In a region characterised by a fast growing young population, the SME sector is considered a key partner to regional governments in absorbing the large number of youth entering the job market in the next decade. The GCC population is growing at a high rate of 2.9 per cent with the young tranche accounting for 73 per cent of the total. Such numbers are compared to 1.3 per cent growth globally and rates below 50 per cent for the young.
“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,” added Hobeika.
“Venture capital firms have invested around $1billion 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.”
Banks currently allocate only 2 per cent of their loans to SMEs in the GCC, compared to 13 per cent in the rest of Mena, and well beyond those numbers in other peer countries. Capital markets, in particular IPOs, remain closed for companies as no substantial funding has been raised from regional stock markets during the past years. Regional governments have adopted many initiatives in recent years to create and promote the SME ecosystem. Many have established specialised bodies, set-up special funds, and developed new regulations.
“Looking forward, governments acknowledge the role that entrepreneurs and SMEs can play in leading economic transformation, where special focus is given to high growth sectors like technology. We have already seen many success stories in the regional tech startups, which are key to promoting competitiveness, innovation, productivity and unlocking economic growth,” noted Hobeika.