SMEs: Improving Growth and Containing Unemployment Munther Sharé President of Jordan’s Economic & Social Council JLGC - SME Conference November 24, 2014 Amman - Jordan SME’s Definition and Features • The term “SME” -- small and medium-sized enterprises -- covers a variety of definitions and measures. • In OECD countries, employment is the most widely used criterion for determining firm size. • SMEs are usually defined as firms with fewer than 500 employees, although a number of countries -- including those in the European Union -- use a lower cut-off point of 250. SME’s Classifications in Jordan Third National Report on Human Development 2011 Classification # of Employees Micro Small Less than 100 Medium Classification Small Medium Central Bank of Jordan 2011 Assets Value Sales Revenue (JD) (JD) # of Employees 5-25 21-100 < 1 million < 1 million 1-3 million 1-3 million And must not be: Public Joint Stock Co.; Insurance; Financial Intermediary. SME’s Classifications in Jordan Ministry of Industry and Trade classify SME's based on the number of employees and the paid capital Classification Paid Capital (JD) # of Employees Micro < 30,000 1-9 Medium 30,000 Small Large 30,000 30,000 10-49 50-249 250 + Employment and Job Creation • There is growing evidence that SME's play an important role in the economic development of any country. • SME's provide the majority of new jobs and produce much of the creativity and innovation that fuels economic progress. • In OECD countries, SME's represent ( > 95%) of all enterprises; (60-70%) of the private work force; provide (30-70%) of value added; (15-50%) of exports. SME’s in Jordan • The economy depends almost entirely on small and medium- sized companies to drive its economy. • About (98%) of all businesses in Jordan are classified as SME's, two third of which have less than (19) employees. Employs (60%) of the labor force. • SMEs contribution to GDP (50%). Manufacturing companies (14%) of total SMEs. SME’s in Jordan • Loans financing SMEs operations JD (2) billion in 2012. (11%) of total banks loans. • Faced with growing competition, Jordanian SME's are trying to modernize their technologies and improve their competitiveness. • Available funding from the government and other donors encourages SME's to move ahead with modernization activities. SME’s in Jordan • • • • • • JLGC activities in 2013: Guaranteed (719 loans) Value= (JD 28.1 million) Guaranteed (833 loans for export) Value= (JD 94 million) Banks claims for default (bad loans) JD 766 K. SME's Challenges and Problems in Jordan • Lack of sophisticated management, production, and marketing skills. • Lack of access to domestic and external financing. • Lack of business planning • Meeting the requirement of export markets. (Products' Specifications, Rules of Origin) • Supply of educated and skilled workers. • High competition from imported goods (Quality and Prices).