The vast majority of businesses in the world are small- and medium-sized enterprises (SMEs). They are the backbone of any economy and play a substantial role in developing economies in generating employment, alleviating poverty and spurring growth. Yet, they often do not have the same access to knowledge and networks as larger businesses. Sometimes, they need help with identifying inefficiencies in the business and sometimes, they simply may not have resources to pay for support services that can help business growth and resilience. Given the established role that SMEs play in job creation and growth, it makes sense that governments around the world try everything they can to support SMEs and help them overcome some of their challenges.
The tools that governments employ depend on the needs of the domestic SMEs and the overarching goals for the economy. For example, in Germany the government administers consulting services to SMEs. In Nigeria, the government provides advice on ICT solutions for small businesses. India has a programme that makes access to procurement opportunities easier, while the Kafalah programme in Saudi Arabia facilitates access to finance to SMEs. Guyana has a Green Business Technology Fund to support green business ideas, the UK provides tax credits to SMEs engaged in research and development. You get the point. There is a plethora of programmes around the world, showcasing the innovativeness that governments display when supporting their SMEs. Governments also barely ever just provide one service for SMEs. It is always a mix of service offerings and they are not always east for SMEs to access.
SME centres, also known as hubs, can help organise centralised and personalised support to SMEs. There is no one model for a SME centre across or within countries. What they share are physical locations-although less relevant during the Covid-19 pandemic-provision of business training and basic consulting services, and a common goal of making local SMEs more competitive and resilient.
SME centres may have different delivery models. For example, the Business Development Bank of Canada (BDC) is an SME-support bank network that stretches even into remote areas of the country. They also provide services to clients. The consultants who work for the BDC may travel to see their clients, if the nearest BDC branch is too far away. This model of mixing finance with services has proven successful for Canada as has increased the loan-repayment rate significantly. The SME hubs in Malaysia have developed an SME centre "on wheels" to also reach rural communities. It moved some services online, during the Covid-19 pandemic.
One component that can add a lot of value for SME centres, but can be tricky to implement are partnerships with the private sector and other government agencies. Partnerships are often organic or focused on specific components or services. The SME Hub model in Malaysia, for example, invites other agencies and programs that cater towards the needs of SMEs once a week to present their offering to SMEs in their hub. Some Small Business Development Centres (SBDC) in the US, such as the one in San Antonio, Texas, work with local banks to provide free training for local businesses, which in turn may provide new clients for the banks also - a mutually beneficial relationship. Companies can also become sponsors of the SBDC. The SBDCs are also usually housed in a government-funded university, training institution, or regional economic development institution. The SME centres in Singapore are overseen and funded by Enterprise Singapore, the government agency overseeing all business support in the island nation. Yet, the centres are housed and implemented by local industry associations, such as the Singapore Manufacturing Federation or the Singapore Chinese Chamber of Commerce and Industry. This model allows the government agency to have excellent access to its constituents and bridges the gap between the public and the private sector.
We have studied many SME centre models across the world and some of the key lessons are:
There is not one model of SME centres that works across the world. Each country has gone through an evolution for its centres - and even within country networks each individual SME centre can be quite different compared to other centres based on the overall needs.
Cooperation with other government agencies is often informal and often happens because it is "the right thing to do". Sometimes cooperation occurs to pool funds, but reporting is focused on KPIs, rather than specific reporting for partner needs.
Partnerships with the private sector are less frequent and mostly materialise in the form of sponsorships or partly the delivery of the services (especially training) a centre offers.
Basic SME centres do not have to be expensive (mostly under $1mn per centre). The model generally appears to be an inexpensive way to deliver instrumental support to SMEs. More sophisticated centres that provide targeted research and innovation support are more expensive but may also yield a higher return on investment for the government implementing it.
Mixing financial and non-financial support leads to better results since the two can augment the effect of the tool. A study by the BDC in Canada verifies these findings.
SME centres simply cannot cover every necessary service effectively or tailor their support to every client's specific needs. They shouldn't if there is a market that can provide services at an affordable cost. Some SMEs will need more targeted or sophisticated support mechanisms for their growth. Yet, a deep-tech startup may benefit from some basic accounting advice, as much as a mom-and-pop shop. However, the startup will need more sophisticated strategy, or research and development support, than most SME centres around the world may not be able to provide. Still, SME centres are good for--giving any type of company a helping hand in a business environment that can be tough to navigate. There is most certainly value to any such model, as long as it is clear what the SME centre can and cannot provide.
For policy makers, the global experience shows that there is a value of setting up this institutionalised SME support mechanism. You will need to identify which model suits your local context the best. There is plenty of inspiration that can guide you on your journey towards a centralised and effective support to your domestic SMEs.
The piece is excerpted from blogs.worldbank.org.