Businesses that employ fewer than 250 persons are categorised as micro, small and medium enterprises (MSMEs). They constitute more than 90 percent of all firms worldwide. They provide 70 percent of all employment and contribute to half of the global economy. Statistics such as these point to the fact that policymakers must prioritise the development of a resilient MSME sector.
In command centred economies, the MSME sector is often neglected as the state takes on the role as the primary employer and creator of jobs in an economy. In situations such as these, people lose their creative impulse and become reliant on the state to provide economic opportunities.
Firms that belong to the MSME sector most often cite the growing financing gap as their most significant obstacle to becoming all that they can be. A way with which to overcome this financing gap could be to rely on an intermediary to provide investment capital to MSMEs that are in the middle of their growth stage.
At the same time, however, commercial financial institutions have a fiduciary responsibility to protect themselves from high-risk exposure. They do this by undertaking due diligence and making risk assessments on potential borrowers. The costs of undertaking risk assessments have increased significantly since COVID-19. Consequently, local commercial lenders have curtailed their financing in general, given the higher-risk environment.
When economic centralisation grows too strong, the economy as a whole begins to weaken as opposed to strengthen. There is a time and place for economic centralisation. This, however, has always come at a cost. The cost is creativity.
Centralisation requires conformity and sacrifice. Historically, those that have lived under centralisation did prefer it to chaos. Is chaos, however, the only alternative to centralisation? I highly doubt it.
Entrepreneurship is suited to those who are from the minority to begin with. It is sometime before these firms grow capable of servicing mainstream customers and clients. At the same time, given the statistics, we cannot downplay or undermine the creative economic contribution that MSMEs are making to their local and global economies.
If we were to ignore the economic creative potential of these small firms, we fail to realise the true potential of the small that will one day grow really big.
If not individually, then, definitely collectively.
The Mercantile 