Small Enterprises in the Arab World

Small enterprises play a fundamental role the domains of economy and production, especially in the developed countries. They consist about 96 percent of the total projects around the world and 60 percent of local production. Accordingly, they became a necessity in the Arab World needed to enhance social development, effectively increase the productivity of individuals and society in general, and then achieve an economic revival, as well as increasing growth rates at all levels.

Undoubtedly, in a market economy, small enterprises are the real nerve of the economy, both for developed and developing countries. They depend on the human potential to move capital within the state and are one of the most flexible means of creating advanced economic entities because of the economic stability which they create within the economic system. In addition to this, small enterprises are an important means of eliminating some economic problems, such as inflation and unemployment.

The value of small enterprises is shown in the economies of the major countries. The British economy shows that the proportion of small businesses accounts for 85% of the total British economy, 51% of the US economy and 40-80% of total employment. (The Importance of Small Enterprises in Supporting the Capacities of Syrian Youth, 8 November 2017

Despite the dependence of some Arab countries on oil as a major source of production, the danger of such dependence became clear. Therefore, officials in those countries started to rely on small and medium enterprises to increase production rates and to achieve prosperity and welfare.

Experience in many countries has shown that relying on large projects without SMEs is a major failure in the process of economic advancement and achieving the goals and plans of development. Therefore, small enterprises began to have an important role in all modern development experiences. The role of small enterprises is affected by a number of factors, including the size of the market, the level of technology available and the quality of the goods consumed.

Characteristics of Small Enterprises:

Small enterprises have several characteristics that distinguish them from others; the most important of which is flexibility. The small size of projects contributes to a high degree of flexibility in many areas due to the small size of the capital required to start the project, which facilitates the establishment process, while reducing the risk ratio, as well as the size of potential losses. The small size of the projects allows them to move from place to another without training, compared with large projects, attracting a lot of labor force, and at a low capital cost, allowing optimal employment of the elements of production.

Each project specializes in a particular type of product, and may be one of the main components produced by large enterprises, which in turn improves the quality of the product, reduces its cost, and helps greatly in the speed of capital recovery and covering the costs in a better manner than large enterprises do.

Small Enterprises’ Role in the Process of Development:

Small enterprises are the beginning of medium and large projects and often a link between them having a great importance in advancing production and development; they are also of a great importance in developing the economies of developing countries in the Arab region, similar to large projects in the developed countries for they are a  key factor in the provision of basic goods and services to society, and play a major role in reducing the spread of the phenomenon of unemployment and poverty because they employ a lot of competencies and craftsmen commensurate with the project.

Small enterprises play a fundamental role in the industrial sector. Many industries in the Arab society depend on crafts, and these industries are primarily small projects that must be preserved; they contribute to increasing national output through the participation of all segments of society in different industries. These small enterprises are considered as a great opportunity to develop ambitious young people’s talent, new ideas and initiatives by employing their abilities, technical skills and scientific and practical expertise to serve these projects, which have a great role in producing exportable goods and services, a thing which benefits the economy and achieves self-sufficiency.

Challenges and Constraints Facing Small Businesses:

Despite the importance of small enterprises and their role in supporting the national economy, they face many challenges and obstacles, the most important of which are the financing process. The most important obstacles to these projects are the difficult conditions on getting loans which make repayment equally difficult, and the banks demanding high value guarantees which are not easily attained by the borrowers.

The lack of managerial awareness in most of these projects, the lack of basic skills of many entrepreneurs, and the lack of adequate employment are an obstacle in the absence of basic expertise or skills; this affects the productive capacity and quality. In addition to this, some people’s lack of marketing awareness, the absent tendency to study the market very well in the geographical area from which the project starts, and the missing knowledge of the project initiator’s potential and the potential of his or her competitors accelerate the failure of the project.

It is important to encourage large enterprises to adopt small ones and to show their importance in supporting large entities within the process of production. There is also a necessity for developing support and training programs for small enterprises and making fishability study for some models, as well as simplifying bank procedures and guarantees and creating a repayment system that suites all the involved parties.

It is also necessary to support the state and government institutions to provide the necessary tools, support and training programs to improve performance, raise the efficiency of production, educate and qualify individuals to use technology and modern technical methods and clarifying their importance in developing projects and meeting current challenges which makes competition on international products easier and allows the opening of new markets abroad while creating opportunities for cooperation between small enterprises and large enterprises in many industries according to predetermined frameworks and rules.

Show More