Innovation Strategy, it will be important for JEDCO and the
HCST to develop cooperation around ensuring that SMMEs’ needs are considered and will be able to
benefit from proposed innovation policies and programmes. But beyond the innovation strategy,
broad-based support is needed to increase the innovation capacity of all SMMEs, even if it just
enabling them to make greater use of ICT.

5. Actions to enhance innovation capacity and technology Relevant target group

adoption/development
NE ME SME HGPIE
5.1. Provide funding programmes to enable SMMEs to assess how X X X
integration of modern technologies, including ICT, could improve
their business operations, followed by financing to acquire and

57
 install the new technology and technical solutions.
5.2. Provide incentives to stimulate SMMEs to undertake R&D and
innovation-related activities (e.g. soft loans and grants, R&D tax X X X
credits, co-funding through an SME Innovation Fund, etc.).
5.3. Improve access to sources of scientific and technical expertise
and linkages to research and technical institutes, technology
innovation centres, and technology transfer centres by introducing X X X X
an innovation vouchers programme for SMMEs, including start-
ups.
5.4. Establish a pre-commercialisation Innovation Fund to subsidise
X X X
the costs of proof-of-concept, prototypes, market studies, etc.
5.5. Expand the pool of seed and venture capital available for high
X
potential, early-stage innovation projects initiated by SMMEs.
5.6. Develop the appropriate systems to foster innovative, technology-
based start-ups (e.g. innovation centres, technology incubators, X X
technology accelerators, technical expertise, seed funds, etc.).

6. Market access
Objective:

1. Create markets for SMMEs by:

a. opening up their access to public procurement opportunities;

b. improving theircapacity and propensity to export;

c. increasing their participation in the supply chains of large enterprises; and

d. promoting the franchising model as an approach to building markets.

Rationale and approach:

SMMEs basically have four options for increasing the scale of their enterprises: selling more of their
existing products/services within existing markets (market penetration); selling their existing
products/services in new markets (new market development); selling new products in existing markets
(new product development); and selling new products in new markets (market diversification).

Some new markets are more complex for SMMEs to tap into than others, for example, export
markets, public procurement markets and supply chain markets, where information deficiencies,
capacity limitations, and lack of know-how all present obstacles. By removing some of these
obstacles, SMMEs can be enabled to compete in these markets and thus increase the scale of their
enterprises and create more jobs. These are three of the markets targeted by the national
entrepreneurship and SMME development strategy for better SMME access. Another way that
SMMEs can increase the size of their markets is by adopting new business models, such as
franchising, which is also proposed as a component of the national strategy. The rationale for each of
these components follows, along with the recommended actions.

a) Public procurement markets

58
Depending on the country, central government purchase of goods and services can range anywhere
between 3% and 18% of its GDP and thus represents a substantial potential market for SMMEs. 91
Governments in a number of countries recognise the specific barriers that SMMEs face when
attempting to secure public sector contracts and seek to actively break down these barriers to improve
the levelof SMME participation. SMMEs may face much higher costs in public procurement relative
to large business, in terms of the costs of pre-qualification, qualification, bid and proposal costs and
other costs associated with accessing information about the bidding process. They also face
formidable burdens in obtaining bid and performance bonds and guarantees, which can be a
significant factor in keeping SMMEs out of public procurement. In addition, SMMEs often do not
have the working capital resources to accommodate the delays in payment for their work due to
regulatory and institutional structures that hinder the government’s ability to pay within a “reasonable
period of time”.

The basic rationale for SMME procurement policies is to enable SMMEs to compete effectively for
public procurements by reducing the transaction costs and alleviating certain information problems
that SMMEs face in the public procurement process. Increasing the participation of SMMEs in the
procurement process has the effect of increasing the size of their domestic markets, which can lead to
both enterprise and employment growth.

Governments may target procurement-related assistance towards SMMEs to enable their participation,
provide preferences to SMMEs in their procurement processes, or may even implement set-aside
procurements specifically for SMME involvement. However, the experience of other countries
indicates that allocating procurement dollars to the SMME sector does not necessarily mean that
smaller firms will be able to access this market without some adjustments to simplify the processes of
submitting tenders and competing for government procurement contracts. These adjustments, among
other actions, include simplifying the tendering documents and procedures, de-bundling large contract
tenders into small lots that smaller firms will have the capacity to deliver on, implementing a SMME
supplier registration system that allows them to be pre-qualified as bidders, and providing information
and training to SMMEs on how to successfully access procurement contracts. 92

According to data compiled from the Government Tenders Directorate by the Young Entrepreneurs
Association (YEA), the annual value of government tenders in Jordan averaged JD 338 million (about
US$475 million) for the period covering 2007-201093. Although there is no data on how much of that
is awarded to SMMEs, it is likely that their share of procurement contracts could be increased,
particularly that of smaller enterprises.

Jordan should examine its national public procurement system to explore opportunities for ensuring
that SMMEs are able to participate in the bidding process for government goods and services
contractsas a mechanism for creating markets for domestic SMMEs.

In addition, the YEA dedicated a whole chapter to the issue of SMME access to government
procurement opportunities in their 2012 Small and Medium Agenda Report, noting that Jordan lacks
both the incentives that are essential to fostering the capabilities of local firms, and the laws to protect

91
International Trade Centre, SME and Export-Led Growth: Are There Roles for Public Procurement Programmes? A
Practical Guide for Assessing and Developing Public Procurement Programmes to Assist SMEs, UNCTAD.
92
Good practices for developing these systems can be found in publications of the European Commission as well as in the
experiences of the US, Canada, Mexico, and other countries. For example, see: EC (2009), “European Charter for Small
Enterprises: 2009 good practice selection”.
93
YEA (2012), “Small and Medium Business Agenda”, calculated from data in Figure 24, p. 96.

59
SMMEs from foreign competition upon accession to the Government Procurement Agreement (GPA)
of the World Trade Organisation (WTO).94 Advocacy efforts may also be required on this issue.

b) Access to export markets

SMMEs face many common challenges in developingtheir markets, particularly as trade agreements
open up both domestic and export marketsto increased competition and opportunities. Relatively high
product cost structures,product quality, and limited marketing resources are frequently noted as
significant barriers forSMMEs in accessing both domestic and export markets. Paramount among the
challenges in accessing export markets are obtaining marketinformation on export markets, making
contact with potential overseas customers, excessive transportation and insurance costs, lack of how-
how regarding the steps to take, and financing their export activities. One of the biggest barriers is not
being able to meet the quality and certification requirements required for access to many international
markets. The decision to export is also subject to managerial discretion.The SMME owners’ decision
to export is tempered by the benefits to be derived, including increased revenues and profits and
improved efficiency, against the internal costs of positioning the enterprise to become an exporter.

Research on factors influencing the propensity of SMMEs to engage in exporting activity reveals
positive correlations with:95

 Having a business plan that includes the intent to export (thus policymakers should make
sure that business planning assistance is available);
 Prior exporting experience and foreign work experience;
 Adequate capital to cover the additional costs associated with export development;
 The ability of SMMEs to identify and develop export opportunities through personal and
business connections developed through trade planning seminars and participation in foreign
trade missionsand reverse trade missions organised by the government;
 Use of agents and distributors in foreign markets to identify new markets;
 Access to staff with exporting skills;
 Having the opportunity to learn from experienced exporters who are willing to their share their
skills and experiences as mentors to new or less experienced exporters.

Governments in many countries have adopted a coordinated national public-private sector partnership
forexport trade development which has a particular focus on SMMEs. Their priorities for export
market development generally include increased awareness of theopportunities and challenges of
exporting, improved information and intelligence,improved training, support and familiarisation
systems, and better export financing. They also maintain export support centres to
provideinformation, counselling and access to government financial assistance programs for SMME
exporters. Government-subsidised export market introduction or familiarisation programmes are
common, as is the availability of specialised export financing institutions. Developed countries are
heavy users ofInternet approaches in providing export information, intelligence and training.

In 2011, the Moroccan government launched the

“Export Synergia” Programme with total funding of
MAD 120 million. The objective is to stimulate the
operation of 55 SME export consortia by 2015. Each
new consortium (consisting of at least five SMEs with

94
YEA (2012), “Small and Medium Business Agenda”.
95
Chambers and Shaw (2008), “Reaching Out: Exploring SME Exporting Opportunities and Challenges”.

60
 exporting capacity) is supported with a grant of up to
MAD 1.5 million to cover the partial costs of forming
the consortium, formulating a development strategy and
undertaking international promotion and marketing
activity. This programme builds on the successful
experience of the Export Consortia Support Scheme that
was in place from 2004-2010 with support from UNIDO
and Italian Cooperation under which 21 consortia
became operation, involving 120 SMEs employing
18,000 people. MarocExport offers consortia a
preferential rate for participation at trade fairs and
commercial missions compared to those offered to
individual companies not in an export consortia. The
Moroccan Export Insurance Company established a
preferential premium for insurance policies issued to
export consortia and offers them wide coverage for trade
fair participation. The National Agency for the
Promotion of SMEs subsidises consulting costs for
group-based modernisation and upgrading activities.
Official statistics on the contribution of SMMEs to Jordanian exports are not available, but estimates
suggest that this is does not exceed 5%.96 As firm size increases to 20-49 workers, the proportion of
exports in sales rises and SMMEs start to become more export-oriented. 97Although a majority of
SMMEs may never reach the point where a large proportion of their products and services are being
directly exported to other countries, in a country of Jordan’s domestic market size, increasing the
exporting potential of its SMMEs is an imperative.

