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This study is supported by Shell Foundation and Citi Foundation SMALL AND MEDIUM SIZED ENTERPRISES IN MENA: Leveraging Growth Finance for Sustainable Development Khalid Al-Yahya, PhD1 Jennifer Airey Citi Foundation CONTENTS EXECUTIVE SUMMARY ....................................................................... 2 1. INTRODUCTION............................................................................. 3 2. CONTEXT — THE GROWING IMPORTANCE OF SMES IN MENA ........................................................................ 4 3. THE NEEDS OF MISSING MIDDLE SMES AND THE CURRENT LANDSCAPE OF SUPPORT PROGRAMS ......... 6 4. OBSTACLES FACING MISSING MIDDLE SMES IN THE MENA ................................................................................. 8 A. ACCESS TO FLEXIBLE PATIENT CAPITAL .............................. 8 B. BUSINESS DEVELOPMENT ASSISTANCE ............................ 14 C. MARKET LINKAGES .............................................................. 15 D. ENABLING BUSINESS ENVIRONMENT ................................ 15 5. POLICY IMPLICATIONS AND RECOMMENDATION: THE NEED FOR AN INTEGRATED & COORDINATED MODEL FOR SME DEVELOPMENT ........................................... 17 APPENDIX A: FIGURES AND GRAPHS ............................................. 18 APPENDIX B: BIBLIOGRAPHY .......................................................... 21 EXECUTIVE SUMMARY Faced with high population growth, high 4) an enabling business environment more effective partnerships between rates of unemployment and poverty, that addresses the barriers to their public authorities and private, regional and the declining capacity of the public development and growth. There is near and international service providers can sector as a viable employer of last resort, unanimous agreement among SMEs and add value through better mobilization, many countries in the Middle East and intermediaries interviewed in this study delivery and optimization of resources, North Africa (MENA) are turning to that addressing these needs in a focused which will enhance the capacity of SME Small and Medium Enterprises (SMEs) and sustained manner would increase support programs. Specialized SME as a potential lifeline to generate jobs the survival rates and sustainability of authorities that centralize many of the and promote economic development. SME businesses. government services and coordinate However, in order for SMEs to contribute among the numerous service providers An integrated system that offers a meaningfully to GDP growth and play in a country can help address many of one-stop-shop facility where SMEs a critical role in economic development these problems. Unfortunately, most can access a range of services from and job creation in the coming years, countries in the MENA region currently information about starting a business they must be provided with the right do not have an integrated approach or to support on how to effectively manage tools and resources. specialized authorities where SMEs and sustain a growing business is can access information about and apply This study assesses the state of a much needed. Organizations in charge for available funding and services, and significant, albeit underserved, segment of these programs also need to build handle necessary transactions with of the SME market, known as the stronger execution capacity that enables government agencies, such as obtaining "Missing Middle" to better understand them to provide services in a rigorous appropriate business permits and their needs and the challenges they and sustained manner, to identify licenses. However, there is growing face. It addresses how governments the deficiencies of entrepreneurs and recognition that the flaws of the existing and other stakeholders can help them managers of SMEs and address their system must be addressed to help reach their potential for growth and specific skill set needs. To make SME SMEs flourish, and many countries in job creation to positively impact the support programs more effective, a the MENA region are exploring ways MENA region. Missing Middle SMEs more coordinated, customized and to address that challenge, including are formally registered firms that have sustained model of support that is the establishment of such specialized passed the initial start-up stage. These sustained throughout the various stages authorities. SMEs typically have modest revenues of of business development and growth, US$100,000–$5 million, employ an and is capable of addressing not only This study shows that average of 6–150 employees and require barriers to starting up a business, but between US$50,000 and $2 million also barriers to operating a business and although there is a number in flexible growth finance, along with achieving growth, should be adopted. of existing SME support business development assistance, to survive and grow. Beyond improving the core capabilities programs in the region, and offerings of SME support programs, This study shows that although there there is a need to increase the synergy they need to go beyond are a number of existing SME support and coordination between them as the provision of limited programs in the region, they need well as to improve communication and subsidized loans and pre- to go beyond the provision of limited information sharing between support subsidized loans and pre-investment programs and the clients they seek to investment training to training to adequately support the serve — entrepreneurs and SMEs. The adequately support the Missing Middle SMEs throughout their lack of coordination between service business lifecycle. More specifically, providers has resulted in a system where Missing Middle SMEs the findings suggest that Missing organizations and government agencies throughout their Middle SMEs have four critical inter- that work in the same sector and deliver related needs for sustainable success: 1) similar services often do not know what business lifecycle. flexible patient capital structured to fit others are doing or offering, resulting in the needs of each SME; 2) sustainable high levels of duplication and overlap, and customized business development and inefficiencies. assistance targeted to each SME's needs; The majority of SMEs are also currently 3) market linkages to supply chains unaware of the services and support to ensure SMEs have an adequate programs available to them. Stronger, access to market opportunities; and 2 SMEs in MENA/Leveraging Growth Finance for Sustainable Development 1 INTRODUCTION Governments in the Middle East and North Africa (MENA) employees (6–150 employees) revenue ($100,000–$5 million), region face daunting social-economic challenges. A burgeoning and capital needs ($50,000 and $2 million). Data collection youth population, high unemployment rates, poor governance occurred between late 2011 through early 2012. Due to political and management in government institutions, and uneven and social unrest in Egypt during the period the survey was rates of economic development within MENA countries have conducted, Egypt was excluded from the quantitative survey. led to declining incomes and social unrest, making the need The study found that Missing Middle SMEs are hampered by to create jobs and raise living standards a top priority. There the lack of several important things — a sufficient business is a growing recognition that small and medium enterprises track record, adequate collateral, suitable guarantors and (SMEs) can be a vital resource to combating some of the strong linkages to the market — which often precludes them challenges facing the region by contributing to job growth from accessing capital from banks. Current market conditions and the economy, and bridging some of the regional economic also favor more established businesses and work against development imbalances that have emerged within countries. Missing Middle SMEs. Hence, historically, they have been SMEs have been widely recognized as effective and successful overlooked by the formal financial sector. This is especially in developed markets, where they are responsible for much true in the MENA region, which has particularly low levels of the growth in new jobs, and contribute to over 60%–70% of of SME lending — the lowest in the world outside of Africa.2 employment and more than 50% of GDP. Though there are multiple finance providers to SMEs in However, in spite of the acknowledgment that SMEs are the MENA region, mostly government-funded agencies, the critical to economic development, the MENA region remains success rate, barriers, challenges and funding gaps of these among the least effective at cultivating a business environment existing programs is mostly unknown. that is friendly to SMEs. Many SMEs face substantial barriers Current SME support initiatives in MENA do provide a range of to growth and sustainability ranging from limited access to financing and nonfinancial services but they have weaknesses finance and an unfavorable regulatory environment, to the lack that impede their ability to support sustainable businesses of business management skills and market linkages needed to that can create jobs and contribute to economic growth over grow and succeed. They often struggle to obtain the financing the long term. These weaknesses can be summarized in three they need to expand and achieve sustainability due to their categories: stage of development. Enterprises in the "Missing Middle" are underserved by investors and government-sponsored 1) Poor coordination: SME support organizations suffer SME support initiatives in the region, which often focus on from poor coordination and limited execution capacity; either start-ups or large, well-established SMEs. A deeper 2) Inadequate products and services: The products and understanding of the needs and challenges of Missing Middle services provided lack suitable terms and capital structure SMEs is important because they are poised for growth and and sustained business assistance; have the greatest potential to create jobs. Their development and success can help to address some of the many economic 3) Weak ecosystem: There are broad environmental and social challenges that the MENA region faces, which arise factors including the lack of effective policy environment from a growing population and burgeoning youth bulge. for SME formation and growth, inadequate educational programs and a high ratio of government employment, that Research for this report was conducted in four countries make entrepreneurship unattractive and a less prestigious that spanned different pockets of the region: Egypt, Jordan, professional