Small- and medium-sized enterprises (SMEs) boost job creation in developing countries, said a study published by the International Labour Organization (ILO) and the German Agency for International Cooperation (GIZ) Friday.
The study, titled "Is Small Still Beautiful? Literature Review of Recent Empirical Evidence on the Contribution of SMEs to Employment Creation," concluded that SMEs provide two-thirds of all formal jobs in developing countries in Africa, Asia and Latin America, and up to 80 percent in low income countries, mainly in Sub-Saharan Africa.
More important than holding the majority of jobs in low income and emerging economies, SMEs made a key contribution to the net creation of jobs, especially smaller and young firms, according to the study which noted that 50 percent of total employment creation came from enterprises with less than 100 employees.
But SMEs faced specific challenges, including the difficulty to access finance, greater burden from regulatory frameworks, and cost disadvantage to expand in relation with bigger companies, as the study pointed out.
The study called for targeted policies for SMEs since they were key engines of the real economy and the seedbed for bigger enterprises, having recommended to improve the business environment, improve access to finance, and stimulate the entry of new enterprises.