SMEs & MEs

The different types of Enterprises

 Micro Enterprises (MEs): 1 – 2 employees

 Very Small Businesses (VSBs): 3 – 9 employees

 Small & Medium Enterprises (SMEs): 10 - 100

employees
 Constraints to SME growth
 Governance issues
 Law & order
 Infrastructure
 Access to credit
 Attitude towards investment, expansion &
diversification
 Lack of modern technology
 Lack of adequate investment
 Irregular/ inadequate supply of power
 High rate of interest on bank loans

 Inadequate availability of raw materials

 Absence of clear-cut government policies

 Fierce competition

 Lack of skilled technicians and workers

 Lack of research & development facilities

 SME programs focus directly on firm
to firm assistance. It addresses
constraints such as poor
management, outdated technology
and a lack of knowledge of markets
 Lessons learned……..
 SMEs are much more dynamic & responsive
to markets than generally believed.
 “ Strategic Alliances” are the most
important mechanism for transferring
information
 Direct firm–by–firm Assistance programs by
either government or NGOs is not an
effective way to develop the SME sector.
 Credit is over-emphasized as a constraint to
SME performance.
 There is an over-emphasis on the problem of
high interest rates.
 The primary goal of SME support programs
should be to remove government induced
distortions that put SMEs at a disadvantage.
 It is essential & it is possible to involve the
SME community in identifying the main
constraints they face.
 The role of IMF, ADB, WB are critical to policy
reforms affecting SMEs in Asia.
 Definition of SMEs in various
countries
Definition of what constitutes a SME vary from one
country to another. In many European countries, they
are defined as independent firms with fewer than 250
employees. In Japan, a SME can have as many as 300
employees, according to official definitions, & in the
United States 500. Common to all countries, however is
the vital role SMEs play in job creation. In the European
Union, such firms provide employment for more than 70
million people, or two-thirds of all EU jobs. In Japan
such firms provide 78 percent of jobs.
 Overview
A thriving Small & Medium Enterprise
(SME) sector has long been recognized by
economists as one of the characteristics of
a prosperous & growing economy. SMEs
contribute to development in multiple
ways, creating employment on expanding
urban workforce, and providing much
needed flexibility and innovation in the
economy as whole.