track. the Kingdom of Saudi Arabia (Saudi Arabia or KSA) and the United Arab Emirates (UAE). The study comprised over 50 We hope that this report will not only provide a better interviews with experts, a quantitative survey of over 150 understanding of the current landscape and challenges local SME owners, and secondary research. The initial 50 of this sector, but also, through our recommendations, interviews spanned experts from "intermediaries" across spawn proactive discussions and meaningful solutions from the four countries, including governments, banks, academia, policymakers and the public and private sectors to enable international donors operating locally and SME-focused SMEs, particularly those in the Missing Middle, to operate nonprofit organizations. The quantitative survey focused in a business and regulatory environment that supports their specifically on Missing Middle SME owners and key financial development, and to receive needed growth financing and decision makers, to allow us to better understand their business development assistance. This will allow them to grow experiences, challenges and needs. All survey respondents sustainably, create jobs and ultimately contribute to economic were local citizens who ran companies that met the thresholds growth and prosperity for the MENA region. for Missing Middle SMEs as defined by the number of SMEs in MENA/Leveraging Growth Finance for Sustainable Development 3 2 CONTEXT — THE GROWING IMPORTANCE OF SMES IN MENA In recent years, the need to support SMEs has become a top and provide more jobs and other economic opportunities, government priority in the MENA region. SMEs have been also highlights why SME growth and success is all the more deemed a key tool to combating the present challenges facing critical in MENA. Public employment has been the typical the region, including the need to diversify the economy, response of government to domestic pressure for political improve competitiveness, raise living standards, create jobs and economic reform in the region to date. Such policy is and bridge the regional development imbalances within no longer viable given the nonproductive nature of adding countries.3 International experience shows that SMEs unnecessary public employment and the limited resources contribute significantly to employment and economic activity, available to governments to respond to the growing needs and are a critical lever for job creation, innovation and of the unemployed population. Thus, reallocating public competitiveness. In developed countries, SMEs contribute to financial resources to invest in SMEs, the engine to create more than 50% of GDP and over 60%–70% of employment. jobs and combat high unemployment, can be more effective Virtually all net U.S. private-sector jobs were created by in the long term than merely adding jobs in the public sector new companies between 1977–2005.4 The World Bank called as part of the long-standing social contract. SMEs essential engines of growth that contribute to effective markets and reduce poverty in developing countries where DEFINING SMES AND THE "MISSING MIDDLE" IN MENA populations were growing rapidly and jobs desperately There is no universally recognized definition of SMEs. needed. However, in low-income countries, SME contribution Countries vary in their criteria for defining SMEs, which to GDP and employment is less than half the rates in typically include number of employees, capital needs, developed countries.5 This gap arises due to the many revenue and fixed assets of the company. Definitions can barriers facing SMEs in low-income countries; particularly also vary based on factors like sector and whether business those in the Missing Middle segment, including a costly is high or low growth. The most popular definitions from business environment, restrictive regulations and lack of each market, based on interviews with expert SME appropriate financing options and business support. intermediaries, are listed in Table 1. More so than any other region in the world, the MENA region Missing Middle SMEs (Figure 1) are formally registered small needs to create employment opportunities, especially for and medium businesses that have passed the initial start-up youth 15–30 years old. Due to rapid population growth, over stage. According to the experts interviewed for this study, the next 15 years, more than 80 million more jobs are needed the Missing Middle represents 40%–70% of the SME market to prevent deterioration in income and rising unemployment. depending on the country in question. These SMEs typically This rapid growth, which began in the 1950s, has created have modest revenues of US $100,000–5 million, employ a large youth bulge in the region.6 Unemployment in the an average of 6–150 employees and require between region falls disproportionately on youth, whose share of US $50,000 and $2 million in growth finance. They occupy unemployment ranges from 36% in Morocco to 73% in Syria. the middle of a spectrum based on size and revenue and Those who are employed predominately work in the informal lack the long track records and collateral required to obtain sector.7 Simultaneously, MENA has also witnessed the traditional financing. Hence, they are often overlooked fastest expansion in educational attainment in the world and underserved by formal financial institutions and SME between 1980 and 2010. As a result, the new generations support organizations, particularly due to the challenges to of workers, male and female, are the most educated in the address their needs in ways that are scalable and sustainable. region's history. This adds to the region's pressure to not This leaves many of them struggling to access capital to only create jobs, but also high-quality job opportunities sustain and expand their business operations. In spite of that match the skill sets of a new, highly educated young their incredible potential to contribute economically and workforce, making job creation one of the most critical create jobs, less attention has been paid to the Missing Middle development challenges facing MENA today.8 segment of the SME market. In addition, the global economic recession has heightened the risk aversion of potential The Arab Spring that swept Egypt, Libya and Tunisia, investors, contributing to the need to make capital and and the current crisis in Syria, triggered initially by public assistance available to this segment even more pronounced. dissatisfaction with government failure to curb corruption 4 SMEs in MENA/Leveraging Growth Finance for Sustainable Development TABLE 1: Current Definitions of SMEs in MENA Company Category # of Employees Annual Revenue in USD More so than any other Saudi Arabia region in the world, the Micro 1–2 Less than $27,000 MENA region needs to Small 3–49 $27,000–$1.3 m Medium 50–200 $1.3 m–$13.3 m create employment UAE (service sector only) opportunities, especially Micro 1–20 Less than $800,000 for youth 15–30 years old. Small 21–100 $800,000–$6 m Medium 101–250 $6m–$40 m Jordan Micro 1–7 Less than $20,000 (capital) Small 8–30 $20,000–$70,000 Medium 31–100 $70,000–$150,000 Egypt Micro 1–10 Less than $170,000 Small 11–49 $170,000–$2 m Medium 50–100 $2 m–$12 m FIGURE 1: Defining "Missing Middle" SMEs START UPS MISSING MIDDLE LARGE BUSINESSES LOW ACCESS TO CAPITAL • Informal/not registered; Start-ups, MSMEs • Formal/registered small & medium enterprises • Large+ Businesses • < 10 employees • 6–150 employees • > 150 employees • Appeals to micro-finance and • Unable to secure traditional financing (lack of • Appeals to private equity, venture capital; government funds; donors collateral, track record and/or guarantors) traditional finance, banks, etc. • Business skills may or may not exist • Lack business skills necessary for viable • Business skills contribute to efficiency, long-term growth scale & sustainability • Seeking < US$50K • Seeking US$50K–2M in additional finance • Seeking > US$2M • High access to capital Needed for success, viable growth and Enabling Business development sustainable employment creation: policy environment assistance/skills Market linkages Patient capital SMEs in MENA/Leveraging Growth Finance for Sustainable Development 5 3 THE NEEDS OF MISSING MIDDLE SMES AND THE CURRENT LANDSCAPE OF SUPPORT PROGRAMS There is a long-held axiom that there is a "three year rule" EXISTING SME SUPPORT PROGRAMS in business — if you can survive the first three years, There are numerous existing programs and initiatives that then chances of success become exponentially higher. serve SMEs in MENA. In recent years, due to growing International studies indicate that 70%–80% of businesses attention given to job creation, workforce nationalization fail after an average of only 20 months. A prominent SME (replacing expatriate workers with nationals) and poverty expert in MENA estimated that the rate of failure in the reduction by governments in the region and international MENA region might be even higher than that — as high donors in Europe and North America, more resources and as 90%.9 funding has been poured into initiatives and programs that support SMEs and promote entrepreneurship. They Nevertheless, the existence of a large Missing Middle in generally provide a range of services, such as subsidized or MENA is a good indication that entrepreneurial spirit guaranteed loans and grants, and business training, advice abounds in the region. The 2011 Global Entrepreneurship and facilitation. Table 2 provides a list of key government- Monitor Report showed that in emerging economies, linked SME support programs and the services they provide. entrepreneurial activity is very high at the start-up phase These programs primarily target SMEs in the start-up phase but then steeply drops, suggesting that many individuals and do not adequately serve the Missing Middle. The absence start businesses but few are able to sustain them. Many of targeted and continuous business and financial support Missing Middle SMEs fail to survive beyond the start-up services, which meet the needs of SMEs across their business phase due to the lack of vital human and financial resources life cycle, contributes to the short lifespan of many Missing needed to expand, their inability to stand up to competition Middle SMEs. and the lack of a solid track record with which to entice customers, investors and lenders.10 This transition period is WEAKNESSES OF CURRENT SME SUPPORT PROGRAMS often referred to as the "valley of death." This highlights the In spite of the additional resources and efforts devoted critical need to support SMEs through this growth phase. to SME development initiatives by governments and SMEs that are growing and in the midst of product expansion international donors in MENA, several weaknesses or development and commercialization require investments impede their ability to address the needs of SMEs of capital and capabilities, often in advance of growth in in the Missing Middle: revenues and associated profits. They need specialized • Most SME support initiatives and organizations and targeted support services and patient financing. Our lack the capacity and sophistication to provide research shows that SMEs in the Missing Middle have four customized and sustained business development common, interrelated needs that require a focused and assistance. The needs of SMEs change dramatically over integrated framework to address them simultaneously. These the course of its business life cycle — start-up, expansion, are described below. The likelihood of SME survival past the commercialization and sustainability. However, existing start-up phase would drastically increase if Missing Middle programs generally offer generic pre-investment training, SMEs were able to access the resources needed to address such as how to develop a business plan, which may not be these needs. relevant or useful to businesses beyond the start-up stage. 