There are a number of export support programmes and activities in Jordan that are carried out by
JEDCO, the JLGC, andthe Jordan Exporters Association.98 However, significant gains could be
achieved by adopting a more strategic approach to preparing SMMEs for export activity through
export readiness, export development, and export financing programmes, such as illustrated in
international practices, as well as by encouraging and supporting the development of SMME export
consortia.

Modernisation, upgrading, technology utilisation, and quality improvement programmes targeted at

SMMEs, coupled with export readiness programmes (e.g. dissemination of information about export
market opportunities, training and counselling on steps in the exporting process, export regulations,
etc.), export financing tools, and trade mission opportunities will improve the export propensity of
SMMEs and expansion of their markets more generally.

c) Supplier development

Governments in many countries have policies to involve SMMEs in indirect export activity by
building their capacity to act as suppliers to larger exporting firms. These normally take the form of
supplier development programmes (SDPs) that work with larger firms to identify input products and
services that could be provided by local SMME suppliers and SMMEs that could become potential
suppliers. The selected SMMEs are then supported to upgrade their production facilities, management
systems and product quality to meet the technical specifications and international standards of the
large firm buyer.

96
MOPIC and UNDP (2011), Jordan Human Development Report 2011: Small Businesses and Human Development.
97
MOPIC and UNDP (2011).
98
USAID funding for the BDC’s export development activities has recently ended and it no longer offers these programmes.

61
SMMEs are often thwarted in their efforts to break into supply chains of large domestic and
multinational enterprises because they lack the capacity and ability to meet performance and quality
standards. Supplier development and supply-chain linkage programmes are an effective way to
improve the capability of SMMEs to act as suppliers. Supplier development programmes (SDPs) are
important in two ways. Upgrading the ability of SMMEs to act as sub-contractors and suppliers to
large enterprises increases their market potential and raises their ultimate capacity to engage in
exporting activity, plus having a supply of qualified domestic SMME suppliers in a country is an
important attraction factor for FDI. Thus, strategic efforts to bring SMMEs up to the quality and
reliability standards required by large firms result in benefits to both vendors and SMME suppliers.
The OECD review of the role of SMMEs in global value chains concludes that such chains are likely
to grow in importance and that governments seeking to increase the role played by SMMEs should
raise awareness of supply chain opportunities amongst SMMEs and support them in the process of
complying with international standards, one of the big issues in being able to access these markets. 99

The role of the government is to facilitate the SDP, often through consultancy firms that are
contracted to promote the programme, recruit anchor companies and potential SMME suppliers;
perform a diagnostic of the financial, technical and operative capacities of the potential suppliers in
relation to the requirements of the large firm; help the SMME owners develop and implement an
improvement plan; and coach the supplier SMMEs through an ISO9000 certification process, as
appropriate. The government can provide soft loans and other types of financial support or fiscal
incentives to the SMME vendors to develop their capacity. The development of supply chain capacity
is generally undertaken on a sector basis and can be applied in manufacturing, construction, retail and
other sectors.

Having depended considerably on Qualifying Industrial Zones (QIZs) to drive Jordan’s economic
growth, programmes to integrate Jordanian SMMEs as suppliers of the large multinational enterprises
(MNEs) would appear to be an obvious opportunity. But in order to build the confidence of these
MNEs and other large Jordanian exporting firmsin local SMME suppliers, experience in other
countries demonstrates that strategic efforts are needed to bring the SMMEs up to the quality and
reliability standards required to substitute for the supplier relationships that these large firms have
established in importing countries. There is not much evidence of strategic SMME supplier
development programmes in Jordan at the present time. JEDCO used to offer a National Linkages
Programme, but for some reason it was discontinued. Because of the success of supplier development
and SMME linkage programmes in many countries, JEDCO should revisit the use of these
programmes as a strategic tool to build the capacity and capability of Jordanian SMMEs to meet the
standards requirements to act as suppliers to large Jordanian enterprises and multinationals.

d) Franchising

Based on the success of franchise models in building markets for SMMEs in developed countries,
governments in developing countries, where the potential for franchising is underdeveloped, are
seeking to facilitate the development of franchise systems as a growth option for SMEs, either by
entering an existing franchise system or developing their own franchise model. For example, a
significant factor impacting the growth of franchising opportunities in Mexico is the National
Programme of Franchises, launched by the government in 2007.The objectives of this programme are
to support the creation of new franchising companies, facilitate the possibility that more entrepreneurs
can acquire franchises, and to support the modernisation, promotion and consolidation of existing
franchise models. It offers support to Mexican entrepreneurs who want to acquire a franchise as a way
99
OECD (2008), Enhancing the Role of SMEs in Global Value Chains, Paris.

62
of getting into business, as well as existing Mexican enterprises that want to expand using the
franchising model.100In the first case, start-up entrepreneurs can access an interest-free loan from a
partnering financial institution to cover up to half of the costs of the franchise fee (to a maximum of
US$20,000). In order to qualify for this assistance, the franchise being acquired must be among those
listed in the Ministry of Economy’s “Certified Franchises Catalog.” Mexican businesses that want to
transform themselves into a franchise model must have at least two years of operation and two
successful existing locations in order to qualify for financial support from the programme. From
2007-2011, the Franchise Programme supported 1,627 franchising outlets (638 of them new
franchises101) that resulted in the creation of 12,000 new jobs. The programme also accredited a
number of specialised consultantsto provide services to the sector.

Egypt’s Social Fund for Development has also launched an SME franchising programme, supported
by a US$40 million loan facility from the African Development Bank and a US$1 million Technical
Assistance grant from USAID. The technical assistance grant was used for capacity building and
training of staff in the Social Fund, lawyers, accountants and judges, and training of bankers on how
to assess the risk of lending to franchisees. It is also used to provide training to franchisors and
franchisees, for example, the Egyptian Association of Franchises does workshops with existing
Egyptian SMEs to help them develop their enterprises into franchise systems. The loan facility
provides loans of up to US$300,000 per project to finance local franchises as well as sub-franchises,
although the loan does not cover the franchising fee, unlike the Mexican programme. The Social Fund
expects to support 40 franchising systems, each with 6-8 outlets, resulting in 320 start-ups companies
in five years and about 7,000 new jobs.

Several systems should be in place to support franchise development, including a national franchise
law or decree governing the registration offranchise agreements and the requirements of disclosure to
protect both franchisees and franchisors, heavy promotion of the opportunities in franchising as a
start-up and growth model, training on how to develop a franchising model and to assess if the
business has franchisable potential, and a network of franchising experts, such as lawyers,
accountants, and consultants.

Proactively supporting the development of franchise models among Jordanian SMMEs may be a
practice to be explored by JEDCO under the National Entrepreneurship and SME Development
Strategy. For potential franchisors, the model provides a growth option in the Jordan market
(multiplying sales through several locations) as well as for expanding into foreign markets. For
potential franchisees, buying into a franchise system is a lower risk way of getting into business
because of the technical and managerial support provided by the franchisor.

100
The Mexican Franchise Association reports that there are 850 franchises in Mexico, ranking 7th in the world and
representing 6% of Mexican GDP; 60% of the franchises are Mexican.
101
About 40% of new franchises are in the food and beverage sector, 10% are health/beauty shops; several are in specialised
retail sector with style brands, and a few are in sectors such as biotechnology and mobile technology.

63
6. Actions to improve market access Relevant target group
NE ME SME HGPIE
Public procurement markets
6.1. Develop an action plan, in collaboration with the appropriate
government procurement entities, for reform of procurement laws
and regulations to include provisions on SMME participation.
This would ideally include establishing a minimum quota for the
value of public procurement contracts to be awarded to SMMEs,
but regardless, should include actions such as:
 Active promotion among SMMEs of public procurement
opportunities to expand their markets;
 Packaging bids to encourage SMMEs to apply, such as by
dividing large contracts into several lots to allow for increased X X X
SMME participation;
 Providing technical assistance and support mechanisms to
SMMEs to assist them with bidding processes;
 Easing the financial and technical requirements of the bidding
process to increase the pool of local SMME bidders;
 Pursue E-procurement to include all government procurement
contracts and to enable uniform access to notices, electronic
tendering and online registration to SMMEs.

