Opinion article by Anwar Zibaoui, General Coordinator of ASCAME

Again, SMEs are the victim of a global economic crisis caused by the COVID-19 pandemic, which represents a great threat to their daily activity and to their workers. The role of SMEs as the backbone of the global economy and their current difficult situation make it urgent to launch specific plans that provide concrete tools to help rescue them.

Tens of thousands of SMEs could or are about to fail due to this new crisis. We are certainly experiencing one of the most difficult periods in the history of small and medium-sized enterprises. Entrepreneurs have difficulties resisting the shock and accessing financing on reasonable terms for their operations or expansion.

Of those thousands of entrepreneurs who could lose their businesses, it is unknown how many will undertake new adventures. There are no reliable figures, but there will probably be very few who do so for the simple reason that they would not only lose their investment, but perhaps also their savings and personal loans.

How can we create a suitable environment for SMEs to grow and prosper even during the crisis? What are the responses and policy measures that have been established to support the development of SMEs? What is needed to do to help them growth?

SMEs are a key and impact factor. They are the ones that generate the most jobs. As an example, it is calculated that for every million euros invested 14.7 jobs are created from an SME, compared to the 3.1 generated if the investment comes from a large company.

SMEs contribute more than 40% to GDP in emerging economies. The private sector contributes 9 out of 10 jobs in developing countries, plays a key role in creating new jobs, fosters growth and has enormous potential.

SMEs in the Mediterranean are an inseparable part of its economy. The region has 25 million SMEs. All administrations recognise its importance and impact in creating wealth and diversifying economies, taking into account that these and informal companies represent 90% of the business fabric, 60% of GDP and 70% of employment in the region. But SMEs only receive 8% of total bank loans. However, this recognition has not led to effective solutions to the endemic problems suffered by these companies, but rather manifests itself tragically in each crisis.

Government measures or financing programmes put in place are not sufficient or satisfactory. The asymmetry of the information and the structure of the financial system, the demands for guarantees and the high rates are impossible to accept.

Despite a growing number of start-up accelerators and funding for the region, job creation, competitiveness, increased productivity, and economic growth help reduce poverty. Therefore, SMEs are the key to inclusive growth in the Mediterranean and are essential, especially for the emergence of the regional middle class and access to employment.

Despite a tangle of obstacles, some SMEs have thrived in the region. There is a kind of hardness and resistance among entrepreneurs in the region that allows them to overcome practically all obstacles. They deserve all the support they can get, especially from administrations, banks, private investors or private equity firms. SMEs will have an essential role to play in creating the 20 million jobs needed to absorb newcomers to the job market in the coming years.

However, they face many obstacles, including access to finance. We must adapt our systems to support them more effectively and thus participate in their development. Its financing needs amount to 200 billion Euros. Needs that constitute a real brake on their growth and, therefore, on the economic development of the countries of the region.

In the Mediterranean there are constant challenges, mainly driven by a rapidly changing e-commerce landscape, increasing digitisation and growing customer demand; indicating that technology and digital transformation will continue to play an important role in the future of commerce and industry.

Direct and immediate support must be provided to SMEs to ensure their continued operation. That is, ensuring that support reaches them and their workers quickly, adapting existing government-run social programmes, and ensuring open trade and the accelerated flow of essential goods across borders.

Therefore, it is necessary to support and improve their environment, extend their life cycle, boost their association with the public sector and facilitate their access to financing, especially to the most vulnerable ones. It is necessary to draw up specific policies, programmes and initiatives to support SMEs, taking into account that they are and will be the engine of economic growth, generators of employment and promoters of true economic integration. SMEs are often left out of the big circuits, despite their effective contribution to mobilising savings, modernising economies, increasing competitiveness, and developing international trade. Channels for dialogue between government, employers, workers and communities must be implemented.

Encourage conventional banks and financial institutions to invest in productive sectors and to finance SMEs and micro-enterprises in Mediterranean countries. To recover from the crisis, it is necessary to stimulate the private sector, especially SMEs.

On the other hand, it is relevant to work to eliminate the main obstacles to business creation and development, providing accounting, technical or legal experience, an advice, training, monitoring or knowledge environmental and social problems. It is also necessary to create support centres for small businesses in the informal economy, which occupy a central place in all Mediterranean societies.

The countries in this region should promote the diversification of their economies with the aim of generating sustainable employment, especially for young people, since they reach an average of 45% unemployment. In this context, supporting the development of entrepreneurship must be an essential strategy. For this, governments must offer a welcoming platform to entrepreneurship and provide a transparent and effective business environment, if they want to get out of the crisis and in view of the material and human potential they have.

In the Mediterranean, entrepreneurship and creativity have roots that drive us to actively help the creation of very valuable and necessary SMEs for economies. This sum must become an element of competitiveness and a comparative advantage in relation to other economies. An economy that encourages and allows new businesses to start and creates an ecosystem that facilitates other types of productive economic activity.

Betting on SMEs translates by national and multilateral political and financial organisations in devoting particular attention in the coming years to these companies in order to improve their sustainability conditions and guarantee their full participation in the development process and growth.