1. Access to flexible patient capital: Debt and equity A deeper breadth of services, customized to the needs of financing on appropriate terms (capital requirement, pricing SMEs as they advance through their business life cycle, and tenor) structured to fit the specific needs of each SME would help entrepreneurs tackle the new challenges they across the lifecycle of the business. may face as they grow their business. Currently, most government and NGO programs seldom meet the specific 2. Business development assistance: Customized, robust skill needs and deficiencies of the enterprises in the and sustained business training and solutions, including Missing Middle. market information, marketing, management and finance, strategic planning and technology to bolster the business • The offerings of SME programs are not designed or skills and knowledge of the entrepreneurs. suited to fit the needs of the Missing Middle. While the MENA region does offer an abundance of subsidized 3. Market linkages: Linking SMEs to supply chains and capital in many countries, it is often inaccessible to the to the vast potential business and community development Missing Middle SMEs that have passed the start-up stage. opportunities and investment projects that will ensure the Funding and other support services were often limited growth and sustainability of SMEs. and inadequate in duration. For example, Missing Middle 4. Enabling business environment: Removing regulatory SMEs need patient, flexible capital with a longer time barriers that are harder for small and mid-sized enterprises horizon, but programs often only provide small grants or to overcome than for large enterprises. loans below the level of need of SME entrepreneurs and 6 SMEs in MENA/Leveraging Growth Finance for Sustainable Development TABLE 2: Selected Government-Linked SME Support Programs in Egypt, Jordan, Saudi Arabia and United Arab Emirates Government-linked SME support programs Country Services provided Centennial Fund KSA Subsidized loans, training, advice Bab RizqJameel Center KSA Loans to start-ups & micro-finance, training and advice Saudi Credit & Saving Bank KSA Loans to entrepreneurs & SMEs Riyadah KSA Subsidized loans, training, advice Kafalah — Saudi Industrial Development Fund KSA Loan guarantees up to 80% Khalifah Fund UAE Subsidized loans, training, advice Dubai SMEs UAE Training, advice, mentoring and loan guarantees Ruwad Establishment — Sharjah UAE Financing, training, advice, incubation Al Tomooh Finance Scheme UAE Subsidized loans and waived commercial fees JEDCO — Jordan Enterprise Development Corporation Jordan Technical assistance & help to get loans from banks Business Development Center Jordan Training and advice I-Park & Oasis 500 Jordan Incubators and start-ups support USAID-Funded SABEQ Program Jordan Investment, training and advice Social Fund for Development Egypt Subsidized loans and technical assistance GAFI — Bedaya Center for Entrepreneurship and SME Egypt Access the different financial and nonfinancial services Development Note: This list is not comprehensive. Many of the programs funded by international donors and private sector firms are not listed here. at terms that were too short in duration or overly high in This fragmented system, combined with the lack of effective interest. Even when funding is available, it is often not communication and information sharing capability between linked to business development assistance that is also service providers and the SMEs, often results in lack of required to help businesses stay on track. awareness among SMEs of services that are available. Most SMEs surveyed in our study indicated they did not know • SME support programs lack effective who is offering what, to whom and how. While select SMEs "implementation" or "execution" capacity. At a high located in major cities and are more "well connected" were level, some elements required to address the SMEs' needs, more likely to be aware of existing support programs, the such as finance and training, are already recognized majority of SMEs lack knowledge and awareness of the by SME support programs. However, these programs resources that exist and are available to help them. fall short because their services are not implemented in an effective way. Capabilities such as screening and assessing applications, developing financial and non- Missing Middle SMEs need patient, financial schemes appropriate to each SME's requirements, credit registries, and dispute and payment settlement flexible capital with a longer time horizon, processes are underdeveloped. Furthermore, there is an but programs often only provide small absence of synergy and coordination between various SME support programs, which weakens their ability to grants or loans below the level of need build specialized expertise to meet the various needs of of SME entrepreneurs and at terms that SMEs, and especially Missing Middle SMEs, across their development stages. Rather than sharing information, were too short in duration or overly high programs protected their SME contacts, leading to a sense in interest. of competition, fragmentation and lack of complementarity in the market. SMEs in MENA/Leveraging Growth Finance for Sustainable Development 7 4 OBSTACLES FACING MISSING MIDDLE SMES IN THE MENA There are significant barriers in the current environment terms for capital that is available are often unsuited to the that face Missing Middle SMEs. This section addresses the needs of Missing Middle SMEs. Hence, these businesses were barriers to the four common needs of SMEs that we identified often forced to rely on self-financing and less formal financial in the previous section. resources such as family, friends and informal moneylenders. A. ACCESS TO FLEXIBLE PATIENT CAPITAL Capital Need FIGURE 2: SME Loans in MENA Access to flexible patient capital is critical to support the growth of Missing Middle SMEs. Over half of the SMEs 30 surveyed reported needing between US$50,000 to $150,000 24% in additional financing to meet the needs of their growing 20% businesses. The amount needed was higher for respondents 20 16% in Saudi Arabia, where more than half of the Saudi owners 13% 15% reporting that financing needs of $500,000 or more (Figure 6). 10% 10 This is in large part due to the large size of the Saudi economy 6% 5% and the current economic boom. 2% 2% 2% 2% 4% 4% .5% 1% 0 Limited Bank Lending to SMEs a Jo ne an ria n- n Le isia co i A in Sa Ba ar Ye on M en le t Tu CC Om it E C Over half of SMEs turn to banks and other lending bi Pa gyp No da wa ud hra UA GC oc t i Sy m n ra st Qa G n r ba or Ku E institutions for additional funding (Figure 7). However, of those that have sought funding from banks, over half have been denied a loan. This is in line with data from the 2010 Reported numbers are weighted averages and Non-GCC average includes Iraqi banks that and 2011 World Bank Enterprise Surveys11 and World Bank's were not reported in the graph as the coverage Iraq is not more than 30% Financial Access and Stability Review, which indicate that Source: R. Rocha, et al 2011. The joint survey of the Union of Arab Bank and the World Bank. access to finance for SMEs is more constrained in MENA than other emerging regions, except Africa, with only one in five SMEs having a loan or line of credit.12 Although banks Saudi owners in particular struggle to obtain bank loans, increasingly view the SME segment as potentially profitable, with close to nine in ten (89%) reporting it is difficult to get a the average rate of SME lending as a share of total lending bank loan. The data show that only 2% of total loans in Saudi is very low at 8% overall compared to their contributions to Arabia were directed at SMEs. To overcome the limitations GDP ranging from 30% in Saudi Arabia, UAE and Jordan they face, entrepreneurs have come up with creative to 70% in Egypt, and to employment ranging from 30% in financing schemes to access needed capital. For example, UAE, 40% in Saudi Arabia and Egypt to 50% in Jordan. in Saudi Arabia, some entrepreneurs who are employed Within Gulf Cooperation Council (GCC) countries, this rate would buy cars using loans, then sell the vehicles and use only averages 2%. It is only slightly higher in the rest of the the funds to their start businesses. Arab countries at 13%. (Figure 2) Furthermore, the loan FIGURE 6: Desired Financing Amounts Additional Financing Sought Jordan Saudi Arabia U.A.E. $50,000–$150,000 54% 79% 20% 63% $150,000–$500,000 25% 17% 27% 29% $500,000–$1m 14% 2% 31% 8% $1m–$2m 8% 2% 22% — BASE: TOTAL RESPONDENTS (n=154) Q: How much additional financing are you currently seeking for your business now or in the near future? 