What are SMEs and MSMEs?

In this series of blogs I will take you on a journey into the wonderful world of SME’s, attempting to define them, their importance and their relationships with banks and the global economy.

That little voice in your head may be already keenly inquiring, “What are SME’s?” So let’s start with this very question.

SME is the acronym for Small and Medium Enterprise, a common term used to describe the non-large organisations which make up the majority of the business population in any economy. Furthermore, the term MSME is also common and is inclusive of Micro enterprises.

Understanding the acronyms is the easy part but the "arguments" start when it comes to the defining a Micro, Small and Medium organisation.

The European Commission uses the below parameters. If you’re still unsure if your company is an SME then you can take their “Are you an SME” test

The reason the EU bothers with such an effort to define SME’s is that there are certain benefits and advantages to being an SME, like eligibility for support and fewer requirements and reduced fees for EU administrative compliance. This leads us to believe that the EU certainly understands the importance of SME’s, their welfare and their well being.

Each country has its own self-imposed definition of an SME using such criteria as number of employees, total net assets, sales and investment level. While a few countries (like Germany, Albania, USA) consider the SME cut off to be 500 employees and a few (like Singapore, Hong Kong, New Zealand and Netherlands) set the upper limit at 100 employees, the majority define SME’s as being up to 200-300 employees. The World Bank has researched many countries, compiling an SME database and eventually settling on the definition as 1-250 employees.

World Bank research also throws up other interesting statistics such as the GDP contribution of SME’s which is only 5% in Belarus and Azerbaijan, with their proliferation of huge state-owned enterprises, but up to 86% in Chile, Greece and Thailand. 

In the  Radar Global Greenhouse250 Community, we observe the EU and World Bank definitions of 1-10 employees being Micro, 11-50 being Small and 51-250 being Medium sized enterprises.

So, SME's are the smaller actors on the economic stage and their importance is only matched by their susceptibility. In the coming blogs we’ll look at the critical role they play and the struggles they face.

Next Blog: What is the Informal Economy?