The Saudi Arabian government and the micro and small enterprise business sector work in tandem in the dynamic ecosystem of Saudi Arabian economy. This collaboration has accelerated the economic growth rate of the Saudi Arabia saves to heightened growth and hence contribution of the micro and small enterprise business enterprises. Whereas the Saudi government establishes the rules, that establish as well as clarify the property rights to maintain inequality within the bounds as well as make the policies, relating to trade and investment, the micro and small enterprise have traded and invested greatly in the country (Zamberi Ahmad, 2012). The micro and small enterprise business sector is the predominantly private as well as spans via the gamut of the economic activity including manufacturing, agriculture, and services such as social services and trade. The micro and small enterprise businesses in the private sector have diverse types of market players including small enterprise, micro and medium businesses.
The Saudi Arabia’s economy is that with efficient bureaucracy thereby accelerating and facilitating the entrepreneurship through the establishment of micro and small enterprises as well as providing the enabling environment for the citizens to realize their full potential. In so doing, the Saudi economy has enhanced the living standards as well as promoted the growth alongside shared prosperity through the micro and small enterprise business sector. Saudi Arabia adopts a criteria that uses number of workers and value of assets to define the micro and small enterprises (Zamberi Ahmad, 2012). Accordingly, following the recognition of the micro and small enterprise business’ rising contribution to the Gross Domestic Product and total employment to over fifty percent in the high-income economies, Saudi Arabia has dropped the perception of micro and small enterprise sector as merely a synthetic construction that targets predominantly political and social development, a view that featured greatly till late 1990s. The country currently follows more than a single definition of the micro and small enterprise based on number of employees and annual revenue. Accordingly, micro business category is defined by between 1 and 2 employees and with annual revenue of less than USD 27,000 whereas small enterprise category is defined by between three and 49 employees with USD of between 27,000 and 1.3 million. Nevertheless, the country acknowledges the need for a more clear and precise Kingdome-wide strategy for the micro and small enterprise with both single institution and definition (Zamberi Ahmad, 2012).
The micro and small enterprise business remain heterogeneous class of businesses in Saudi Arabia. The micro and small enterprise in Saudi Arabia are of differing sizes, nature and can operate in various markets, including urban, local, national, rural as well as global markets. They are operating a gamut of business activities that range from a single artisan to a small enterprise engineering and software organization. The micro and small enterprise business in Saudi Arabia embody diverse levels of skills, sophistication, capital, as well as growth orientation. This kind of embodiment is based on the size as well as market served by micro and small enterprise businesses in Saudi Arabia. The economy has benefited from the micro and small enterprise business sector greatly on the basis of economic activity curbing the monopoly, entrepreneurial opportunities, absorbing modern economic fluctuations, innovation as well as employment.
The micro and small enterprise business sector is presently accounting to ninety percent of the entire enterprises in Saudi Arabia. Accordingly, the micro and small enterprise business sector is currently providing valuable opportunities that have enhanced both diversity and productivity of the Saudi Arabia’s economy. The micro and small enterprise business have contributed over thirty-three percent to the Saudi’s economy, a figure that is greater than many of the countries in the Gulf Cooperation Council (GCC) economic region. Due to the heightening significance of the micro and small enterprise businesses in Saudi Arabia’s economy, the government of Custodian of 2 Holy Mosques, King Salman Bin Abdulaziz, has embarked on initiatives to enhance, promote as well as develop the micro and small enterprise business sector in Saudi Arabia (Tuncalp, 2009).. This government’s financial initiative has purposed to consider various mechanisms through which the micro and small enterprise businesses can be supported in the many fiscal as well as social variables which focus towards the imperative role that micro and small enterprise business play in the stimulation and development of the Saudi Arabia’s economy. The key enablers of Micro and Small enterprise Businesses in Saudi Arabia include strong regulatory environment, political stability as well as solid infrastructure in the country.
The Micro and small enterprise in Saudi Arabia currently account for 90 percent of all the businesses in the country. They provide the country with valuable opportunities to enhance productivity as well as diversify the economy (Tuncalp, 2009).. The contribution of the Micro and small enterprise to the Growth Domestic Productive (GDP) is 30 percent. This percentage is higher than any other GCC economies. The increasing significance of the Micro and small enterprise in the Saudi Arabian economy has consequently triggered the government of the Custodian of the Two Holy Mosques, King Salman Bin Abdulaziz to take initiatives to encourage as well as develop the Micro and small enterprise. The government’s financial initiative purposes to regard the mechanisms of supporting the Micro and small enterprise in the various fiscal as well as social factors which focus towards the imperative role of Micro and small enterprise in stimulating as well as developing economies throughout the world.
