SMEs outnumber large companies by a wide margin and also employ many more people. For example, Australian SMEs make up 98% of all Australian businesses, produce one-third of the total GDP and employ 4.7 million people. In Chile, in the commercial year 2014, 98.5% of the firms were classified as SMEs. In Tunisia, the self-employed workers alone account for about 28% of the total non-farm employment and firms with fewer than 100 employees account for about 62% of total employment.Rijkers et al (2014): "Which firms create the most jobs in developing countries?", Labour Economics, Volume 31, December 2014, pp.84–102 In developing countries, smaller (micro) and informal firms, have a larger share than in developed countries. SMEs are also said to be responsible for driving innovation and competition in many economic sectors. Although they create more new jobs than large firms, they also suffer the majority of job destruction/contraction.Aga et al (2015): SMEs, Age, and Jobs: A Review of the Literature, Metrics, and Evidence, World Bank Group, November 2015
Overview
At the employee level, Petrakis and Kostis (2012) explore the role of interpersonal trust and knowledge in the number of small and medium enterprises. They conclude that knowledge positively affects the number of SMEs, which in turn, positively affects interpersonal trust. Note that the empirical results indicate that interpersonal trust does not affect the number of SMEs. Therefore, although knowledge development can reinforce SMEs, trust becomes widespread in a society when the number of SMEs is greater.P.E. Petrakis, P.C. Kostis (2012), “ The Role of Knowledge and Trust in SMEs”, Journal of the Knowledge Economy, DOI: 10.1007/s13132-012-0115-6.
Legal boundary on SMEs around the world
Africa
Egypt
Medium-sized enterprises with 10 to 50 employees account for around 2.7 percent of total businesses. However, big businesses with over 50 employees account for 0.4 percent of all enterprises nationwide.
The data is part of Egypt's 2012/13 economic census on establishments ranging from small stalls to big enterprises. Economic activity outside the establishments – like street vendors and farmers, for example – were excluded from the census.
The results show that Egypt is greatly lacking in medium-sized businesses.
Seventy percent of the country's 24 million businesses have only one or two employees. But less than 0.1 percent – only 784 businesses – employ between 45 and 49 people.
Kenya
For micro-enterprises, the minimum number of employees is up to 10 employees. For small enterprises, it is from 10 to 50. For medium enterprises, it is from 50 to 100.
Nigeria
Somalia
South Africa
Medium-sized businesses usually employ up to 200 people (100 in the Agricultural sector), and the maximum turnover varies from R5 million in the Agricultural sector to R51 million in the Manufacturing sector and R64 million in the Wholesale Trade, Commercial Agents and Allied Services sector.
A comprehensive definition of an SME in South Africa is, therefore, an enterprise with one or more of the following characteristics:
- Fewer than 200 employees,
- Annual turnover of less than R64 million,
- Capital assets of less than R10 million,
- Direct managerial involvement by ownersDu Toit.Erasmus.& Strydom "Definition of small business" Introduction to business management, 7th Edition Oxford University Press,2009, p. 49
Asia
India
| + !Sr No !Classification !Criteria | ||
| 1 | Micro Enterprises | Investment <= 10 cr and Turnover <= 50 cr |
| 2 | Small Enterprises | Investment <= 100 cr and Turnover <= 500 cr |
| 3 | Medium Enterprises | Investment <= 500 cr and Turnover <= 2500 cr |
Businesses that are declared as MSMEs and within specific sectors and criteria can then apply for "priority sector" lending to help with business expenses; banks have annual targets set by the Prime Minister's Task Force on MSMEs for year-on-year increases of lending to various categories of MSMEs. MSME is considered key contributor in India's growth and contribute 48% in India's total export.
Indonesia
| 300,000,000 |
| 2,500,000,000 |
| 50,000,000,000 |
An annual revenue of Rp 50 billion is approximately equal to US$3.7 million as of November 2017.
