The Role Of Governments In SMEs’ Economic Prosperity

Mastercard has, in a new research, highlighted the important role of governments’ support in helping small and medium enterprises (SMEs) across the Middle East and Africa (MEA) to recover, position for growth, and contribute to economic prosperity.

In the inaugural Mastercard MEA SME Confidence Index, government support and implementation of effective policies was highlighted as ‘important’ by 88 per cent of the region’s SMEs, 50% of which rated this point as a ‘must-have’ essential.

This sentiment was especially pronounced in the Middle East and North Africa (MENA) (92 per cent) and Sub-Saharan Africa (90 per cent) regions.

Multitude of opportunities

In addition to looking for effective regulatory support from governments, 92 per cent SMEs in MEA said they are also looking for support in upskilling of their teams, and 88% highlighted the importance of improved telco infrastructure – pointing to opportunities to effect positive change in wide-ranging areas from education and skills development to systems and infrastructural progress.

Public-private partnerships are crucial for the effective development and implementation of initiatives that advance financial inclusion and inclusive growth. To achieve this, governments and the private sector must play a joint role in enabling a safe and secure operating environment.

Mastercard works closely with governments and the wider business community to advance SME inclusion into the digital economy through tailor-made digitization strategies, cutting-edge technologies, insights, and policy advice.

Government-led initiatives key to positive growth

Across MEA, 51 per cent of SMEs say government-led initiatives could have a positive impact in supporting their businesses.

These include the UAE, where Dubai Government launched a third stimulus package to support small and medium enterprises to maintain business continuity by reducing operational costs, while the Abu Dhabi Executive Council allocated AED 3 billion to the SME Credit Guarantee Scheme. The Central Bank of Egypt made it easier for SMEs to access capital by encouraging banks to raise their share of loans to MSMEs. A six-month debt relief finance scheme for SMMEs was launched by the South African government, along with a spaza support scheme and an agricultural disaster support fund for smallholder and communal farmers.

Public private partnerships are a catalyst for growth

Furthermore, SMEs in the region recognize the great potential of public-private partnerships (PPP), and 63% think private sector initiatives and partnerships will benefit businesses and the markets in which they operate.

One in three SMEs (32 per cent) think that collaborating with governments and businesses outside their markets could impact their growth. In Southern Africa, this was especially pronounced, with over half (56 per cent) agreeing.

The need for the public and private sectors to work together to create a better environment for small businesses has been outlined in a public policy paper* titled Reimagining Support for Small Businesses, released by the Mastercard Policy Center for the Digital Economy in partnership with global consulting firm Kearney. The paper outlines a number of strategic recommendations which highlight how effective policy and innovation can address many of the challenges faced by business-to-business SMEs.

The key recommendations are:

Ensure ongoing working capital stability for SMEs by driving solutions that ease cash flow burdens.
Remove barriers that hinder women-owned businesses’ ability to receive capital by making IDs more accessible, and allowing different types of collateral.

Make funding and resources available for B2B SMEs to build their digital capabilities by offering digitalization support for SMEs buying and selling internationally.

Ensure a safe and secure operating environment for SMEs, in terms of cybersecurity, trust, and transparency, as SMEs become increasingly digital.

Build B2B SMEs’ knowledge of the financial and digital tools and resources available to them.

Facilitate partnerships in which private entities, non-banking financial institutions (NBFIs), development finance institutions (DFIs), and non-governmental organizations (NGOs) are incentivized appropriately to provide cash flow management support, capital, or digital services to B2B SMEs.

Improve the collection, analysis, and availability of B2B SME data for use by governments and B2B SMEs. Model best practices by buying goods and services directly from SMEs, adopting payment and invoice digitalization, and increasing the credibility of emerging businesses.

“Collaboration is the key to developing a commercial landscape that is fit for future growth. Through effective partnerships, the public and private sectors can together create a supportive environment where SMEs can thrive. The contribution of small businesses to regional economies is ultimately about much more than the immediate gains to livelihoods – it’s also about the sustainable development of an ecosystem that can advance inclusive growth and prosperity for all.

This is why it’s so important that we prioritize public-private partnerships for SME growth, and why we’re putting our technology, expertise, and global network to work, helping to develop the infrastructure to connect more people – and more small businesses,” said Valerio Murta, Senior Vice President, Core Products Middle East, and Africa, Mastercard.

Mastercard has successfully collaborated with regional governments to create growth opportunities for SMEs, by creating an ecosystem where small businesses can thrive.

In Egypt, Mastercard worked alongside the Central Bank to develop a comprehensive national digital payments strategy and digital payroll program, as a way to include more people in the formal economy.

Through its partnership with Saudi Arabia’s domestic payment network, mada, Mastercard became the first company to enable e-commerce in KSA.

In Ethiopia, Mastercard is working with the Ministry of Innovation & Technology to drive financial inclusion, support SMEs, and enhance digital transformation readiness.

Through technology services, cyber assessments, insights, grants, digital training, mentoring platforms, and knowledge initiatives, Mastercard will contribute $250 million over five years to support small businesses’ financial security globally. As part of its goal to build a more sustainable and inclusive world, Mastercard has committed to connecting 50 million small businesses, including 25 million women entrepreneurs globally, to the digital economy by 2025.