Export markets NE ME SME HGPIE

6.2. Open an SME Window in the Ministry of Industry and Trade;

actively disseminate information about export market X X X X
opportunities and export regulations to SMMEs.
6.3. Organise seminars and workshops where experienced exporters
share their strategies and lessons learned with potential and X X X X
novice SMME exporters.
6.4. Develop co-funded SMME “export readiness” programmes for
potential exporters that include training and counselling on the
steps in the exporting process, finding markets, developing an
export strategy, and the firm-level requirements for adapting to X X X
the needs of export markets. This could be facilitated by
providing funding for the expansion of the Jordan Exporters
Association’s Export Development Programme.
6.5. Provide an expanded grant or subsidy scheme to support SMMEs’
costs of conducting research to explore export market X X X
opportunities and participation in trade missions.
6.6. Enable SMMEs to access financing for the implementation of
their export strategies/plans, including the costs associated with
X X X
adapting their products for export markets and meeting
international product standards and requirements.
6.7. Provide support to enable high-growth SMEs to identify export
X
market opportunities and to pursue those opportunities.
6.8. Provide incentives for the formation of SMME export consortia
by offering programme grant funding support for their creation, X X X
development, and international promotion and marketing activity
(which is experienced by other countries as an excellent tool for

64
 SMMEs upgrading and modernisation as well as for expanding
exports).
6.9. Further simplify exporting procedures. X X X
6.10. Expand the availability of export credit guarantees for SMMEs. X X X

Supplier development markets NE ME SME HGPIE

6.11. Based on international best practices, design and implement a

comprehensive SMME supplier development programme with
components directed to microenterprises and to SMEs to facilitate X X X
their integration into supply chain of larger firms and build their
markets.

Franchise markets NE ME SME HGPIE

6.12. Examine the potential for a National SME Franchise Support

Programme to provide technical and financial support to
Jordanian SMEs that want to develop franchised outlets as part of X
their growth strategy.

The framework of how the focus area recommendations can be applied across target groups in a more
programmatic fashion is presented in Figure 4. Using the four (target groups) by six (focus areas)
matrix, one option for implementing the strategy would be to tailor a National Programme around
each of the four target groupswith a package of relevant supports as clustered under each of the
column headings (e.g. National New Entrepreneurs Programme, National Microenterprise
Development Programme and so on). This could be considered when designing the implementation
action plan.

65
 Figure 4. Programmatic framework for entrepreneurship and SMME development

New entrepreneurs and start-ups Microenterprises Small and medium enterprises High-growthpotential and
(SMEs) innovative SMMEs

Legal and regulatory One-stop shops for business
environment registration
Simplified business registration
procedures
Tax and social security exemptions
in first 3 years of business operation
Reform to bankruptcy law that
allows entrepreneurs to have a
“second chance”
“SMME Test” to be applied to
assess the impact of all laws and
regulations on the entry of new
enterprises
Tax exemptions for Simplified accounting Tax credits to encourage R&D
microenterprises with turnover of requirements for SME reporting activity and pre-
less than JD 100,000 (to apply to enterprises with fewer commercialisation activity
Incentives to encourage than 50 employees)
formalisation (e.g. exemption
from social security charges to
encourage registration of workers
Allow licensing of home-based
enterprises in both rural and urban
areas
Implement the Microfinance Law
Expand and accelerate the Guillotine Regulatory and Impact Assessment Reform Project
“SMME Test” to be applied to assess the impact of all laws and regulations on SMMEs
Simplify the administrative process and reduce the costs of changing the legal status of an enterprise

Entrepreneurship Entrepreneurship awareness “road

awareness and culture shows” in all governorates
building Entrepreneurship promotion
campaigns
Expansion of INJAZ and KAB
curriculum in schools and
universities
Integration of entrepreneurship at
all levels of the educational system
Support national business plan
competitions
Design entrepreneurship
programmes targeting post-
secondary graduates and women

Access to finance Establish start-up seed grants Implement recommendations of Expanded provision of loan Implement soft loans and grants
(especially for new young the MicroFinance Strategy guarantees to improve access to to support R&D activity
entrepreneurs) Expand scale of microfinance bank financing Expand early-stage venture

67
 New entrepreneurs and start-ups Microenterprises Small and medium enterprises High-growthpotential and
(SMEs) innovative SMMEs
Expand seed grants programme for provision for income-generating capital funds
JIC incubating enterprises activity Provide incentives to encourage
Require MFIs to provide formation of more business angel
information on loan clients to the networks, including in the
credit bureau governorates
Implement the Credit Bureau Law by establishing a private credit bureau; increase credit information coverage
Expansion of JEDCO SME Banking Window
Subsidise funding for delivery of BDC “Global Financial Bridge: training to more SMMEs
Encourage opening of SME Windows in banks; training of loans officers on SME lending opportunities and risk-assessment methodologies

Entrepreneurial/ Provide on-going entrepreneurship Expand provision of IRADA Expand upgrading, modernisation Establish business accelerators in
management skills and training workshops in rural and training, advisory and and quality certification the governorates
business support urban areas consultancy services programmes
Expand the number of incubators Make financial literacy Expand Kaizen Quality
and incubator spaces programmes more available and Improvement Programme
accessible Expand access to EJABI
Implement modernisation and management/certification
upgrading programmes to foster programmes
productivity and growth
Introduce “Enterprise Growth” training programmes
Establish full service Business Development Units (BDUs) in the governorates

Innovation capacity Technology incubators Support for integration of IT and Support for acquisition of IT and Support for acquisition of new
and technology Pre-commercialisation fund for modern technology in business new technologies technologies
adoption/ development technology start-ups operations R&D/innovation incentive
See fund for innovative start-ups programmes
Support for spin-offs from R&D
Technology accelerators/parks
SMME-research/technical institute linkage programme (e.g. innovation voucher scheme)
SME Innovation Fund

Access to markets Marketing skills support Supplier development/ linkages Examine potential for National
programme Franchise Support Project

68
 New entrepreneurs and start-ups Microenterprises Small and medium enterprises High-growthpotential and
(SMEs) innovative SMMEs
Supplier development/ linkages Marketing skills support
programme
Expanded export market development assistance
Government procurement programme for SMEs
Establish an SME Export window in MIT
Expanded offer of export readiness programmes
Further simplification of export procedures
Expand export credit guarantee schemes
Support programme to encourage formation of SMME export consortia

Cross-cutting actions

Communication and Develop a communication plan for the Strategy.

information Develop and launch a SMME information web-portal.
Continue to support Global Entrepreneurship Week and expand its activities and reach across Jordan.
Implement special promotional efforts to celebrate entrepreneurial success and create credible role models, including for women and young people.

Capacity-building Expand business support structures, such as BDUs in the governorates, expansion of IRADA offices/advisors; information portal on opportunities and markets,
etc.
Implement professional development programmes to improve the competencies of management and staff of BDUs, incubators, accelerators, and other entities
delivering advisory and consultancy services to SMMEs, and the quality of service provision.
Set standards for the management and performance of incubators.
Form a national/regional network of entrepreneurship and SMME support providers for the purposes of exchange, sharing of experience and partnership
development.

Monitoring and Develop an evaluation framework for the Strategy and its component programmes.
evaluation Refine the SMME statistical system at the Department of Statistics to report annual establishment survey data and Establishments Census data according to the
size breakdowns specified in the National Strategy.
Develop a system to capture data on business entry and closures rates.
Developindicators to measure progress against goals, objectives and targets and the overall impact of strategy/ programmes.
Establish an SMME Observatory.

69
 New entrepreneurs and start-ups Microenterprises Small and medium enterprises High-growthpotential and
(SMEs) innovative SMMEs
Prepare annual reports on the state of the SMME sector and the Strategy’s implementation progress.

Funding Establish an SMME Fund to channel funding for implementation of the programmes and initiatives of the National Strategy.

70
71
CHAPTER 6. GOVERNANCE AND IMPLEMENTATION
MECHANISMS
Completion of a strategy document is only the first step in achieving objectives for entrepreneurship
and SMME development and growth over the next five years. In order to successfully execute the
strategy, the Kingdom must commit to a steadfast and focused implementation mechanism and to the
allocation of sufficient resources.

The implementation mechanismwill entail setting up an oversight governance and coordination

structure, establishing adequate institutional structures for effective delivery of SMME support
services, enhancing the statistical system for tracking dynamic developments in the SMME sector,
launching a communications campaign and comprehensive SMME information web portal, and
implementing a monitoring and evaluation system to assess the impact of the entrepreneurship and
SMME development strategy.

Effective oversight and coordination

Following international good practices, the governance mechanism recommended for Jordan is:

1) establishment of an Interministerial Council on Entrepreneurship and SMME Development as

the oversight body,
2) confirmation of JEDCO as the lead body for coordinating actions under the strategy (and
acting as the Secretariat to the Interministerial Council),
3) creation of entrepreneurship and SMME support networks and Service Level Agreements
between public and private sector organisations to achieve a more integrated and coordinated
system of business support to entrepreneurs and SMMEs.