The key enablers of the Micro and small enterprise in Saudi Arabia include strong regulatory environment, political stability as well as solid infrastructure. Saudi Arabia defines micro as those enterprises with between one and two employees with annual revenue of less than $27,000. The micro and small enterprises are defined by Saudi Arabia as those with between 3 and 49 employees with between $27,000 and $1.3 million. Medium enterprises feature those firms with between 50 and 200 employees and $1.3 to $13.3 million. A clear kingdom-wide strategy for Micro and small enterprise is inevitable with solely one institution and one definition to understand the Micro and small enterprise in Saudi Arabia (Asad Sadi & Henderson, 2011).
The Micro and small enterprise business environment in Saudi Arabia has provided the understanding of the contribution of Micro and small enterprise business enterprise in this economy. They have remained the backbone of any successful as well as the sustainable economy, and Saudi is not exempted (Looney, 2004). The roots of Micro and small enterprise in Saudi Arabia is local but with the growing globalization and trade crossways the globe, Micro and small enterprise business in Saudi Arabia have exploited the global opportunities. They have a firm footing in Saudi Arabia due to the region’s overall economic strategy which supports the diversification away from the oil sector.
Micro and small enterprise business in Saudi accounts for 1.97 million (90%) of all the country’s businesses registered. They also account for 60% of the total Saudi Arabia’s employment. Over 85% of the Micro and small enterprise business in Saudi Arabia are single proprietor companies. The Micro and small enterprise business in Saud Arabia have remained the key to unlocking the broad potential of the economy of Saudi Arabia (Tuncalp, 2009).
The sectoral distribution of Micro and small enterprise enterprises in the Saudi Arabian economy can help also acknowledge their contribution to the overall GDP growth of the country. The commercial and Hotel sector has the largest Micro and small enterprise business standing at 47% while the construction industry comes in a distance second at 27% of the Micro and small enterprise . Industrial, social services, and others account for 12%, 8% and 6% in that order (Ghanem, 2013).
The Micro and small enterprise business in the Saudi Arabian economy are widely present in the private sector representing one of the fundamental pillars in the field of trade. Seventy-four percent of the Micro and small enterprise business enterprise in Saudi Arabia are involved in the trade as well as construction businesses which are followed by twelve percent in the industrial sector (Zamberi Ahmad, 2011). The Micro and small enterprise ’ contribution to the GDP in Saudi Arabia presently pegs at 33% that is very low relative to the most developed economies as seen by 64.3% and 50% of the Spain and US GDPs respectively.
Nevertheless, the contribution of Micro and small enterprise to the economy of Saudi Arabia has remained relatively higher in the GCC countries whereby Bahrain and Oman’s contributions to respective GDP are 28% and 14%. The KSA’s Micro and small enterprise, have, however, gained from several initiatives by the government. A greater percentage of such Micro and small enterprise benefiting have risen by 28% to 1,497 businesses in 2014 against 1,173 businesses in 2013 (Acs, 2006).
The Micro and small enterprise accounts for 4.5 million employees in Saudi Arabia comprising about 25% of the economy’s labor force. It is surprising that Micro and small enterprise employ mainly migrant workers since about 74% Micro and small enterprise are in construction and commercial sectors. The nationals of Saudi Arabia only account for less than ten percent of the total Micro and small enterprise employed labor (Zamberi Ahmad, 2012).
Saudi Arabia has remained the home for over twenty-percent of the entire Micro and small enterprise in the region of Middle East and North Africa (MENA). It is the largest economy in GCC saves to the micro and small enterprise business. The Saud Arabia’s micro and small enterprise business is ranked number two after United States Emirates in terms development in the GCC. The average share of the micro and small enterprise business lending of total is three percent for Saudi Arabia that is greater than the average of GCC of two percent. Saudi Arabia has the greatest number of both private and public sector for the micro and small enterprise businesses support programs with the region of GCC. The cost of micro and medium business set up in Saudi Arabia is one-third contrasted with the average of the G20 economies. Therefore, micro and small enterprise business is a lucrative sector in Saudi Arabia.