8 SMEs in MENA/Leveraging Growth Finance for Sustainable Development FIGURE 7: Sources of Additional Funding Source(s) Sought Additional Funding Sought Funding Succeeded Denied Funds Bank or other nancial inst. lending for business 25% 52% 27% Personal resources/assets 41% 42% 1% Business partners who started business with you 31% 32% 1% Family 21% 24% 3% Bank or other nancial inst. personal loan 7% 14% 7% Friends 11% 11% 0% A Government Fund 8% 11% 3% Venutre Capital 7% 8% 1% A fund targeted to SMEs 2% 8% 6% International Donations 4% 5% 1% Government subsidies 3% 4% 1% Personal bank account overdrafts 3% 3% 0% Private Equity 2% 3% 1% Non-Pro t Groups or Foundations 2% 2% Academia/Univ. or Higher Education related grants 2% 0% Domestic Donations 1% 0% Credit cards 1% 0% Other 2% 3% 1% BASE: TOTAL RESPONDENTS (n=154) Q: Earlier you noted that you are currently seeking [INSERT RESPONSE FROM Q1050] in additional financing for your business. Which, if any, of the following sources of financing have you pursued to secure this level of funding for your business? Q: Have you been denied finance or funding from any of the sources you pursued for this level of funding? Select any that have rejected request for funding. The difficulty SMEs face in obtaining bank lending "How to transition from small grocery disproportionately impacts the Missing Middle segment, which has few alternative funding sources. Unlike start- shop to supermarket can be challenging ups, Missing Middle SMEs are typically not small enough to traditional owners. I know a small to be served by various microfinance schemes even though microfinance is abundant in the region. The microcredit but successful business that failed model is not effective when larger and riskier investments when it tried to transform itself into a are needed and cash flows are not immediate. Hence, small bigger business for lack of business and loans from microfinance providers are not well suited to meet the needs of Missing Middle SMEs. Missing Middle management skills. The owner did not SMEs are also too big to qualify for many of the support have the skills to set up an accounting and programs that provide considerable financial and technical assistance to start-ups, such as the Oasis 500 and I-Park HR system." — An Egyptian SME expert incubation programs in Jordan, and the Bab RizJamel, AGFUND, Centennial Fund, and Riyadah in Saudi Arabia. Barriers to Obtaining Bank Financing However, they are also not big or well established enough Respondents indicated that bank loans are typically denied to be attractive to venture capital or private equity firms. to the Missing Middle segment because banks are unwilling These firms are reluctant to invest in Missing Middle SMEs to finance companies without long track records (typically a due to the higher risks and lower risk-adjusted returns of minimum length of 5–10 years), sufficiently large collateral investing in smaller, unproven SMEs and the difficulties of (typically between 120%–150% of the loan amount) and exiting such investments. Thus, the funding challenge for guarantors with enough capital to protect against default SMEs really begins when start-ups enter the growth and risk. Even for those who meet the criteria, banks still only commercialization stage and begin to face fierce competition fund a small fraction of SMEs, likely due to the availability but lack the vital financial and human resources needed to of safer investment opportunities or lack of sufficient loan grow and expand market share. capital. Respondents indicated that those that are lucky to receive loans face high interest rates that are as high as 10%–14% compared to only 4%–8% for large companies. SMEs in MENA/Leveraging Growth Finance for Sustainable Development 9 Despite the challenge of obtaining bank financing, SMEs in our study still prefer debt vs. equity financing. SME PREFERENCE FOR DEBT VS. EQUITY FINANCING FIGURE 3: Preference for Debt vs. Equity Funding The choice between taking on debt and giving up equity Format Preferred for Securing Outside Funding to fund a company's growth is one of the most daunting Format Preferred for Securing Outside Funding decisions SME owners can make. Despite the challenges 6% 17% that SME owners face in obtaining bank financing, 10% 6% Prefer to Give up 17% in Exchange Equity our study found that SMEs surveyed still had a strong 10% 14% Prefer to Give up for Finance preference for taking on debt over giving up equity by 14% Equity in Exchange for Finance a factor of four (Figure 3).This preference is reflected in their approach to financing their businesses. Sixty-two 69% 41% Prefer to Take on percent (62%) of SMEs in our study reported that they 69% Debt Via a Loan 41% have or had a loan at one point. That percentage is even Prefer to Take on Debt Via a Loan higher in Jordan and the UAE, where three quarters of 28% SME owners reported having an interest-bearing loan (Figure 4). As shown in Figure 5, current interest levels 28% for loans typically range anywhere from 8%–14% Total Total Among those who prefer to finance with debt, agreement Entirely through giving equity Mostly through giving equity is nearly unanimous that the reason for doing so is to Entirely through giving equity Through both equity and debt evenly avoid having to share the business with a partner and Mostly through giving equity Mostly through taking on debt via a loan Through both equity and debt evenly deal with potential conflicts over business decisions and Entirely through taking on debt via a loan Mostly through taking on debt via a loan exits. Those who finance through equity do so to avoid Entirely through taking on debt via a loan risk or because they were unable to qualify for bank loans. Table 3 shows some of the reasons provided by respondents. In contrast to other countries, in Jordan, Past behavior many indicated that they would prefer equity financing, Past behavior 62% instead of debt, if it is with a more credible and capable Have taken on an interest-bearing loan 62% that needs/needed to be paid pack partner, and if it leads to better business development Have taken on an interest-bearing loan and logistical support to ensure success. This may be that needs/needed to be paid pack 21% attributable to the small size of the Jordanian economy, Have given up equity in the business 21% which intensifies competition and increases the already Have given up equity in the business high risk of failure among SMEs. However, the preference BASE: TOTAL RESPONDENTS (n=154) for debt versus equity is also dependent on the stage of Q: Ideally, if you were able to secure outside funding in the range you specified earlier, and you had the choice between giving away equity/shares in your company or taking the business in Jordan. When a company has a longer on a loan that had to be paid back with interest, which format would you prefer? Please track record and is more established, and the risk of choose the one you most lean toward even if this is hypothetical. failure is drastically diminished, making it easier to Q: Up until now, has your business given up equity and/or taken on an interest-bearing acquire a bank loan, the preference for debt still rings loan that needs to be paid back? Please check all that apply. true in Jordan. In general we believe that different debt financing options can be appropriate in the region. This includes short- or medium-term financing that is linked to TABLE 3: Reasons for Taking Loans or Giving Equity fixed repayment schedules, mezzanine finance (e.g., where Reasons for Preference to Take on Reasons for Preference to Give repayment is linked to cash flow) or indeed the principles Debt Via a Loan. Equity Ownership/Share underlying Sharia'h finance (i.e., striving to achieve a "To avoid the partner problems and "Reduce interest and risks in case money multiple rather than set interest). conflicts." — Jordan business fails." — KSA "Easy to do business without going "I choose partnership because a to deal with partners who can delay partner can help in management things." — KSA and can share part of the risk" — Jordan "Independence in ownership and decision-making." — KSA "Fear of default - inability to repay." — KSA "My equity share is higher in the longer term, given the business can "I don't have guarantees and pay for the loan installments." — partners might have them." — KSA Jordan 10 SMEs in MENA/Leveraging Growth Finance for Sustainable Development FIGURE 4: Current Debt vs. Equity by Country Current Behavior Have taken on an interest-bearing loan that meeds/needed to be paid back Have given up equity in the business ' Neither Jordan 71% 13% 17% Saudi Arabia 39% 37% 33% U.A.E. 76% 14% 18% BASE: JORDAN (n=52), SAUDI ARABIA (n=51), U. A. E. (n=51) Q: Up until now, has your business given up equity and/or taken on an interest-bearing loan that needs to be paid back? Please check all that apply. FIGURE 5: Exit Strategies for Equity Based Financing Exit Strategy from an Equity-Based Current Level of Interest in Loan Choice of Debt or Equity if Financing Model Among those who have nanced through debt Do Over Again Among those who have nanced through equity Among those who have nanced through equity or debt No Interest 17% < 2%, not 0% 2% 59% 2%–3% 5% 4%–5% 11% 52% Have an Exit Strategy 6%–7% 15% 19% 8%–10% 30% 13% 9% 11%–15% 16% 16%–20% 3% Only Only Both Not sure 21%–30% 1% give up take equity equity on debt and debt More than 30% 0% BASE: FINANCING THROUGH EQUITY; TOTAL RESPONDENTS (n=33) Q: Do you have an exit strategy for transitioning away from an equity-based financing model? Meaning, is there a clear agreement and schedule of how equity will be earned back or phased out over time? BASE: FINANCING THROUGH DEBT; TOTAL RESPONDENTS (n=96) Q: What is the current level of interest for this loan? BASE: FINANCING THROUGH EQUITY OR DEBT; TOTAL RESPONDENTS (n=119) Q: If you had it to do over again, would you choose to only give up equity in your company or would you choose to only take on debt? SMEs in MENA/Leveraging Growth Finance for Sustainable Development 11 Barriers to Obtaining Bank Financing (continued) or neglect them entirely. Lastly, SMEs are risky investments Lack of appropriate collateral was noted as the single due to their stage of development. Even in cases where biggest obstacle to receiving funding from a bank followed finance is provided to SMEs, sustainability and success are by high interest rates, the lack of needed contacts and not guaranteed. SMEs face many other challenges that may the lack of business skills (Figure 8). Banks often impose lead to failure, including the lack of business and managerial more stringent collateral requirements on SMEs, relative skills, insufficient access to markets, lack of a vibrant to large corporations. This can be attributed to structural entrepreneurial culture in their own countries/communities challenges, such as the lack of transparency in the SME and competition from bigger, more powerful businesses. market, and weak financial infrastructure, including limited Within the MENA region, there are notable differences credit information, and the lack of a collateral registry and across countries. More than four out of five Saudi SME mechanism for legal enforcement of contracts in case of owners point to insufficient collateral as the key barrier, default. Other barriers include concerns about management while Jordanian owners are