1) Interministerial Council on Entrepreneurship and SMME Development

Given the horizontal nature of government policies impacting on development of entrepreneurship
and SMMEs, the national strategy seeks to implement an integrated policy approach with oversight
from the highest levels of government. This is to be achieved by establishing an Interministerial
Council represented by all relevant ministries.

The proposed structure of the Council is illustrated in Figure 5.

The role of the Interministerial Council is to provide policy direction and input on the development of
measures and programmes within the context of the national entrepreneurship and SMME strategy,
approve annual action plans to achieve the goals and objectives of the strategy, foster cooperation in
the implementation of action items within the jurisdictional mandates of Council members, and
monitor the execution of the strategy.

Further, based on international practices, an Entrepreneurship/SMME Advisory Committee should be

established to create a formal process for regular dialogue with SMMEs, the representative
entrepreneurship and SMME associations, and key organisations providing business services to
SMMEs. The Interministerial Council will meet with members of the SMME Advisory Committee at
least twice a year to solicit input on policy developments affecting SMMEs. Membership of the
SMME Advisory Committee would consist of key sector and business associations, organisations
delivering programmes and services to entrepreneurs (and potential entrepreneurs) and SMMEs, and
other experts specialising in the field.

Figure 5. Structure of the Interministerial Council on Entrepreneurship and SMMEs

Interministerial Council on Entrepreneurship and SMMEs

Ministry of Industry and Trade

Ministry of Planning and International
Cooperation Jordan Chamber of Commerce
Ministry of Finance Jordan Chamber of Industry
Ministry of Higher Education and Scientific
Research JEDCO
(Secretariat)
Ministry of Communications and Information
Technology
Ministry of Labour Entrepreneurship/SMME Advisory Committee
Ministry of Education Members to include key sector and business
Ministry of Agriculture associations (e.g. Young Entrepreneurs
Association, Jordan Forum for Business and
Ministry of the Interior and Regional
Professional Women), entrepreneurship
Development
promoters and business service providers (e.g.
Central Bank of Jordan INJAZ, the Business Development Centre),
Higher Council on Science and Technology and other experts in the field of
entrepreneurship and SMME development

2) Role of JEDCO
JEDCO will have the lead role on implementation of the Strategy and act as the Secretariat to the
Interministerial Council. JEDCOs role will incorporate an advocacy function, coordination (linkages
with other ministries, agencies, and SMME stakeholder groups) and partnership development,
networking of business services and programme delivery partners, capacity building to ensure the
quality of service delivery to SMMEs, and monitoring and evaluation of the implementation of the
strategy. To carry out this role, an Entrepreneurship and SMME Development Unit/Department
should be established within JEDCO. The Unit will, in cooperation with SMME stakeholder groups
and partners, prepare annual work plans for the entrepreneurship and SMME development strategyon
the basis of the goals, objectives and directions laid out in the strategy. The action plans will include
activities, budget estimates, and assignment of roles and responsibilities. This process will be
coordinated by JEDCO in cooperation and consultation with ministries, agencies and stakeholders
represented in the Interministerial Council, as well as with any other key implementing entities. The
annual action plan will be approved by the Interministerial Council and the government will allocate
sufficient budget for its implementation. The JEDCO Unit will also prepare annual reports on
progress.

To assist JEDCO in its coordination function, SMME focal points should be established in all
ministries and public agencies represented on the Interministerial Council. One of the roles of these
focal points is to ensure that interests of SMMEs are taken into account in the formulation of
departmental policies and programmes. JEDCO will coordinate regular meetings of these focal points
to assist in developing and implementing action plans developed within the context of executing the
National Entrepreneurship and SMME Development Strategy.

3) Formation of public-private sector entrepreneurship and SMME development

support networks
JECDO will form regional committees for enterprise creation and SMME support, consisting of the
key programme and service delivery partners, such as the BDUs, IRADA, the BDC, the JIC Network,
as relevant in each governorate. The purpose of these committees will be to promote entrepreneurship
and SMME development in the governorates and to cooperate in providing more coordinated actions
within the framework of the national strategy. Regular meetings of these regional committees will
foster the sharing of experiences and good practices, and enhance the relevance and quality of
services being provided. They will also be a conduit for identifying gaps in services to new
entrepreneurs and SMMEs and opportunities for providing better services to meet their needs.

Adequate Business Support Infrastructure and Effective SMME Support

Services
The goals of this component of institutional support are to ensure that start-ups and SMMEs in all
governorates have ready access to appropriate business support infrastructure to obtain information,
advice and counselling, entrepreneurship and business management training, referrals to specialised
expertise and support programmes, coaching and mentoring, and sources of financing to meet their
specific needs; and to ensure the quality of business support services through capacity building and
professional development.

This will require attention to monitoring the balance of supporting infrastructure in the various
governorates, such as BDUs, incubators, one-stop shops for business registration, MFIs, and
technology and innovation centres. It will also require attention to the quality of services being
provided. This can be achieved by setting performance standards, ensuring that staff have the proper
knowledge and skills to perform their roles, and offering professional development programmes to
upgrade the knowledge, skills, and capacities of management and staff working in the system of
business incubators, BDUs, and other offices providing support to early-stage entrepreneurs and
SMMEs, including business advisors and consultants.

Communications Plan and Creation of an SMME Web Portal

A very important aspect of the strategy implementation is development of a communications plan to
adequately inform SMMEs and stakeholders about its existence, as well of the actions to be taken.
Disseminating information to SMMEs and other stakeholders about SMME policies, programmes and
services will be an important communication role for JEDCO.

In addition to public relations and other promotional vehicles, Jordan will need a comprehensive
SMME information web portal to communicate to SMMEs more effectively about support
programmes and services and disseminate information on the requirements to start and grow a
business. Currently, there is no central online web portal for information on SMME support services
in Jordan, so this is to be a new initiative.

75
Actions:

 Develop and launch an official national awareness campaign to advice entrepreneurs,

potential entrepreneurs, SMMEs and stakeholder organisations about the National Strategy
and its implications.

 Develop and launch acomprehensive SMME information web portal, with a domain name
such as “www.sme.gov.jo” or “www.sme-support.gov.jo”. The type of information to be
provided on the SMME web portal could be modelled on the Canada Business Network
website (see: www.canadabusiness.ca) or the Singapore SME Portal (see:
http://www.singapore-sme.com/).This includes information on planning, registering, starting,
managing, growing and exiting a business; detail on the available assistance and support
programmes to aid in each stage of the process, such as access to infrastructure (e.g.
enterprise centres, incubators, technology parks); sources of financing, entrepreneurship
training, skills upgrading and advisory services (with links to organisational websites); tips on
how to prepare loan requests; information on markets, how to export and sourcing
technology, etc.

Monitoring and Evaluation

In order to effectively monitor the objectives and targets set in the strategy, effective data and
reporting systems are required. This includes the capability and capacity of the national statistical
system to track developments in the SMME sector over time. Currently, Jordan has a relatively good
system of SMME tracking in the Department of Statistics (DOS). The 2011 Establishments Census
provides an up-to-date and timely baseline for the National Entrepreneurship and SMME
Development Strategy. The next Establishment Census, anticipated in 2016, will allow Jordan to
assess the overall impact of the strategy’s implementation on net growth in the SMME sector over the
five-year period and shifts in the size distributions of enterprises.

However, it will be important for DOS to align the size categories for reporting on enterprises to
match the SMME definitions adopted in the national entrepreneurship and SMME development
strategyand the SMME Law. For the future, DOS should be requested to start reporting data on
SMMEs with slightly different employment-size bands than in the past. These size bands should be
consistent with the following enterprise-size categories:

 fewer than five employees,

 5-9 employees,
 10-19 employees,
 20-49 employees,
 50-99 employees,
 100-300 employees,
 more than 300 employees.

This will enable Jordan to better compare the distribution of its enterprises by size with the more
standard size-classifications of enterprises used in other countries, including the EU, as well to better
monitor shifts in the distribution of enterprises and employment across enterprise size categories.

Efforts will also be made to improve the capacity of the Jordanian statistical system to track the
annual entry of new enterprises, the annual closing of existing enterprises, and the annual employment
dynamics created as a result of new, growing, declining and exiting enterprises. This will be important

76
in terms of being able to understand the dynamic underlying net growth in the stock of SMMEs and in
monitoring the overall impact of the national entrepreneurship and SMME development strategy.

These efforts could be facilitated by DOS in coordination with the Jordan Chamber of Industry and
the Jordan Chamber of Commerce to compile business registration data from all chambers of industry
and commerce on a regular basis, enabling at least annual reporting on this activity. This project
would allow determination of annual business entry and exit rates and provide a measure of the
dynamic evolution of the SMME sector. It would also be useful if all business registration data in
government ministries were centralised and each Jordanian enterprise was issued a single business
number that was used for all transactions within the government.

In the case of entrepreneurship development programmes, it may be necessary to collect survey data
to track changes in attitudes towards entrepreneurship, levels of “intent to start a business” in the
population, and entrepreneurial activity rates. To facilitate this requirement, funds should be allocated
to support annual GEM surveys in Jordan.

