According to the World Bank, small and medium enterprises (SMEs) account for the majority of businesses worldwide, representing about 90% of businesses and more than 50% of employment worldwide.
This is according to Andrew Maren, founder and CEO of ProfitShare Partners (PSP), a fintech that provides access to capital to SMEs that would ordinarily have little chance of getting. He says that 2024, with its financial challenges and geopolitical crises, may look bleak in many ways – but SMEs could take advantage of opportunities larger firms may have to forego.
“With their vital role in job creation, innovation and economic resilience, we afford SMEs the agility they require to seek out prospects that often appear in turbulent fiscal times.”
As drivers of growth, Maren notes that SMEs contribute to technological advancements, product development and process improvements, fostering overall innovation in a variety of industries. He lists areas in which SMEs have the potential to be the engine rooms of some fiscal stability in 2024, largely through:
* Diversification of economies: SMEs operate in various sectors, contributing to economic diversification, which can help economies withstand economic shocks and reduce dependence on a single industry.
* Export and trade: Many SMEs engage in international trade, contributing to a country’s export revenue by acting as act suppliers or subcontractors to larger companies, thereby playing a role in global supply chains.
* Social impact: SMEs are often more connected to their local communities and are more likely to engage in socially responsible practices, including initiatives such as promoting sustainable business practices and contributing to community development through job creation.
* Adaptability: Due to their smaller size, SMEs can adapt rapidly to changes in the business environment. This flexibility allows them to respond to market demands, regulatory changes and technological advancements effectively in an always-on world.
* Contributions to GDP: Collectively, SMEs make a significant contribution to the Gross Domestic Product (GDP) of many countries. Their cumulative impact on economic output is substantial, even if individual SMEs may have relatively smaller turnovers.
* Supplier diversity: SMEs often serve as suppliers to larger corporations, contributing to supplier diversity. This diversification helps reduce risk for larger companies and fosters a more resilient and competitive business ecosystem.
“The contributions of SMEs to the global economy are multifaceted and their importance in 2024 looks set to lie in their ability to bring diversity, agility and vitality to the business landscape,” Maren concludes.