mostly concerned with high competency of SMEs and weak risk management at banks. interest rates upwards of 10%–14%, compared to 4%–8% for As a result, there is a strong preference for large, well- large businesses in real terms, as well as the requirement for established businesses. Furthermore, lending to SMEs often two guarantors (Figure 10). Barriers in the UAE appear to requires more time and resources on the part of financial be much lower — nearly a quarter of the nationals surveyed institutions, which increases the banks' operating costs. As responded that they were "not aware of any barriers to a result, lenders often charge a premium to SME customers receiving bank financing." SMEs face many other challenges that may lead to failure, including the lack of business and managerial skills, insufficient access to markets, lack of a vibrant entrepreneurial culture and competition from bigger, more powerful businesses. FIGURE 8: Barriers or Obstacles to Bank Funding Barriers or Obstacles to Receiving Bank Funding Lack initial assets Lack of appropriate collateral 62% Don't know the right people Interest rates too high 48% Lack of appropriate guarantors or co-signers for loans 35% Having the right contacts (access) at funding sources 25% Need BDA Lender is concerned of loan default 19% Track record/not enough experience or not in business long 14% Lender questioned plan or ability of business to succeed/be 12% Entrepreneurs' lack of business or management skills/expertise 11% Monopoly exists in the market – dif cult to compete 10% Lender seeks audited nancial statements 9% Size of business (no. of employees/revenue) was not what lender required 8% Entrepreneurs' income history 7% Bias due to the personal background of the entrepreneurs 5% Did not want to give up the level of equity required 4% Length of terms too long (spans too many years) 4% Length of terms too short (not enough time to pay back) 4% Business was not in the industry that lender speci es 4% Education of the entrepreneurs involved 3% Could not agree on an exit stategy to buy out external nancers 3% Lender does not believe the business is staffed appropriately 2% Other 3% Not aware of any barriers to receiving bank nancing 8% BASE: TOTAL RESPONDENTS (n=154) Q: Which, if any, of the following do you consider barriers or obstacles facing your business in terms of your ability to receive this level of funding ([INSERT RANGE SELECTED IN Q1050]) from a bank? 12 SMEs in MENA/Leveraging Growth Finance for Sustainable Development FIGURE 10: Barriers to Bank Funding by Country Barriers or Obstacles to Receiving Bank Funding Jordan Saudi Arabia U.A.E. Within the MENA Lack of appropriate collateral 67% 86% 33% region, there are Interest rates too high 87% 25% 31% notable differences Lack of appropriate guarantors or co-signers for loans 65% 24% 16% Having the right contacts (access) at funding sources 37% 10% 29% across countries. Lender is concerned of loan default 31% 6% 20% Track record/not enough experience or not in business long enough 6% 6% 31% Lender questioned plan or ability of business to succeed/be profitable 10% 6% 20% Entrepreneurs' lack of business or management skills/expertise 12% — 22% Monopoly exists in the market — difficult to compete 6% 8% 18% Lender seeks audited financial statements 21% 2% 4% Size of business (no. of employees/revenue) was not what lender req'd 10% 14% — Entrepreneurs' income history 12% 2% 8% Bias due to the personal background of the entrepreneurs involved — 8% 6% Did not want to give up the level of equity required 4% 4% 4% Length of terms too long (spans too many years) 4% 4% 4% Length of terms too short (not enough time to pay back) 8% — 4% Business was not in the industry that lender specifies 8% — 4% Education of the entrepreneurs involved 2% — 8% Could not agree on an exit strategy to buy out external financers — 4% 6% Lender does not believe the business is staffed appropriately — 6% — Other 2% 6% 2% Not aware of any barriers to receiving bank financing — — 24% BASE: JORDAN (n=52), SAUDI ARABIA (n=51), U. A. E. (n=51) Q: Which, if any, of the following do you consider barriers or obstacles facing your business in terms of your ability to receive this level of funding ([INSERT RANGE SELECTED IN Q1050]) from a bank? SMEs in MENA/Leveraging Growth Finance for Sustainable Development 13 FIGURE 11: Experience Securing Funding FIGURE 12: Experience Securing Funding by Country Ease of Securing Funding Ease of Securing Funding By Country 0% Very easy 12% 8% Somewhat easy 24% Neither easy nor dif cult 31% 12% 18% Somewhat dif cult 55% 27% Very dif cult 22% 48% 41% 37% 10% 8% 48% Jordan Saudi Arabia U.A.E. Somewhat easy Somewhat dif cult Neither easy nor dif cult Very dif cult BASE: TOTAL RESPONDENTS (n=154) BASE: TOTAL RESPONDENTS (n=154) Q: How would you rate your overall experience in trying to secure this range of funding Q: How would you rate your overall experience in trying to secure this range of funding ([INSERT RANGE SELECTED IN Q1050]) for your business? ([INSERT RANGE SELECTED IN Q1050]) for your business? Regardless of the amount of funding sought, only 12% would B. BUSINESS DEVELOPMENT ASSISTANCE consider it "somewhat easy" to secure the funding while two Business development assistance encompasses a range thirds (66%) considered it "difficult" (Figure 11). of services from developing a business plan to building Again, there were variations across countries. Nearly one market linkages. The study found that business skills and quarter (24%) of Emirati owners and one in ten (12%) development assistance are perceived by many SME owners Jordanian owners described the process of securing funds to be nearly as important as obtaining financing for their as "somewhat easy" but in Saudi Arabia, none described businesses. During a "chip allocation" exercise, where SME the process as "somewhat easy" (Figure 12). Instead, nearly owners were asked to weight the importance of business all Saudi respondents (92%) noted some level of difficulty development assistance in relation to financing to the long- in securing funds. In interviews with lenders, information term success of their SME by allocating chips, SME owners asymmetry between lender and borrower was noted as gave nearly equal weight to business development assistance an impediment to SME lending as it drives up the risk (46 chips out of a possible 100) versus financing (54 chips premium. Interest rates also tend to be high because lack of out of a possible 100). SME owners in the UAE placed the credit information makes it difficult for banks to distinguish most importance on business development assistance (61 between low- and high-risk debtors. Throughout MENA, chips), perhaps due to easier access to financing for local intermediaries reported that market information was lacking, citizens (Figure 13). Across the region, business development which explains some of the difficulty SME owners experience assistance is most attractive to younger SME owners and to when trying to secure funding. female SME owners. "What Emirati SME owners need is not finance but entrepreneurial attitudes and continued business assistance and mentoring for business to be mature and stable. I wish I had known or had someone advise me about accounting, cash flow, marketing and customer service when I started my business. I would have [acquired] more customers and lots more money in little time." — An Emirati SME owner 14 SMEs in MENA/Leveraging Growth Finance for Sustainable Development Intermediaries noted that there is a strong need for a opportunities for smaller firms to fill those needs. In MENA, model that offers both business development assistance and however, large firms tend to build their own supply chain financing to SMEs, a sentiment seconded by SME owners and support systems in-house, which cover a broad range who believe that such an integrated model will help to of functions like human resources, web development, ensure better SME sustainability. SME owners recognize marketing, and maintenance to distribution, insurance that lack of business and managerial skills, an impediment and customer service, rather than outsourcing. Without to getting bank loans, is also a major reason why businesses domestic supply chain opportunities that are created by fail. Agreement is nearly unanimous (97%) among SME large firms trying to cut costs and focus on core businesses, owners and intermediaries that SMEs would be more likely SMEs in MENA have more limited market prospects and a to succeed if they received business development assistance greater risk of failing. Creating new market opportunities in addition to funding. The more employees an SME has, the and establishing market linkages is critical to the survival more likely its owners "strongly agree" that such support of many SMEs. This is a key area where SME support services improve its chances of long-term success. programs can provide much-needed assistance, by providing access to new markets and customers, including export SME owners, in recognizing the need for and importance markets and multinational firms. of business development assistance, seek a diverse range of services. From a lengthy list of skills and capabilities D. ENABLING BUSINESS ENVIRONMENT presented in the survey, better access to customers and A favorable regulatory environment is also crucial to markets, marketing, strategic positioning, customer service, SME success. Government inefficiencies and burdensome business planning, finance and accounting were deemed the regulatory obligations can severely hamper SMEs' ability most critical by business owners (Figure 14). However, the to survive. Establishing effective policies that address most effective form of business development assistance is market failures, which stack the odds against SMEs, is also one in which services are tailored to the individual needs of important to building a system in which SMEs can flourish. each SME over the life cycle of the business. SME owners The "Intermediary" respondents provided important insights have varying levels of business acumen and managerial on the limitations of the government's policy to support the capabilities and the needs of their businesses may also vary SME sector. Most of the comments provided by respondents drastically across sectors and markets. Generic trainings and center on two key issues: other support services are insufficient to meet the needs of Missing Middle SMEs, which must tackle numerous business • Government inefficiencies related to procedures of and market challenges to survive and succeed. starting and running a business. Many SMEs choose to remain informal because the