Bangladesh
| 01 | Services | For SE 1000,000 - 200,00,000 & For ME 200,00,000 - 30,00,00,000 | SE - 16-50 & ME - 51-120 | N/A |
| 02 | Business | For SE 1000,000 - 200,00,000 | SE - 16-50 | SE 10,000,000-120,000,000 |
| 03 | Industrial | For SE 7,500,000 - 150,000,000 For Me 150,000,000 - 500,000,000 | SE - 31-120 & ME - 121-300 | N/A |
Singapore
Europe
European Union
| Medium-sized | < 250 | ≤ €50 million | ≤ €43 million |
| Small | < 50 | ≤ €10 million | ≤ €10 million |
| Micro-enterprise | < 10 | ≤ €2 million | ≤ €2 million |
In July 2011, the European Commission said it would open a consultation on the definition of SMEs in 2012. A consultation document was issued on 6 February 2018 and the consultation period closed on 6 May 2018. no conclusions or responses have yet emerged.European Commission, Public consultation on the review of the SME definition, accessed 22 November 2019
In Europe, there are three broad parameters which define SMEs:
- have up to 10 employees
- Small enterprises have up to 50 employees
- Medium-sized enterprises have up to 250 employees.
EU member states have had individual definitions of what constitutes an SME. For example, the definition in Germany had a limit of 255 , while in Belgium it could have been 100. The result is that while a Belgian business of 249 employees would be taxed at full rate in Belgium, it would nevertheless be eligible for SME subsidy under a European-labelled programme.
SMEs are a crucial element in the supplier network of large enterprises which are already on their way towards Industry 4.0. According to German economist Hans-Heinrich Bass, "empirical research on SME as well as policies to promote SME have a long tradition in West Germany, dating back into the 19th century. Until the mid-20th century most researchers considered SME as an impediment to further economic development and SME policies were thus designed in the framework of social policies. Only the Ordoliberalism school, the founding fathers of Germany's social market economy, discovered their strengths, considered SME as a solution to mid-20th century economic problems (mass unemployment, abuse of economic power), and laid the foundations for non-selective (functional) industrial policies to promote SMEs." Hans-Heinrich Bass: KMU in der deutschen Volkswirtschaft: Vergangenheit, Gegenwart, Zukunft, Berichte aus dem Weltwirtschaftlichen Colloquium der Universität Bremen Nr. 101, Bremen 2006 (PDF; 96 kB)
Poland
United Kingdom
Many small and medium-sized businesses form part of the UK's currently growing Mittelstand, or Brittelstand as it is also sometimes named. These are businesses in Britain that are not only small or medium but also have a much broader set of values and more elastic definition.
The Department for Business Innovation and Skills estimated that at the start of 2014, 99.3% of UK private sector businesses were SMEs, with their £1.6 trillion annual revenue accounting for 47% of private sector turnover.
In order to support SMEs, the UK government set a target in 2010 "that 25% of government’s spend, either directly or in supply chains, goes to SMEs by 2015"; it achieved this by 2013.
Switzerland
- Microentreprises: 1 to 9 employees.
- Small enterprises: 10 to 49 employees.
- Medium-sized enterprises: 50 to 249 employees.
- Large enterprises: 250 employees or more.
North America
Canada
Corporations in Canada are generally taxed at 29% federally. Canadian Controlled private corporations receive a 17% reduction in the tax rate on taxable income from active businesses up to $500,000. This small business deduction is reduced for corporations whose taxable capital exceeding $10M, and is completely eliminated for corporations whose taxable capital exceeds $15M. It has been estimated that almost $2 trillion of Canadian SMEs will be coming up for sale over the next decade which is twice as large as the assets of the top 1,000 Canadian pension plans and approximately the same size as Canadian annual GDP.
Mexico
United States
Also in the United States, small and medium-sized manufacturers are referred to as SMMs, which the US Department of Energy classifies as having gross annual sales below $100 million, fewer than 500 employees at the plant site, and annual energy bills more than $100,000 but less than $2.5 million.
Oceania
Australia
New Zealand
See also
- CEA-PME (CEA-PME), an international federation of SME associations
- Environmental regulation of small and medium enterprises
- Hidden champions
- Mittelstand
- Small and medium enterprises in Mexico
- Small business
External links
- SMEs and Entrepreneurship at the OECD
- SME definition by European Commission
- Small Business Expo Events Schedule USA
- MSME Loan 5 Important thing to know
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