The term Small and Medium Enterprises (SMEs) encompass a broad spectrum of definitions. Different organisations and countries set their own guidelines for defining SMEs but generally all definitions boarder on a number of employees, asset size and annual turnover.
SMEs include a wide range of businesses, which differ in their dynamism, technical advancement and risk attitude. SMEs are crucial contributors to job creation and economic growth in both high and low-income countries.
IMPORTANCE OF SMEs IN AN ECONOMY
Source: International Journal of Finance and Economics; Issue 39 (2010)
The table above depicts similar trends regarding the important role played by SME in all economies irrespective of the country’s level of development. It is clear that, on the average, over 90% of businesses the world over full within the SME domain.
SMEs have been identified as the means through which economic growth and other developmental goals of countries like those mentioned above, can be realised.
Indeed, in many emerging markets like China, India, Brazil etc, the SME sector is one of the principal driving forces for economic growth and job creation. Generally, SMEs play useful roles in;
• Ensuring income stability
• Enhanced economic growth
• Increased employment
• Promoting the equitable distribution of income
• Contributing to even distribution of economic activity
• Helps slow the flow of rural-urban migration