costs of regulatory process C. MARKET LINKAGES of registering businesses and joining the formal economy A dearth of market linkages and supply chain opportunities sometimes outweigh the economic benefits. In Egypt, an for SMEs also hampers their ability to survive in MENA. estimated 75% of micro and SMEs operate in the informal In developed economies, large firms increasingly place part market.13 According to the Egypt Labor Market Survey, of their work outside the organization since subcontracting these enterprises provided around 80% of the jobs in the and outsourcing can reduce production costs. This provides nonagricultural private sector. FIGURE 13: Business Development vs. Financial Funding Allocation of 100 Chips to Areas of Importance in Creating a Sustainable and Long-Lasting Business Business Development Skills/ Financial Funding Assistance/Expertise Business Development Skills/ Assistance/Expertise Jordan 62.0 38.0 46 chips Saudi Arabia 61.4 38.6 54 chips U.A.E. 38.8 61.2 Financial Funding BASE: JORDAN (n=52), SAUDI ARABIA (n=51), U. A. E. (n=51) Q: Imagine you have 100 chips to allocate. Thinking specifically about the long-term success of your business, how many chips would you allocate to the importance of receiving financial funding and how many chips would you allocate to the importance of receiving business development skills and expertise to creating a sustainable and long lasting-business? You may allocate any number between 1 and 100 to each item as long as the overall total adds to 100. SMEs in MENA/Leveraging Growth Finance for Sustainable Development 15 FIGURE 14: Business Skills & Support Services Important Business Skills/Support Services (Top 2 Box %) Very Important Extremely Important Better access to customers/mkt share 29% 67% 95% Insurance 28% 23% 51% Mktg/strategic positioning of business 27% 59% 86% Expansion and global/int'l knowledge 27% 23% 50% Customer Service/CSR 35% 44% 79% Inventory related 25% 25% 50% Business planning/strategy dev. 34% 38% 73% Assist. securing vendors/contractors 30% 19% 49% Industry/Sector expertise/knowledge 39% 34% 73% Purchasing equiptment 20% 24% 44% Networking 21% 52% 73% Legal assistance 17% 26% 43% Contracts and agreements 34% 38% 72% Feasibility studies 21% 21% 43% HR/Human capital/recruitment 31% 40% 71% Navigating regulatory enviroment 28% 14% 42% Market research and/or market data 40% 31% 70% Investing/investment advice 24% 17% 41% Communications 34% 34% 69% Technical assistance 21% 19% 40% Instilling work ethic in staff/new hires 29% 40% 69% Avoid/Navigate bureaucracy 26% 14% 40% Accting/inc stmts/balance sheets 36% 30% 66% 18% 16% 34% Real estate or property related Financial management skills 27% 30% 57% Copyrights 16% 18% 34% Understanding cash ow, risk/opport. 31% 27% 57% Tax management 6% 21% 28% Supply chain and partnerships 31% 25% 56% Corp. governance and standards 16% 6% 21% BASE: TOTAL RESPONDENTS (n=154) Q: For each of the following business skills/support services, rate how important they are for helping your company grow and succeed for the long term. • Administrative and regulatory obligations are time- 3. Developing a better understanding of the impact of SMEs and cost-consuming burdens for SMEs. Jordanian and in economic development. Egyptian participants noted that a tax system that does 4. Helping the collection of data on the sector in order to not provide tax exemption for SMEs is a major hurdle to make intercountry and interregional comparisons. SME success and competitiveness. As such, the tax system discriminates against SMEs. Most OECD countries offer 5. Coordinating multistakeholder approaches, as needed, lower tax rates for SMEs that enhance entrepreneurship to ensure all are targeting the correct client group.15 and job creation.14 There are recent signs that governments in the region The Need for a Specialized SME Authority are realizing the benefits of establishing such authorities. The creation of specialized SME authorities, which Qatar recently announced the launch of an SME authority understand the special needs and challenges of SMEs, — Enterprise Qatar — that will champion SME policies represents and lobbies for them, champions SME-enabling and coordinate debt, equity, training and business services policies, and oversees and coordinates the provision of programs. Saudi Arabia is considering a new SME agency targeted services and programs to the sector, can help and the UAE is drafting a national SME promotion law. address many of the structural challenges faced by SMEs Lastly, members of Kuwait's parliament, which is working to in MENA. Successful global experiences from developed create new engines for job creation and diversify its economic and emerging economies, including the U.S., Canada and base, have presented a draft bill on the establishment of an Singapore, suggest that independent SME Authorities are independent SME authority for the country. effective in: 1. Facilitating the development of policies that encourage SME sector growth. 2. Enabling the accurate evaluation of the sector so that the impact of regulatory reform and financial and nonfinancial programs can be monitored and assessed. 16 SMEs in MENA/Leveraging Growth Finance for Sustainable Development 5 POLICY IMPLICATIONS AND RECOMMENDATION: THE NEED FOR AN INTEGRATED & COORDINATED MODEL FOR SME DEVELOPMENT With a deeper understanding of the unique needs of and • A wide menu of SME support services that can be challenges facing Missing Middle SMEs, policymakers, tailored to the needs of individual SMEs and is available practitioners and academics can turn their attention to throughout its business life cycle. Continuous support solutions that address those needs, mitigate the challenges, to SMEs, whose needs change over time, increases the eliminate barriers and ultimately create an enabling likelihood of success. SME support providers should work environment for SMEs to flourish. An ideal support model for with individual SMEs to develop specific strategies that SME development is one that is integrated and coordinated, address the issues challenging the business. This includes: and provides both patient growth capital, structured with – Providing support and guidance to rigorously plan and terms that are appropriate to the needs of SMEs, as well as professionally manage businesses in a manner that customized business development assistance over the life drives positive cash flows, higher revenues and profits, cycle of the business. greater likelihood of business success and, ultimately, In adopting an integrated model, the following features business sustainability. should be considered: – Introducing good corporate governance to SMEs to • Loan applications that are assessed on the basis of enhance transparency and confidence in management, the potential of the businesses and credibility of the which will in turn make them more likely to get the entrepreneurs, not solely on the basis of collateral, support they seek from banks and potential investors. guarantors or length of operations. • Better communications and information systems to reach • Specialized SME loan funds or loan guarantee schemes SMEs and inform them of available support programs and that would encourage more lending to the Missing Middle. how to access them. • Access to focused, well-coordinated local support and • More effective partnerships between SME support expertise. SMEs face unique challenges particular to their providers to improve synergy and cooperation, and reduce sector and market. They need access to teams of specialists duplication and waste of resources. who understand the unique set of challenges facing a business in a particular local market. SMEs in MENA/Leveraging Growth Finance for Sustainable Development 17 APPENDIX A: FIGURES AND GRAPHS FIGURE 15: SME Employee Numbers Number of Employees Jordan Saudi Arabia U.A.E. 6-9 people 38% 52% 22% 39% 10-49 people 54% 44% 65% 53% 50-99 people 6% 2% 12% 4% 100-150 people 3% 2% 2% 4% BASE: TOTAL RESPONDENTS (n=154) Q: How many employees, full-time and/or part-time, are employed at your business? Figure 15 shows that the majority of SMEs surveyed had between ten and 49 employees (54%). Those in Jordan tend to have smaller numbers (below ten) than the other markets. Saudi SMEs in particular were more likely to have larger numbers of employees. This might be related to the larger size of the Saudi market and economic activities. It was also found Jordanian owners are most likely to employ nationals as 92% are composed of citizens. KSA and the U.A.E. are the complete opposite, showing a much stronger propensity to employ foreign workers (Figure 16). It was also found that larger the SME, the more likely it is to employ more expats than nationals. FIGURE 16: Employee Breakdown into Nationals and Foreigners Foreigners Nationals/Citizens Jordan 8.2% 91.8% Saudi Arabia 73.3% 26.7% U.A.E. 85.4% 14.6% BASE: JORDAN (n=52), SAUDI ARABIA (n=51), U. A. E. (n=51) Q: Approximately what percentage of your employees are nationals/citizens of…? Q: Approximately what percentage of your employees are foreigners/not nationals or citizens of…? In terms of revenue size (annual sales), most SMEs cite revenue levels between $50,000 and $250,000 USD. SMEs in KSA and the U.A.E. skew slightly higher on revenue. 18 SMEs in MENA/Leveraging Growth Finance for Sustainable Development FIGURE 17: Business Revenue 2010 Business Revenue Jordan Saudi Arabia U.A.E. Less than US $50,000 1% — 2% — $50,000–$250,000 37% 63% 22% 25% $250,000–$500,000 29% 17% 37% 31% $500,000–$1m 20% 15% 16% 29% $1m–$3m 11% 4% 16% 14% $3m–$5m 2% — 6% — $5m–$10m 0% — — — $10m or more 1% — 2% — BASE: TOTAL RESPONDENTS (n=154) Q:- Which of the following best describes your business's approximate total revenue in 2010? In terms of ownership, SMEs in the study were mostly male-owned. Women own only 20% of the SMEs surveyed in this study either wholly or partially. Female employees, on average, comprise 16% of SME workforces of companies in the study, though nearly half (44%) employ solely men. The Jordan and U.A.E. companies in the study are most likely to have wholly owned female businesses. KSA is the least likely with only 2% wholly owned by women. FIGURE 18: Female SME Ownership and Female Employee Percentages for Survey Participants Business Owned by Women Percentage of Employees Who Are Women No women owners 44% None 10% Partially Wholly 1%–10% 20% 10% 11%–25% 17% 26%–50% 11% 80% On average, 16.1% of employees are women 51%–75% 3% 76%–100% 6% BASE: TOTAL RESPONDENTS (n=154) Q: Is your business partially or wholly owned by a woman/women? Q: Approximately what percentage of your employees are women? SMEs in MENA/Leveraging Growth Finance for Sustainable Development 19 FIGURE 19: Firmographics for Study Participants Years in Operation Process of Registering Registration Getting Easier or Harder <1 yr 1% 1-2 yrs Dif cult More 10+ yrs Dif cult 16% 13% 17% 16% Neither Stay Same 3-5 yrs 54% Easy 50% 6-10 yrs Easier 33% 29% 37% 34% Jordan Saudi Arabia U.A.E. Jordan Saudi Arabia U.A.E. Jordan Saudi Arabia U.A.E. <1 yr — — 4% Easy 25% 25% 35% Easier 35% 24% 43% 1-2 yrs 4% 14% 22% 3-5 yrs 17% 29% 53% Neither 52% 55% 57% Staying at same 54% 43% 53% 6-10 yrs 50% 39% 20% Difficult 23% 20% 8% More difficult 12% 33% 4% 10+ yrs 29% 18% 2% BASE: TOTAL (n=154), JORDAN (n=52), SAUDI ARABIA (n=51), U. A. E. (n=51) Q: How many years has your business been in operation? Q: How would you describe the process of registering your business in this country? Q: Do you believe the process of registering businesses in this country is getting easier, is the same as it always was or is getting more difficult? 