Annual reporting on SMME sector development is to be implemented. This will take the form of an
annual report to the Interministerial Council on Entrepreneurship and SMME Development, to be
prepared by JEDCO. The annual report on the state of the SMME sector will include analysis of data
from the DOS annual surveys of establishments and employment andthe GEM study, and progress
reporting on the policy and programme actions taken to implement the strategy.

Performing this task will require development of management information systems capable of
collecting data on each of the initiatives and programmes included under the strategy. This will
include basic data on the number of clients served by SMME programmes and service providers,
demographic information on the assisted SMMEs, and results of impact studies assessing the effect of
assistance programmes on the performance of assisted SMMEs (e.g. increases in employment, sales,
exports, etc.), depending on the target objectives of each initiative/programme. Without a
commitment to carrying out programme evaluations, it will be impossible to assess the effectiveness
of individual strategy actions and whether the overall strategy is achieving its desired outcomes. In
cooperation with other stakeholders, JEDCO will develop a monitoring and evaluation system and
carry out any necessary actions to build the capacity and capability to undertake this task.

In summary, the actions to be taken with respect to institutional support mechanisms are the
following.

7. Actions with respect to institutional support mechanisms

Effective oversight and coordination

7.1. Establish an Interministerial Council on Entrepreneurship and SMME Development
7.2. Form an Entrepreneurship and SMME Advisory Committee
7.3. Create an Entrepreneurship and SMME Development Department/Unit within JEDCO
7.4. Establish SMME focal points in all relevant ministries
7.5. Form a network of regional committees for enterprise creation and SMME support
7.6. Prepare an annual Entrepreneurship and SMME Development work plan

Adequate business support infrastructure and effective SMME support services

7.7. Implement capacity-building and professional development programmes for business service
providers

77
Communications
7.8. Launch a national awareness campaign to inform SMMEs and other stakeholders about the
National Strategy
7.9. Develop and launch a comprehensive SMME information web-portal

Monitoring and evaluation

7.10. Realign DOS reporting on enterprise and employment distributions according to size bands
consistent with those outlined in the National Strategy
7.11. Develop a statistical system to track the annual entry and closing of enterprises (in cooperation
with the Jordan Chamber of Industry and Jordan Chamber of Commerce)
7.12. Develop a management information system that is capable of collecting data on each of the
initiatives and programmes included under the National Strategy (such as number of clients
served, types of services and programmes accessed, etc.)
7.13. Carry out impact studies assessing the effect of assistance programmes on the performance of
assisted SMMEs
7.14. Provide funding for annual Global Entrepreneurship Monitor studies in Jordan to monitor
changes in entrepreneurial perceptions, attitudes and entrepreneurial activity rates
7.15. Prepare an annual report on the state of entrepreneurship and SMMEs and progress in
implementing the National Strategy

Funding
7.16. Provide adequate funding for implementing the National Strategy through creation of a National
SMME Fund

78
CHAPTER 7: IMPLEMENTATION ACTION PLAN
A five-year action plan for implementation of the strategy with projects/programmes, specific tasks
associated with each project/programme, time frames, budget estimates, and assignment of roles and
responsibilities will need to be prepared. This action planning process will be coordinated by JEDCO
in cooperation and consultation with ministries, agencies and key implementing entities, and
facilitated following the consultation process on the Draft National Entrepreneurship and SMME
Development Strategy 2013-2017 and agreement with its framework and outlined directions. During
the process of drafting the implementation action plan, it will be very important, as much as possible,
to set quantifiable targets for each of the Strategy objectives and actions.

Some of the actions will be best led by JEDCO and other government bodies, while others may be
best led by private sector organisations and NGOs or as public-private partnerships under Service
Level Agreements. Each partner will commit to certain actions and be held accountable for their
implementation.

The action plan can be used to identify priorities for support from donors and international financial
institutions, but the government should establish a Fund specifically for implementing the Strategy
and its work plan. The Fund should allow for multi-year commitments of Strategy funding, which can
be adjusted based on requests laid out in annual work plans, but is considered essential to the
successful implementation of the Strategy.

This five-year plan will be followed up with annual work plans as described under JEDCO’s role in
Chapter 6.

79
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83
84
ANNEXES

85
Annex 1. Changes in rank on “Doing Business” indicators from 2007 to 2013,
Jordan
Indicator Doing Business Doing Business Indicators in 2007 Indicators in 2013
2007 2013
(rank out of 175 (rank out of 185
countries) countries)
Starting a 133 103 10 procedures; 16 days; 7 procedures; 12 days; cost
business cost – 73% of income per – 13.8% of income per
capita; 864.4% of income capita; no minimum capital
per capita for minimum requirement
capital requirement
Dealing with 70 102 20 procedures; 92 days; 17 procedures; 70 days;
construction cost – 1,005.3% of income cost – 529.8% of income
permits per capita per capita
Getting N/A 38 N/A 5 procedures; 43 days; cost
electricity 292.3% of income per
capita
Registering 110 102 7 procedures; 21 days; cost 7 procedures; 21 days; cost
property – 10% of property value – 7.5% of property value
Getting credit 83 167 Depth of credit Depth of credit
information – 2; public information – 2; public
registry coverage – 0.7% registry coverage – 1.9%
of adults; private bureau of adults; private bureau
coverage – 0.0% coverage – 0.0%
Protecting 118 128 Strength of investor Strength of investor
investors protection index- 4.3/10 protection index- 4.3/10
Paying taxes 18 35 26 payments/ year; 136 25 payments/ year;
hours/ year; tax rate – 151hours/ year; tax rate –
31.1% of profit) 28.1% of profit
Trading 78 52 7 documents and 24days to 5 documents and 13 days
across borders export; per container cost to export; per container
to export – US$720; 12 cost to export – US$825;
documents and 22 days to 7 documents and 15 days
import; cost per import to import; cost per import
container US$925 container US$1,335
Enforcing 75 129 39 procedures; 689 days; 38 procedures; 689 days;
contracts cost –31.2% of claim cost - 31.2% of claim
Resolving 84 112 4.3 years; costs - 9% of the 4.3 years; cost - 9% of the
insolvency estate; 27.8 cents on the estate; 27.4 cents on the
dollar recovery rate dollar recovery rate
Source: World Bank “Doing Business” reports.

