The Impact of Small and Medium Enterprises Development on the National Economy
What is the impact of small and medium enterprises development on the national economy?
Enterprises are micro-sized when the number of their employees is between 1-5 employees and their revenues range from 0-3 million riyals. Enterprises are small when the number of their employees is between 6-49 employees and their revenues range from 3-40 million riyals, while enterprises s can be described as medium when they have the number of its employees ranges between 50-249 employees and its revenues range from 40-200 million riyals.
The development of small and medium enterprises s has an important role in strengthening and developing the national economy. It stimulates economic growth, raises the level of competition in markets, pushes the wheel of innovation forward, and develops many sectors such as the industrial, agricultural and technology sectors, which means improving the efficiency of products and services, and increasing well-being, which necessarily raises the level of the national economy in the country.
The Kingdom of Saudi Arabia gives special attention to the small and medium enterprises s sector, as this interest appears from its continuous endeavor to raise the contribution of this sector to its economy from 21% to 35% by 2030, in accordance with the Kingdom’s Vision 2030.
One of the fruitful and tangible efforts in this aspect is the establishment of the Small and Medium Enterprises Bank, which is one of the banks affiliated with the National Development Fund, which was established to achieve a set of goals. These are the most prominent ones:
- Increasing financing for the small and medium enterprises s sector.
- Enhancing the contribution of financial institutions to provide innovative financing solutions in this sector.
- Achieving financial stability for the small and medium enterprises s sector.
- Enhancing the role of the small and medium enterprises s sector in developing the Kingdom’s economy in accordance with Vision 2030.
How does the development of small and medium enterprises affect the national economy?
Small and medium enterprises s have a role in strengthening the national economy worldwide, as they play an important role in the economic development process, so working to develop them has a positive impact on the national economy. This is through the following:
● Raising income levels and increasing investment opportunities
Small and medium enterprises contribute to the flow of money to the state and increase income across various levels of society. They also attract more investments as a result of their continuous development and the strong competitiveness they create in the markets. In the Kingdom of Saudi Arabia, it is expected that the participation of small and medium enterprises in the Saudi GDP will rise to 1.1 trillion riyals, with continued work on its growth and development, which means higher income and greater investment opportunities, thus pushing the national economy forward in the long term.
● Providing more job opportunities
Small and medium enterprises constitute the majority of companies in the world, which indicates that they have a role and importance in strengthening the national economy, and developing these enterprises necessarily means obtaining better results. According to expert estimates, small and medium enterprises provide approximately 4 jobs out of 5, and this is clear evidence of Its role in increasing employment opportunities and providing more job opportunities in countries.
According to the Small and Medium Enterprises Authority in Saudi Arabia, the Kingdom – compared to the 15 largest economies in the world alongside it – is ranked 14th; That is, a contribution rate of 53% in generating jobs in it, which shows the extent of the Kingdom’s endeavor to develop these establishments, and the extent of their impact on the national economy there. Nearly 6.5 million employees were employed in small and medium enterprises by the end of the first quarter of 2023, according to the Authority’s report. General Small and Medium Enterprises “Monsha’at” first quarter of 2023.
● Promoting economic diversification
Small and medium enterprises play an important role in many fields and sectors, such as the agricultural, technology, and manufacturing sectors, which means that they participate in different industrial fields and within different sectors in the country. This leads to economic diversification that positively affects the national economy of this country.
For example, the scope of small and medium enterprises in the Kingdom has been expanded to include many diverse sectors such as agriculture, forestry, fishing, administrative services, human health, social work, and other sectors that work to diversify the economy and strengthen the national economy in the Kingdom, according to what was stated in the report of the General Authority for Small and Medium Enterprises. “Monsha’at” first quarter 2023.
● Raising efficiency and productivity in the labor market
The occurrence of competitiveness in markets between small and medium enterprises positively affects the level of efficiency and productivity. This means continuous development and innovation in the process of producing services and products, which contributes to strengthening the national economy in the country. Here, the country’s continuous initiatives to develop this sector have positive effects on its economy. For example, the skills development programs and integration of commercial efficiency-based technologies provided by the General Authority for Small and Medium Enterprises raise the level of efficiency of small and medium enterprises in the Kingdom.
How to support small enterprises to contribute to the development of the national economy
According to the report of the General Authority for Small and Medium Enterprises in the first quarter of 2023, the number of registered establishments in the Kingdom by the end of the first quarter of 2023 reached 1.2 million small and medium enterprises, in addition to the establishment of 88,858 small and medium enterprises in the first quarter of the same year.
This indicates the efforts made by the Kingdom in developing this sector, and in general, small enterprises can be supported to contribute to the development of the national economy through the following:
● Providing services to small and medium enterprises
Providing services that support the small and medium enterprises sector can increase their efficiency and their role in strengthening the national economy. Among the Kingdom’s most prominent efforts in this field are the following:
- Establishing the General Authority for Small and Medium Enterprises, or “Monsha’at,” in order to remove the obstacles that these establishments may face.
- Launching the Windows application, which provides advice and guidance to owners of small and medium enterprises.
- Creating the Jadeer platform, which is a free electronic service that works to qualify and empower small and medium enterprises.
- Creating a Mazaya platform that contributes to the growth and stability of small and medium enterprises, in addition to raising the quality of services in them, by providing them with various services and benefits at competitive and subsidized prices.
- Providing a financing portal service that links the government and private sectors with small and medium enterprises that wish to obtain financing, providing them with various financing options.
● Providing financing to develop the small and medium enterprises sector
The process of financing small and medium enterprises is one of the ways to support and develop them to be a strong source of the national economy and economic development, and the Kingdom has a prominent role in this step, which comes starting with the Small and Medium Enterprises Bank, which aims to increase financing for this sector and fill the financing gap in it, as financing requests in it reach up to Approximately 5,442 funding requests, in partnership with approximately 48 partners.
Among the prominent efforts of this bank in financing the small and medium enterprises sector for 2023 is the allocation of more than 10 billion riyals with a number of financing and investment bodies for this sector to include its various economic activities, in addition to its launch of the “Finance in Two Days” initiative in partnership with a number of financing bodies. In the Kingdom, in conjunction with the “Enterprise Week” activities organized by the General Authority for Small and Medium Enterprises, this initiative aims to speed up the procedures for approving financing requests, obtaining credit approval and other goals that support this sector.