20 SMEs in MENA/Leveraging Growth Finance for Sustainable Development APPENDIX B: BIBLIOGRAPHY 1 To communicate with authors: firstname.lastname@example.com and email@example.com 2 World Bank. The Financial Sector Flagship report, "Financial Access and Stability: A Roadmap for the Middle East and North Africa." 2011 http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/MENAEXT/ EXTMNAREGTOPPOVRED/0,,contentMDK:22734614~pagePK:34004173~piPK:34003707~theSitePK:497110,00.html 3 R. Rocha, S. Farazi, R. Khouri, D. Pearce. 2011. The status of bank lending to SMEs in the Middle East and North Africa region: The results of a joint survey of the Union of Arab Bank and the World Bank (2011), Policy Research Working Paper World Bank. 4 Ewing Marion Kauffman Foundation. The Importance of Startups in Job Creation and Job Destruction, 2010. 5 Ayyagari, Beck, & Demirguc-Kunt. 2007. "Small and medium enterprises across the globe: A new database," Small Business Economics 29, 415-434; Klapper, Leaven & Rajan "Entry regulation as a barrier to entrepreneurship," Rauch "Modeling the informal sector formally." 6 Ragui Assaad and Farzaneh Roudi-Fahimi. Youth in the MENA: Demographic Opportunity or Challenge? Population Reference Bureau, 2007. 7 ILO KILMnet Dataset, 2011. 8 Navtej Dhillon and Tarik Yousef. Generation in Waiting: The Unfulfilled Promise of Young People in the Middle East. The Brooking Institute, 2009. 9 Murphy, L. M., and P. L. Edwards. Bridging the Valley of Death: Transitioning from Public to Private Sector Financing. Golden, CO: National Renewable Energy Laboratory, 2003. Online at: www.cleanenergystates.org/CaseStudies/NREL-Bridging_the_Valley_of_Death.pdf 10 The global experience shows that due to a lack of suitable exit strategies and consequent investment lock-ins in old deals, new private equity and venture capital investments declined in 2008. According to National Venture Capital Association, the total value of VC funding declined by 13% in 2008 to $4bn. 11 World Bank's Enterprise Survey. http://www.enterprisesurveys.org/?d96a349c52fc4f68eea46a47ccb3d360 12 http://www.enterprisesurveys.org/ 13 Ministry of Foreign Trade http://www.sme.gov.eg/English_publications/MSME_Profile_2003.pdf 14 Chang Woon Nam and Doina Maria Radulescu. 2007. Effects of Corporate Tax Reforms on SMEs. Small Business Economics. 29:101-118. 15 Saudi-US Relations Information Service. An "SME" Authority for Saudi Arabia. Feb 2, 2011. http://www.susris.com/2011/02/02/a-sme- authority-for-saudi-arabia/ SMEs in MENA/Leveraging Growth Finance for Sustainable Development 21 Citi Foundation and Shell Foundation collaborated to commission independent research from Heart and Mind Strategies, an international research and consulting firm, to conduct research in the Middle East in late 2011 through early 2012. The research sought to capture the current SME finance environment and "market offerings" for the Missing Middle in the Middle East with a view to understanding the opportunities for promoting growth finance into the region. This research looked beyond what is already "known" to assess what current financing strategies SMEs are using, the size of the funding gap, the potential for growth and the kind of service offering that would suit their needs. A key intention of the research program is to provide a thought leadership platform for engaging relevant parties to encourage discussions and potentially reforms to ensure that this section of the market can source adequate funding in the future and sustainable socioeconomic growth opportunities can be maximized. This funding should comprise much more than the traditional SME funding product offering that simply offers finance in the absence of critical strategic advisory services. ABOUT SHELL FOUNDATION Shell Foundation is an independent charitable foundation that was established by the Shell Group in 2000 to catalyze scalable and sustainable solutions to global development challenges. We apply business thinking to a range of social and environmental issues linked to the energy industry — seeking to harness links to Shell where possible to deliver greater development impact. Over the last 12 years we have developed an "enterprise-based" approach to: identify the market failures that prevent products and services that can support sustainable development from reaching the poor; co-create new business models with long-term "social enterprise" partners to service these markets; and to provide extensive business development support to help these partners develop the skills, capacity and incentives to operate at scale and achieve financial independence. By applying this approach to major global challenges such as job creation through small and medium enterprises, access to modern energy, urban mobility, cleaner cooking solutions and sustainable supply chains — and by learning from both success and failure — Shell Foundation has created several strategic partners that are now delivering large-scale impact in multiple countries across Africa, Asia and Latin America. Additional information can be found at www.shellfoundation.org ABOUT CITI FOUNDATION The Citi Foundation is committed to the economic empowerment and financial inclusion of individuals and families, particularly those in need, in the communities where we work so that they can improve their standard of living. Globally, the Citi Foundation targets its strategic giving to priority focus areas: Microfinance, Enterprise Development, Youth Education and Livelihoods, and Financial Capability and Asset Building. The Citi Foundation works with its partners in Microfinance and Enterprise Development to support environmental programs and innovations. Additional information can be found at www.citifoundation.com ABOUT HEART+MIND STRATEGIES At Heart+Mind Strategies, our mission is to provide strategic decision-making insight and advice to help our clients understand the hearts and minds of the people that matter most to their enterprise, and transform that understanding into measurable success. Our approach is grounded in a rigorous framework and experience-driven set of principles that have elected presidents and prime ministers, strengthened corporations, bolstered declining industries, and reinvigorated global brands. Headquartered in Northern Virginia, USA, the core leadership of our team has worked together for over 20 years, and we apply state-of- the-art and forward-looking qualitative and quantitative market research techniques within our unique framework and set of principles. Additional information can be found at www.heartandmindstrategies.com ABOUT THE AUTHORS Dr. Khalid Al-Yahya has over 18 years of global and MENA experience in strategy, policy, and governance research. His work experience includes serving as an Associate at Harvard University's Kennedy School, Director of Public Management and Policy Program at Dubai School of Government, an Assistant Professor at Arizona State University's School of Public Affairs, an official at the Ministry of Finance and National Economy in Saudi Arabia, and recently the founder and director of Madarek House of Consulting and Research. He also served as a senior adviser in several international organizations and corporations, including the OECD, UNDP, World Bank, Swedish International Development Agency, Bill Gates Foundation, Visa International, and to several government agencies in the GCC countries. His work has appeared in many international and professional publications and he has spoken in more than 90 international and national conferences and forums in 38 countries. email@example.com Jennifer Airey is a Partner at Heart+Mind Strategies. She has been a global researcher for almost two decades. Jennifer uses research- based insights to craft benefit-driven strategies and messaging to motivate audiences in positive and personally relevant ways. She has expertise in global branding, corporate reputation, advocacy and positioning that spans multiple industries in more than 30 countries. She has been the lead researcher/investigator on numerous international qualitative and quantitative research studies among hard to reach audiences such as senior government officials, board members/C-Suite executives, NGO heads, and many facets of the general, commercial, governmental and non-profit populations. She has counseled clients and coalitions such as Microsoft, UBS, Visa, Sun Life Financial and the National Cyber Security Alliance. Jennifer is a published author who holds an Honors BA and MA in Sociology from the University of Windsor in Ontario, Canada and she is on the executive counsel of the New York Association for Public Opinion Research (NYAAPOR). email@example.com 1036491 01/13
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On 40 years ago: Young Lawrence girl works hard for her musical dream
Sarah St. John 2 years ago
Sarah appears to have followed her dreams. A quick web search finds her in Minneapolis as recently as 2010-2011: "Acting Concertmaster Sarah Kwak, a Minnesota Orchestra member since 1988, has performed numerous solos with the Orchestra. Kwak, a 2008 McKnight Artist Fellowship winner, has also soloed with many orchestras, including the Philadelphia Orchestra, Houston Symphony, and Curtis Chamber Orchestra. An avid chamber musician, she has toured internationally with the Casa Verde Trio, and has participated in the Marlboro Music Festival, Pensacola Festival, Pittsburgh Summerfest, Bargemusic of New York and Festival Mozart in France. She was a founding member of the Rosalyra String Quartet, which gave its New York debut in 1996 and was awarded a McKnight Artist Fellowship in 2000. The ensemble has released several CDs on the Artegra label.