86
87
Annex 2.SMME Sector Statistics
Table A2.1. Legal structure of enterprises by enterprise-size
Enterprise 1-4 workers 5-19 workers 20-49 workers 50-99 workers 100+ workers Total
size No. of Distrib No of Distrib No. of Distrib No. of Distrib No. of Distrib No. of Distrib
enterpris ution enterp ution enterp ution enterp ution enterp ution enterpris ution
Legal es rises rises rises rises es
form
Sole
116,686 90.6% 9,282 60.2% 546 27.7% 51 8.9% 53 7.6% 126,618 85.9%
proprietorship
General
10,103 7.8% 4,437 28.8% 658 33.4% 172 30.0% 86 12.3% 15,456 10.5%
partnership
Limited
402 0.3% 84 0.54% 56 2.8% 12 2.1% 11 1.6% 565 0.4%
partnership
Limited
1,179 0.9% 1,218 7.9% 578 29.4% 273 47.6% 441 63.1% 3,689 2.5%
liability co.
Public share-
5 0.004% 13 0.08% 48 2.4% 39 6.8% 84 12.0% 189 0.13%
holding co.
Cooperative
76 0.1% 107 0.69% 17 0.86% 3 0.5% 0 0 203 0.14%
society
Other
359 0.3% 280 1.8% 65 3.3% 23 4.0% 24 3.4% 751 0.5%
Total 15,42
128,810 100% 100% 1,968 100% 573 100% 699 100% 147,471 100%
1
Notes: “Other” includes non-profit organisation, branch of a foreign company, etc. Of the “other”. 660 are non-profit
organisations, 86% of which are enterprises with fewer than 20 workers. The Employment Survey does not include
enterprises in the agricultural sector.
Source:Data from The Employment Survey 2009 (DOS 2011), Table 2, p.1
 Table A2.2. Number of active establishments by governorate and employment size, Jordan 2011
Governorat 1-4 10-19 20-49 50-99 100-249 ≥ 250 Total Dens- Change
e ity of in
  enter- number
prises
of enter-
> 250
work- prises,
ers per 2006-
1,000 2011
inhabi-
tants*
Numbe Distri- Number Distri- Number Distri- Number Distri- Number Distri- Number Distri- Number Distri-
r bution bution bution bution bution bution bution
(row) (row) (row) (row) (row) (row) (col.)
Amman 61,201 87.0% 6,888 9.8% 1,309 1.9% 451 0.64% 342 0.49% 181 0.26% 70,372 44.9% 29.7 -5.1%
Ajloun 2,596 97.1% 67 2.5% 10 0.4% 0 — 0 — 0 — 2,673 1.7% 19 18.3%
Aqaba 3,013 86.7% 394 11.3% 35 1.0% 20 0.58% 9 0.26% 5 0.14% 3,476 2.2% 26.1 2.6%
Balqa 7,856 96.5% 227 2.8% 34 0.4% 6 0.07% 9 0.11% 10 0.12% 8,142 5.2% 20 10.8%
Irbid 25,806 95.9% 946 3.5% 103 0.4% 22 0.08% 16 0.06% 16 0.06% 26,909 17.2% 24.7 11.0%
Jarash 3,420 97.3% 85 2.4% 8 0.2% 0 —- 0 — 3 0.09% 3,516 2.2% 19.2 21.8%
Karak 5,000 95.1% 232 4.4% 17 0.3% 5 0.10% 1 0.02% 1 0.02% 5,256 3.4% 22 8.0%
Ma’an 2,239 92.3% 161 6.6% 16 0.7% 7 0.29% 4 0.16% 0 — 2,427 1.5% 21 1.5%
Madaba 3,494 96.1% 117 3.2% 14 0.4% 3 0.08% 5 0.14% 1 0.03% 3,634 2.3% 23.8 12.2%
Mafraq 4,548 96.0% 164 3.5% 14 0.3% 2 0.04% 6 0.13% 3 0.06% 4,737 3.0% 16.5 0.2%
Tafiela 1,647 96.4% 59 3.5% 2 0.1% 1 0.06% 0 — 0 — 1,709 1.1% 20 27.4%
Zarqa 22,542 94.4% 1,114 4.7% 129 0.5% 36 0.15% 30 0.13% 26 0.11% 23,877 15.2% 26.2 5.6%
143,36
Total 91.5% 10,454 6.7% 1,691 1.1% 553 0.35% 422 0.27% 246 0.16% 156,728 100% 25.6 6.6%
2
Notes: *Calculation of SMME density per 1,000 inhabitants based on population data for December 2010.
Source: Data on enterprises from the Department of Statistics, Establishments Census 2011, Table 14.
 Table A2.3. Active establishments by employment size, 2006 and 2011
Employment 2006 2011 Change in
size category Active Distribution Active Distribution number of active
(number of establishments establishments establishments
employees) (number) (number) by employment
size, 2006-2011
1-4 135,585 92.22% 143,362 91.47% 5.7%
5-9 6,708 4.56% 7,681 4.90% 14.5%
Sub-total 142,293 96.78% 151,043 96.37% 6.1%
10-19 2,291 1.56% 2,773 1.77% 21.0%
20-49 1,691 1.08%
1,883 1.28% 19.2%
50-99 553 0.35%
Sub-total 146,467 99.62% 156,060 99.57% 6.5%
100-249 422 0.27%
250-300 556 0.38% 52 0.03% 20.1%
> 300 194 0.12%
Total 147,023 100.0% 156,728 100.0% 6.6%
Sources: DOS Establishments Census 2006, Establishments Census 2011.

Figure A2.1. Changes in the number of private enterprises by size, 2000-2010

2010

2008

2006

2004

2002

2000
0 25000 50000 75000 100000 125000 150000

1-4 employees 5-19 employees 20-49 employees

50-99 employees 100 or more employees

Source: Department of Statistics.

Figure A2.2. Share of enterprises of different sizes varies from year to year, 2000-2010

2010 89.1% 8.6% 1.3%

2009 87.3% 10.5% 1.3%
2008 89.1% 8.9% 1.2%
2007 88.8% 9.2% 1.2%
2006 88.7% 9.4% 1.2%
2005 87.3% 10.5% 1.4%
2004 89.1% 9.0% 1.2%
2003 92.9% 5.4%1.2%
2002 89.4% 8.9% 1.1%
2001 89.8% 8.2% 1.3%
2000 90.6% 7.8% 0.9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1-4 employees 5-19 employees 20-49 employees

50-99 employees 100 or more employees
Source: Department of Statistics.
 Figure A2.3. Growth in the number of enterprises slowed down in the second half of the decade, 2000-
2010
100%
% increase in number of private enterprises

80%

60%

40%

20%

0%
1-4 workers 5-19 workers 20-49 workers 50-99 workers 100+ workers Total net
increase
-20%

Source: Calculations based on data from the Department of Statistics.

Figure A2.4. Number of private enterprise workers by enterprise-size category, 2000 to 2010

2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000

0 100,000 200,000 300,000 400,000 500,000 600,000 700,000

In enterprises with 1-4 workers 5-19 20-49

50-99 100 or more

Source: Department of Statistics.

 Figure A2.5. Share of private enterprise employment by enterprise size, 2000 to 2010

2010 35.3% 14.9% 8.3% 7.5% 34.1%

2009 35.5% 17.8% 8.8% 5.9% 31.9%

2008 37.4% 16.8% 8.7% 5.7% 31.3%

2007 38.7% 17.5% 8.9% 6.3% 28.6%

2006 38.2% 17.4% 8.4% 5.7% 30.4%

2005 38.4% 19.7% 9.3% 6.0% 26.7%

2004 37.6% 17.5% 8.2% 6.4% 30.3%

2003 50.8% 14.7% 10.7% 4.4% 19.4%

2002 43.1% 18.2% 9.3% 6.2% 23.2%

2001 43.6% 17.1% 10.2% 6.4% 22.6%

2000 45.8% 18.8% 7.5% 6.4% 21.6%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

In enterprises with 1-4 workers 5-19 20-49

50-99 100 or more

Source: Department of Statistics.

FigureA2.6. Growth in private sector employment by enterprise-size category, selected periods from 2000
to 2010
140%

120%

100%
% increase in employment

80%

60%

40%

20%

0%
1-4 workers 5-19 workers 20-49 workers 50-99 workers 100+ workers Total net
increase
-20%

Source: Calculations based on data from the Department of Statistics.

95
 Table A2.4. Number and share of private enterprises by sector and size, 2010
Sector Total enterprises <5 employees 5 to 19 20-49 employees Subtota 50-99 employees 100+ employees
employees l < 50
% % % % % % % Total
# # # # # #
(col.) (row) (row) (row) (row) (row) (row) (row)
Wholesale & retail
89125 60.4% 84584 94.9% 4043 4.5% 277 0.3% 99.4% 151 0.17% 70 0.08% 100%
trade, repair
Manufacturing 20238 13.7% 15665 77.4% 3463 17.1% 662 3.3% 97.8% 185 0.91% 263 1.3% 100%
Real estate, renting,
10803 7.3% 9851 91.2% 757 7.0% 126 1.2% 99.4% 29 0.27% 40 0.37% 100%
business activities
Community, social &
9591 6.5% 9242 96.4% 296 3.1% 35 0.4% 99.8% 10 0.10% 8 0.08% 100%
personal services
Hotels and restaurants 6616 4.5% 5282 79.8% 1082 16.4% 162 2.4% 98.6% 37 0.56% 53 0.8% 100%
Health & social work 4417 3.0% 3929 89.0% 369 8.4% 45 1.0% 98.3% 39 0.88% 35 0.79% 100%
Construction 2386 1.6% 998 41.8% 933 39.1% 238 10.0% 90.9% 125 5.24% 92 3.8% 100%
Education 2075 1.4% 754 36.3% 986 47.5% 183 8.8% 92.7% 67 3.23% 85 4.1% 100%
Transport, storage &
1721 1.2% 988 57.4% 529 30.7% 88 5.1% 93.3% 68 3.95% 48 2.8% 100%
communications
Financial
427 0.29% 131 30.7% 186 43.6% 44 10.3% 84.5% 20 4.68% 46 10.8% 100%
intermediation
Mining and quarrying 142 0.10% 22 15.5% 82 57.7% 38 26.8% 100.0% 0 0.00% 0 0.0% 100%
Electricity, gas and
2 0.001% 0 0.0% 1 50.0% 0 0.0% 50.0% 0 0.00% 1 50.0% 100%
water supplies
100.0
Total 147543 131446 89.1% 12727 8.6% 1898 1.3% 99.0% 731 0.5% 741 0.5% 100%
%
Source: Data from Department of Statistics, “Employees and Enterprises by Economic Activity and Size Group of Employment for Year 2010 for Private Sector”.
 Table A2.5. Number and share of private enterprise employees by sector and enterprise size, 2010
Sector Total employees <5 employees 5 to 19 20-49 employees Subtotal 50-99 employees 100 + employees
employees < 50
% % % % % % % Total
# # # # # #
(col.) (row) (row) (row) (row) (row) (row) (row %)
Wholesale and retail
trade, repair 208713 31.1% 141844 68.0% 29372 14.1% 8342 4.0% 86.0% 9955 4.8% 19200 9.2% 100%
Manufacturing 183303 27.3% 34534 18.8% 25448 13.9% 18192 9.9% 42.6% 12951 7.1% 92179 50.3% 100%
Real estate, renting,
business activities 42223 6.3% 17035 40.3% 6606 15.6% 3711 8.8% 64.8% 2061 4.9% 12811 30.3% 100%
Community, social &
personal services 20753 3.1% 15268 73.6% 2481 12.0% 1122 5.4% 90.9% 611 2.9% 1272 6.1% 100%

