SMEs in Gulf forecast to see 156% growth over next 5 years
New study says SME sector could be worth $920bn and employ 22 million people
Small and medium enterprises (SMEs) in the GCC region are forecast to grow by 156 percent in the next five years, with the sector set to be worth $920bn.
According to a new study by MENA Research Partners (MRP), the SME sector in the Gulf will employ 22 million people in five years.
While the GCC region accounts for 34% of SMEs in the Middle East and North Africa, it has the largest potential for SMEs regionally, the study noted.
It added that the SME sector in MENA is estimated at around $1trn per year.
Anthony Hobeika, CEO at MENA Research Partners, said: "Most of this growth is expected to come from key geographies such as Saudi Arabia and the UAE, which are giving high priority to SMEs across many new regulations, policies and initiatives with the aim of boosting their share in the national economy."
In its Vision 2030, Saudi Arabia has set a target to increase the share of SMEs to its GDP from the current 20% to 35% while the UAE, in its Vision 2021, set a target to increase the share of SMEs to its non-oil GDP from the current 60% to 70%, he added.
"SMEs are the main engine for job creation in the GCC region. Current SME employment is estimated at around 17 million people with a potential to reach 22 million in five years, a rise of around 30%," said Hobeika.
The GCC's SME sector is seen as a key partner to regional governments in absorbing the large number of youth entering the job market in the next decade.
Hobeika added: "Such a positive outlook for SMEs and entrepreneurship in the GCC is clearly reflected by the enthusiasm of private and institutional investors gearing up their funding into the sector. Venture capital firms have invested around $1bn into SMEs and start-ups in the past five years.
"Although such numbers remain low, they have been on a fast growth trajectory, driven by many success stories in sectors like technology. These initiatives are filling the large gap created by regional banks and capital markets, in failing to provide adequate funding to SMEs."
The report said banks currently allocate only 2% of their loans to SMEs in the GCC, compared to 13% in the rest of MENA, and well beyond those numbers in other peer countries.