In what appears to be an almost-everyday custom for the United Nations, 27th June of every year was declared to be the World Micro, Small and Medium Enterprises Day. On the same day as this last year, we celebrated the maiden of this event, and today, we commemorate the necessity and impact MSME’s have on the economy and society.
The enterprises generally employing fewer than 250 persons, constitute the backbone of a more substantial portion of worldwide economies, playing a significant role in developing countries. According to the data presented by the International Council for Small Businesses (ICSB), formal and informal MSMEs make up more than 90% of all firms and account for 60 to 70 percent of total employment on an average and 50% of Gross Domestic Profit (GDP). The General Assembly of the United Nations took these numbers and facts into cognizance, recognized the importance of these enterprises and resolved to declare every 27th June the Micro, Small and Medium-sized Enterprises Day in a bid to raise public awareness of these brands’ contributions to sustainable development.
The United Nations recognized MSMEs as the first responders to the societal needs of various communities in the world. These types of enterprises are self-saddled with the mandate to bring about substantial employment and revenue generation opportunities across the planet. They have, as a result of these contributions, been identified as a major vehicle which alleviates poverty and promotes development. According to the United Nations, these enterprises tend to employ a larger share of the vulnerable sectors of the workforce, such as women, youth, and persons from poorer households. “MSMEs can even sometimes be the sole source of employment in the rural settlements,” UN adds. As such, MSMEs as a set is the primary income provider for the income distribution at the “base of the pyramid.”
What is significant about June 27 is that the United Nations used this day to remind the world of the substantiality of MSMEs, along which line different considerations are made bespoke. As the union says that these businesses should be the first responders to societal needs and providers of the safety net for inclusiveness, the General Assembly highlights the following topics which MSMEs and related bodies should ponder on.
Access to Finance
Although a significant number of MSMEs generate most of the new jobs in the world, yet they face many bottlenecks in their daily operations as well as in their traction-gaining process. Access to funds is often identified as one of the main obstacles affecting these enterprises disproportionately. According to the World Bank, there are 200 to 245 Mn formal and informal enterprises that do not access to a loan or overdraft and in need of one. According to the study still, there are MSMEs in those millions that do have a loan but still find it constraining to access finance. This number makes up to over 90 percent of such enterprises.
Financing constraints are even more magnified for informal firms, which have the tendency to be small-sized. And, despite being often less productive than formal enterprises, they contribute substantially to employment and economic activity. Informal firms have been estimated to account for around 74 percent of all MSMEs worldwide, and approximately 77 percent of all MSMEs in third-world countries. Unregistered firms often rely on informal financing, which – despite being essential in facilitating finance access – is associated with lower firm growth and increased firm illegality.
UN posits that a developed financial sector helps to mobilize and allocate resources and manage risks, contributing to private sector development. Finance helps economic growth, and ultimately, job creation.
The United Nations in their own way uses this information to inform the world of this challenge MSMEs face and in the same vein urges governments, financial institutions, and private fund endorsers to avail these businesses the funds required to impact world economy. As said, this challenge brings about an opportunity for policymakers and the private sector to intervene at various levels to try to encourage formalization, participation, and growth of MSMEs in international, regional and national markets, not excluding through access for all to capacity-building and financial services like affordable microfinance and credit.
How MSMEs Contribute to the Sustainable Development Goals (SDG)
The United Nation says that MSMEs are vital in achieving the Sustainable Development Goals, especially in promoting innovation, creativity and decent work for all and sundry. Efforts to enhance access to finance for SMEs across key sectors of national economies are an essential element of implementation of the SDG, which targets 8.3 and 9.3 calls for improving the access of SMEs to financial services. Additionally, SMEs constitute a vital component of the implementation of SDG 8 (decent work and economic growth) and SDG 9 (industry, innovation, and infrastructure).
Celebrating the Day
The General Assembly of the United Nations cordially invites all Member States, organizations of the UN system and other international and regional organizations, as well as civil society, including non-governmental organizations, academia, individuals and other relevant stakeholders to observe every 27th of June in an appropriate manner and in accordance with national priorities, in a bid to raise public awareness of the contribution of MSMEs to sustainable development. The UN in the same ways urges the Member States to facilitate the observance of the Day by promoting research presentations, policy discussions, practitioner workshops and business owner testimonials from around the world.
The slogan for this year’s conclave is Youth Dimension. Happy World Micro, Small and Medium Enterprises Day!