"Born in Boston and raised in Lawrence, Kansas, Kwak entered Philadelphia's Curtis Institute at age 12, studied briefly at the Vienna Hochschule fur Musik and graduated from Curtis at age 19. Among her teachers were Joseph Sivo, Ivan Galamian and Szymon Goldberg. The winner of numerous competitions, including the 1989 WAMSO Young Artist Competition, Kwak was also the first artist ever to capture all three memorial awards at the Washington International Competition. Before coming to the Twin Cities, she served on the faculty of Princeton University." [From http://www.msomn.org/FeaturedArtists/SarahKwak/tabid/251/Default.aspx]
In spite of receiving early honors for his skill on the viola, her brother Larry took a different career path....... http://wellcommons.com/groups/wellnes...
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Lawrence Memorial Hospital 785-505-5000
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We are setting the signals - in Germany and in Europe
At the DVGW (Deutscher Verein des Gas- und Wasserfaches e.V. - Technisch-wissenschaftlicher Verein = DVGW German Technical and Scientific Association for Gas and Water) the transfer of know-how and communication is at the centre of attention. On the basis of high technical competence we choose an open dialogue. We are transparent, and we are neutral.
The DVGW is indispensable for the industry self-regulation in the gas and water supply industry. Our technical rules set the standard in both Germany and within Europe the utmost safety combined with the best possible efficiency.
The staples water and energy always have to be secure and available in high quality. This requirement has been the incentive and continuous basis for the technical rules of the DVGW - for more than a century.
Long-term experience combined with our current knowledge result in our motives and our daily work:
- technical and hygienic safety
- optimising gas- and water- supply technology from an economic point of view
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In these matters, we are independent, non-profit making and neutral in accordance with industrial self-regulation.
The DVGW at a glance
24. July 2015
News on the DVGW Technical Rules No. 6/15
15. July 2015
The "Profile of the German Water Sector" published
The "Profile of the German Water Sector" provides a comprehensive and up to date picture of water supply and wastewater disposal services in Germany.
9. July 2015


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Holiday Inn Express & Suites - York
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The long day of driving included several encounters with slowed traffic and construction. We finally arrived in Gettysburg. We decided to drive through town to see what eating establishments were still open - trying to avoid the quick burger & fries menu. We ended up in the park and decided to go see the Eternal Flame. We'll be visiting the site again tomorrow, but wanted to get some pictures of the flame in the twilight / dusk. ...
... had showers and then wandered down the roads looking for restaurants to eat at for dinner. We ate at a brasserie 2 miles away, it was delicious and the waitress had a great sense of humour! XD We came home and jumped into bed and slept.. Ready to begin again the next day, I have to go! Later Gators! LJ ...
York Fair
... home for the foreseeable future, possibly for good, but at least for now.
And it was also more foreign to me than anything I had experienced in the UK, Iceland, Hungary, France, Switzerland, Brazil, or Norway in the past year of my life. As I looked up at the crowd – the show, the people, the occasional Confederate flags – to me it was all foreign. Foreign and really, really strange.
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We're in Florida!!!
... the La Quinta Panama City Beach.
I give it 2 PAWS UP. They even have a trail in the woods next door to go n pee n stuff. It's nice n new here. I like it!
MUNCHY - Well, I guess that's enough for tonight. Jack n I really need to play for a while before bedtime so see ya tomorrow! Oh, yea, it's the Central Time Zone here. So it's an hour earlier than back at home. That means it an hour earlier here! That's really neat, huh.
Good night guys!


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Despite going behind to their npower League Two opponents, Blues booked their place in the next round thanks to a rampant second half and goals from Marlon King, Steven Caldwell, Peter Lovenkrands, Wade Elliot and Ambrose himself.
The new signing from Crystal Palace was pleased to make his bow at St. Andrew's, even if the performance had not gone entirely to script:
"Well obviously it was a fantastic result for us. It was a sloppy start from the team; there were a lot of signs that Barnet were going to go ahead. We knew that at half-time and we didn't need telling. The manager agreed with the players and echoed that we were not quick enough. The second half was a totally different game and a fantastic result."
Ambrose wasted no time in opening his Blues goalscoring account, cutting in from his left-midfield position to sumptuously curl the ball past the outstretched Liam O'Brien in the Barnet goal from 25 yards. It was a glimpse of what Blues fans can expect to see throughout this campaign, but Ambrose is just as happy to set up the other players as he is to bag himself.
"I was pleased to get out there and pleased to play my first game at St. Andrew's and the goal was a bonus. I've made it clear I'm not putting any pressure on myself to score goals, we have a lot of fantastic goalscorers at the club and I'm happy to feed them and happy for them to get the goals. As long as we're winning games that's the main thing, but it's always a bonus to get a goal."
Ambrose was quick to praise the fans for sticking with the side at 1-0 down and describing them as the "12th man" and is now looking forward to a league game against Charlton this Saturday. There were five new signings on display against Barnet and Ambrose feels that they are all settling in well ahead of the clash with his former club.
"If we're called upon we'll all be ready to go, everyone has welcomed us with open arms and it's been fantastic. It's a great club, I spoke to a few people before I arrived and everyone said it's a fantastic bunch, the manager and staff are great. It shows out there (on the pitch) too, it's like the lads have been together a long time. Hopefully we can kick on now in the league."
30 Jul 2015
Wolves home game to be...
The Football League have confirmed that Blues' Sky Bet Championship home fixture against Wolverhampton Wanderers in October is to be broadcast on Sky Sports.
28 Jul 2015
Blues Development Squad...
Blues Development Squad travel to The Automated Technology Group Stadium this evening for a pre-season friendly against Solihull Moors.
27 Jul 2015
Reaction: Benfica B 1,...
Mark Sale believes that it was another important session for the team with most players getting 90 minutes.
25 Jul 2015
Reaction: Burton Albion 2...
Boss Gary Rowett admits that Blues conceded two sloppy goals in their first pre-season defeat at the Pirelli Stadium.
24 Jul 2015
Affordable football at...
Birmingham City is working hard to make football affordable for its supporters.
18 Jul 2015
Reaction: Kidderminster...
Birmingham City manager Gary Rowett gives his reaction as Blues were held to a 1-1 draw at Aggborough.
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