The Saudi Arabia’s government has engaged in a number of initiatives to bolster the micro and small enterprise business growth due to the immense contribution of the sector to the GDP growth of the country. The government has come up with the Tenth Development Plan capturing the period between 2015 and 2019. It has aimed at accelerating the creation of the specialized agency to be responsible for the growth of the micro and small enterprise business in the country via each of their stage of development (Zamberi Ahmad, 2011). The program has also aimed at ensuring the reliance of the micro and small enterprise business on Saudi nationals thereby contributing to the Saudization. The government is also using the Kafalah loan which is a loan-guarantee program. This program has issued a total of 10,892 guarantees for the micro and small enterprise business to acquire the loan thereby speeding up their investment.
The construction sector of the micro and small enterprise business received the maximum guarantee in 2014 making up to sixty percent of the entire guarantees issued. The Riyadh was ranked the first with forty-nine percent of the total number of guarantees issued in 2014. The same year also saw the partaking banks tightening their loan lending regulations due to the obscure financial statements given by the micro and small enterprise business sector (Looney, 2004). The latest project called Taqeem has been launched by the Saudi Arabia government to help in the mitigation of the financial risk linked to micro and small enterprise business lending through the provision of the banks with the Probability of Default (PD) of a micro and small enterprise. There has been a promotion of Foreign Direct Investment (FDI) in the micro and small enterprise business sector in Saudi Arabia by Saudi Arabia General Investment Authority (SAGIA). It has further arranged a strategic alliance with Japan thereby bolstering a high-growth as well as innovative micro and small enterprise business sector (Ghanem, 2013).
The Centennial Fund in partnership with Microsoft have served to nurture a knowledge-oriented growth in the Saudi economy based on sustainable model of development. This collaboration has assisted the expedition of the go-to market capacity of the micro and small enterprise business as well as promoted the Information Technology entrepreneurship (Tuncalp, 2009). Again, the Saudi Hollandi Bank, which is the recipient of the best micro and small enterprise bank award in 2014 in the MENA Region Award has already launched the customized training program thereby enabling the micro and small enterprise enterprises to better utilized its services.
The micro and small enterprises have played a key role in the promotion of diversification, innovation and employment in Saudi Arabia’s economy. These businesses have been enhanced throughout GCC member countries. They have saved the country the need to over rely on hydrocarbons (Asad Sadi & Henderson, 2011). The micro and small sector in Saudi Arabia has been highlighted in the development plan of the Kingdom in of 2010-2014 as the economic diversification growth. The country has remained keen to accelerate the micro and small enterprises’ role in the economy.
Over the past few years, the government of Saudi Arabia has undertaken various constructive moves towards the growth of the micro and small business. It has focused on more extension or expansion of the amount of the micro and small businesses in contrast to the available ‘gazelles’ that are poised to become internationally competitive as well as possess the power to diversify the Saudi Arabia’s economy. Nevertheless, the Saudi government has acknowledged the need for a broad based of assistance, including the capital, business services as well as training throughout the micro and small enterprise lifespan. The government has subsequently undertaken various initiatives to mitigate the challenges facing the micro and small enterprise sector.
The government has provided nine fewer procedures to begin a new micro and small business compared to 2015. This has eliminated the rigorous bureaucratic procedures used before to set up a new micro and small business in Saudi Arabia. The government plans to further decrease the amount of rigorous procedure to make sure that it achieves the full potential of the micro and small enterprise (Al-Khaldi & Wallace, 2009). The government has also used Kafalah, and Taqeem programs besides initiatives driven by SCSB to increase the participation of banks through the mitigation of respective apprehensions in lending to micro and small businesses hence increased access to finances.
The government has also eliminated the lack of financial assistance throughout the micro and small business lifespan by bolstering the banks to offer steady, customized as well as ongoing support through Hollandi Bank that has invested in skilled labor force to promote the relationship banking with respective micro and small enterprises customers. Accordingly, the Saudi Arabian youths have proved their entrepreneurial bend and have taken the advantage of the government boost to compete on a global platform (Acs, 2006). Moreover, the government of Saudi Arabia is emulating the Japan’s micro and small enterprise growth strategy to sustain its historically hiked rates of growth as well as exploiting its individual economic resources. The micro and small enterprise are, therefore, striving to attain high growth as well as establish themselves as competitive businesses internationally.
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Asad Sadi, M., & Henderson, J. C. (2011). Franchising and small medium-sized enterprises (SMEs) in industrializing economies: A Saudi Arabian perspective. Journal of Management Development, 30(4), 402-412.
Ghanem, H. (2013). Role of Micro and Small Enterprises in Egypt's Economic Transition. Brookings.
Looney, R. (2004). Development strategies for Saudi Arabia: Escaping the rentier state syndrome. Strategic Insights, 3(3), 6-18.
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