Hotels and restaurants 40347 6.0% 13325 33.0% 8259 20.5% 4509 11.2% 64.7% 2988 7.4% 11266 27.9% 100%
Health & social work 27875 4.2% 7764 27.9% 2438 8.7% 1264 4.5% 41.1% 3200 11.5% 13209 47.4% 100%
Construction 46095 6.9% 2276 4.9% 8636 18.7% 7190 15.6% 39.3% 8393 18.2% 19600 42.5% 100%
Education 43556 6.5% 2161 5.0% 9556 21.9% 5996 13.8% 40.7% 4843 11.1% 20999 48.2% 100%
Transport, storage &
communications 27582 4.1% 2191 7.9% 4529 16.4% 2339 8.5% 32.8% 4314 15.6% 14210 51.5% 100%
Financial
intermediation 26231 3.9% 372 1.4% 1826 7.0% 1530 5.8% 14.2% 1258 4.8% 21245 81.0% 100%
Mining and quarrying 2120 0.3% 69 3.3% 737 34.8% 1315 62.0% 100.0% 0 0.0% 0 0.0% 100%
Electricity, gas and
water supplies 2776 0.4% 0 15 0.5% 0 0.6% 0 2761 99.5% 100%
Total 100.0
671575 236839 35.3% 99902 14.9% 55509 8.3% 58.4% 50573 7.5% 228752 34.1% 100%
%
Source: Data from Department of Statistics, “Employees and Enterprises by Economic Activity and Size Group of Employment for Year 2010 for Private Sector”.
 Table A2.6. Active establishments by revenue size and distribution, 2006 and 2011
2006 2011 Change in
Active Distribution Active Distribution number of
Revenue category establishments establishments active
(JD) (number) (number) establishments
by revenue
size, 2006-2011
< 5,000 78,122 53.1% 55,222 35.2% -29.3%
5,000-10,000 34,305 23.3% 39,090 24.9% 13.9%
10,001-20,000 16,941 11.5% 25,604 16.3% 51.1%
20,001-40,000 7,839 5.3% 18,465 11.8% 135.6%
40,001-60,000 3,903 2.7% 6,982 4.5% 78.9%
60,001-100,000 2,784 1.9% 4,901 3.1% 76.0%
Sub-total 143,894 97.9% 150,264 95.9% 4.4%
100,001-500,000 4,306 2.7%
500,001-1,000,000 900 0.6%
3,129 2.1% 106.6%
1,000,001-1,500,000 254 0.2%
> 1,500,000 1,004 0.6%
Total 147,023 100.0% 156,728 100.0% 6.6%
Sources: DOS Establishments Census 2006, Establishments Census 2011.

Figure A2.7. Jordan has relatively low self-employment rate

40%
35%
30%
Percentage of total employed

25%
20%
15%
10%
5%
0%

Own account self-employment rate Employers rate

Notes: Self-employment rates are based on the percentage of self-employed workers in the working population. Own-
account self-employment refers to self-employed individuals with no employees; employers are self-employed individuals
who have employees. Data for Algeria is the overall combined self-employment rate. Data for Bahrain, Kuwait, Qatar, and
the United Arab Emirates is for nationals only. The employers rate in Qatar is 0.07% (too small to be legible in the Figure),
compared to a 2.26% rate for the own account self-employed (for a total of 2.33%).

Sources: Country statistical sources for latest year available.

 Figure A2.8. Self-employment rates, Jordan, 2000 to 2011

25%

20%
% of total employed persons

15%

10%

5%

0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Notes: The self-employment rate is based on the proportion of self-employed persons in the employed population, excluding
unpaid workers.
Source: Employment and Unemployment Surveys, Department of Statistics.

Figure A2.9. Growth in the number of self-employed workers, 2000 to 2011

90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011

Source: Department of Statistics. No comparable data for 2004.

Figure A2.10. Early-stage entrepreneurial activity rates in MENA countries

30

25
# / 100 18-64 year-olds (95% CI)

20

15

10

Note: The vertical bars indicate the 95% confidence intervals (CI). The mid-point is the mean.
Source: GEM data.

100
 Figure A2.11. Early-stage entrepreneurial activity rates by gender
30%

25%

20%
% of 18-64 population

15%

10%

5%

0%
Yemen Algeria Morocco Lebanon Egypt Tunisia Jordan Palestine Syria Average
-5%

Source: GEM data as reported in IDRC (2010, Table 8, p.15.

Figure A2.12. Early-stage entrepreneurial activity rates by age and level of education, Jordan 2009
20% 18.8%
18%
16% 14.2%
14% 12.6%
11.4%
12% 10.0% 10.3%
10% 8.9%
7.8%
% of 18-64 adult population

8% 6.8%
6% 3.8%
4%
2%
0%

Source: 2009 GEM data for Jordan.

101
Annex 3. Matrix of major entrepreneurship and SMME support providers and programmes in Jordan
Category Organisation Product/service
Entrepreneurshi INJAZ Classes/modules on entrepreneurship, financial literacy,
p education and starting and operating a junior enterprise (Company
Programme)
BDC ILO Know About Business (KAB) training
Development of entrepreneurship curriculum
QRCE Developed a “Think about Entrepreneurship” curriculum
(how to identify business opportunities, develop business
plans)
Developing entrepreneurship curriculum in Arabic for
use in the teaching of entrepreneurship in the
universities; writing case studies based on Jordanian
enterprises for use in classroom teaching.
Sponsors business plan competitions for students
Agreement with the Jordan Chamber of Industry to
launch the Made in Jordan Industry-University
Programme, a form of business plan competition where
student teams meet with industrial SMMEs, identify
their problems (technical, design, marketing, etc.) and
Target group Impact
School and university Classes delivered in up to 200 Jordanian schools at
students the 7-12 grade levels; every university has
introduced INJAZ components, with the majority
running the Company Programme. Now works with
135,000 of young Jordanians a year, in teams of 12-
15 students/graduates to launch new enterprises;
225 of these new ventures are projected to start
each year as long as resources are available.
Vocational education KAB modules piloted in vocational schools;
students seeking approval of the Ministry of Education to
train public school teachers to deliver KAB
curriculum in schools and vocational centres.
University students Delivered at Yarmouk University in 2012 as non-
credit course; plan to evolve into a credit course.
University students “Think about Entrepreneurship” piloted at the
Princess Sumaya University for Technology
(PSUT); goal to introduce into 10 universities in the
governorates by the end of 2012 and into technical
universities in the governorates as an elective
course (for credit pending approval of the Ministry
of Higher Education).
Some of these lead to start-ups.
The objective in 2012 was to have 100 student
teams from 10 universities working with 20 Jordan
companies. Will lead to employment gains and
potential commercialisation of new product or
Category Organisation Product/service Target group Impact
then develop business plans to solve the problem. technological ideas.
Start-up support BDC EMPRETC entrepreneurship training programme (6 Delivered more than 32 EMPRETEC workshops to
days workshop); training of EMPRETEC trainers in the almost 800 participants; 68% start businesses,
governorates creating an average of 4.1 jobs; trained 213
EMPRETEC trainers in Amman and Aqaba.
Maharat Entrepreneurship Programme – training on how Young people
to start a business
Partner in Business-In-Development (BiD) Network Start-ups and SMMEs In 2012, had 65 companies in the BiD Network
offering coaching and mentorship on the business pipeline.
planning process to start-up entrepreneurs and existing
SMMEs
QRCE QRCE Start-up Programme (boot camps, business plan Over 3,500 people have participated in entrepreneur
competitions, mentoring, linkages to incubators and boot camps, training, workshops, and mentoring
angel investors) programmes.
Jordan Business incubators operated by business associations, Young entrepreneurs, The incubators are generally very small with no
Innovation universities, the Royal Scientific Society (RSS), Jordan technology start-ups more than 5-10 units each and do not have the
Centre Industrial Estates, the private sector, and NGOs. capacity to graduate a significant number of new
Network Provided with operational funding grants of JD 15,000 enterprises on an annual basis.
(JIC) from JEDCO.
YEA Operates two incubators Young entrepreneurs
JFBPW Operates an incubator for women entrepreneurs Women entrepreneurs
Oasis500 Operates as an incubation environment for start-ups; High-potential start-ups Launched in 2010. Has worked with close to 60
identifies entrepreneurs with promising ideas, puts them in ICT, digital media, start-ups to the end of 2012. Goal is to launch 500
through an acceleration programme (e.g. boot camp, mobile technologies start-ups over five years.
training, business plan development), provide seed
capital for the development of the start-up, prepares
them for funding by venture capitalists and private
equity funds and links the entrepreneurs to investor
networks.

103
Category Organisation Product/service Target group Impact
Endeavor Package of learning, mentorship, networking and seed Growth-potential start- Has supported 20 companies to end of 2012.
capital support that aims to accelerate the growth path of ups
new enterprises
Counselling and IRADA Information, feasibility studies, training, business Micro and small In 2011, provided assistance to almost 1,000
management counselling, marketing assistance, and technical support enterprises (investment clients, including household enterprises; delivered
development size of less than JD almost 770 training seminars reaching over 14,000
support 100,000) business owners and their employees; involved over
500 micro and small enterprises in marketing
support activities; and helped 53 enterprises initiate
quality management system processes.
JEDCO JUMP II funds SMMEs to improve their production and SMEs in Close to 1,000 SMEs were supported in JUMP I.
managerial capacity, covering up to 80% of the cost of manufacturing and Evaluation study of a sample of companies revealed
consultancies and equipment needs (SME Reinforcement agri-industries with 10- significant increases in sales, gross profit, exports
component). 250 employees; and employment. JD 1 in JEDCO support leveraged
JD 2.43 in tax revenue for the government.
Support to Microenterprises and Start-ups component
covers up to 90% of the eligible costs of developing a Start-ups and JUMP II started in 2012.
business plan, building managerial capacity, improving microenterprises (up to
equipment – emphasis on innovation aspects 9 employees and at
least two years of
operation) in
manufacturing and
agri-industries located
outside of Amman and
Zarqa
JSMP - component to reinforce the business SMEs in the services
development capacity of services businesses; subsidies sector (5-250
of up to 80% of costs of consultants, staff training, employees); start-ups
computerising management information systems
Kaizen Project to promote quality/ productivity SMEs with up to 250 2012 pilot with 20 SMEs and 10 local consultants
improvement practices employees trained in the Kaizen methodology

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Category Organisation Product/service Target group Impact
NAFES Provides subsidises to cover up to 80% of the SMMEs with 5-100 Plays a significant role in enabling micro and small
counselling and training fees paid to qualified local employees enterprises to assess affordable competency-
consulting and training organisations, such as the BDC, building services.
in return for general business development services
BDC Offers training and counselling to SMMEs, including SMMEs with 5-249 Dependent on donor funding for its programmes,
studies and training. Currently, the major focus is one employees; young which means its focus changes from time to time.
youth employability skills and entrepreneurship entrepreneurs
development.
Financial management training programme, “Global Small and medium Trained 321 SMMEs. Big need to have this
Financial Bridge” to help SMMEs on building financial enterprises programme delivered more often, but SMEs need
statements, interpreting their financial needs, and subsidisation.
presenting themselves to a financial institution
EJABI Management training and consultancy services in more Small and medium
advanced business management areas to enhance the enterprises
managerial skills and productive and innovation
capacities of Jordanian companies; includes a number of
certification training programmes
JFBPW Mentoring and advisory services Women entrepreneurs
Innovation Innovation Innovation clusters formed in 20 sectors, including Goal to spur innovation for wealth creation, foster
support Clusters healthcare, ICT, gaming industry, bi-pharmaceuticals, new business opportunities
Programme creative industries (building emerging screen industry
and linkages between media, IT, education and digital
content), clean technology (e.g. helping clean technology
enterprises by offering them advice and services and
access to capital and markets - solar energy, alternative
fuels, R&D, etc.).102
HCST Industrial Scientific Research and Development Fund SMEs with at least one
provides some funding to SMEs to cover the consultancy year of operation
costs to diagnose their technological problems and help
with the solution, in cooperation with the Research
Centre Institute

102
An innovation cluster is defined as a grouping of firms, research centres, investors, public officials, academicians, and enabling organisations working together in close proximity to create new
technologies, products and enterprises (“Jordan Innovation Clusters” brochure, USAID Jordan Economic Development Program).

105
Category Organisation Product/service Target group Impact
El Hassan Consortia of the HCST, the RSS, and the PSUT. Innovative
Science City Promotes technology transfer from HCST and RSS entrepreneurs and
research institutes to private enterprises and R&D and SMMEs
commercialisation linkages with SMEs. Assists
entrepreneurs in developing their innovation ideas and
transforming them into viable businesses (incubation).
Export assistance JEDCO JSMP/JUMP – Export Development Scheme supports SMMEs in According to data supplied by JEDCO, JUMP I
the exporting activity of industrial and service manufacturing, agri- (ended in 2010) supported more than 1,800
companies. Covers up to 80% of the costs of developing industries, and services companies to participate in trade fairs.
and implementing an export plan, marketing materials, (5-250 employees)
visits to target markets, participation in trade missions,
costs of certification to meet international standards
Jordan Market intelligence and information; export marketing SMMEs wanting to
Exporters and management training programme that leads to export
Association development of an export marketing plan, with one-on-
one coaching to assist in the implementation of these
plans for the SMMEs with the highest export potential.
Export Support to the Union of Dead Sea Traders and Exporters
consortia and the Olive Oil Consortium
JLGC Export Credit Guarantee
SMME financing DEF Government microfinance arm. Delivers loan funds Low income micro and In 2011, did JD 20.5 million in loans to 33,000
directly to clients and flows funding through to other small enterprise active micro and small enterprises.
microfinance facilities. 14 windows in rural areas, plus owners; unemployed
uses mobile vans. Direct loans consist of small loans (JD university graduates
2,000-JD 15,000) and medium loans (JD 15,000-JD
50,000). Start-ups receive about 2/3 rds of the total loan
value. Does follow-up visits to loan clients to monitor
survival rates. Business counselling offered to clients
through an agreement with IRADA.
MFIs A number of MFIs, including the MicroFund for Micro and small Overall, the outreach of microfinance services grew
Women, FINCA, Tamweelcom and the National enterprises, including a by an annual rate of 28% between 2006 and 2010,
Microfinance Bank among the major ones. large percentage of resulting in an increase in the number of active
women-owned borrowers from 76,830 to 203,579; the gross loan
enterprises portfolio rose from about JD 81 million to JD 111.6

106
Category Organisation Product/service Target group Impact
million.103
JEDCO SME Banking Window assists enterprises prepare loan SMEs, mostly JEDCO Service to be expanded with introduction of SME
requests for banks clients Financing Programme.
SME Financing Programme –US$250 million loan SMEs with up to 300 Launched in late 2012. Expects to guarantee 1,000
guarantee programme, employees SME loans over four years, leverage US$315
million in bank loans to SMEs.
Guarantees 70% of the bank loan to an SME to a
maximum of US$2 million, complemented by a JEDCO
grant to the SME of up to 20% of the project cost,
reducing the lender’s risk exposure to 10%.
Start-up Seed grants of JD 15,000 Start-ups in JICs in the
governorates
Capital for Growth Fund, managed by Abraaj Capital. Growth-potential Launched in 2012. Expects to do 7-15 investments.
EUR 30 million venture capital fund for early-stage SMEs with fewer than
investments. Equity investments of EUR 300,000 to 250 employees
EUR 2 million.
Early-Stage Fund of EUR 5 million; individual Early-stage start-ups To launch in 2013. Expects to do 7-15 investments.
investments of EUR 100,000 to EUR 700,000. and SMEs with fewer
than 250 employees
JLGC Loan guarantees to a maximum of JD 550,000 and Enterprises with up to In 2011, guaranteed 516 productive loans with a
covering up to 70% of the loan amount for productive 50 employees guarantee value of JD 12 million (average
loans to SMMEs rendered by the banks guarantee amount of JD 23,330).
Has guarantee agreements with 14 banks and
financial institutions, over 80% of the guaranteed
loans are with the Ahliyeh Finance Company at an
average loan guarantee amount of JD 1,216.104
Agreement with the Cairo Amman Bank to
guarantee 70% of the value of microloans up to JD
15,000 on a portfolio basis.

103
MOPIC (2011b), “The Jordanian National Policy Framework for Microfinance: Towards Inclusive Finance”.
104
JLGC (2011), 17th Annual Report 2010.

107
Category Organisation Product/service Target group Impact
In 2012, the government allocated an additional JD
1.2 million to be used by the JLGC to guarantee
loans approved by the DEF.
Badia Impact US$30 million start-up, seed and expansion capital fund, Early-stage European Investment bank funding of EUR 4
Fund managed by Accelerator Technology Holdings entrepreneurs and start- million approved in December 2012.
ups in technology,
media and
telecommunications
Oasis500 Provides seed equity of JD 10,000 to start-ups in ICT, Start-ups being Has made investments in around 60 start-ups; raised
digital media, and mobile technologies; follow-on incubated in Oasis500 US$6 million entirely devoted to its entrepreneurs.
rounds of seed equity up to JD 150,000. Takes 15-20% programme
equity stake in the enterprise.
Bedaya Network of angel investors offering seed capital to new Start-ups and early-
Angel businesses; focus on science and technology. Works with stage enterprises linked
Investors incubating enterprises to get them ready to make a pitch to El Hassam Science
Network to informal investors; arranges matchmaking events for City, and QRCE
investors and entrepreneurs. business plan
competitions

108