26 June 2023
Micro-, small, and medium-sized enterprises (MSMEs) are, quite literally, the foundations of the global economy. They are engines of economic growth and employment, accounting for at the global level.
To truly understand the importance of MSMEs in trade and economic growth, one must look beyond abstract numbers. The story of MSMEs is less about aggregate statistics and more about improved lives of individuals, entrepreneurs and their communities.
Bahauddin Agha, a farmer in the Pishin district of Pakistan, used an aid-funded grant to install an irrigation system powered by solar panels. Bahauddin’s grape nursery grew from one to six employees, and neighbouring farmers now often visit his vineyards to study the irrigation system. Bahauddin hopes his farm will become a model for others in the farming community in Pishin and encourage them to adopt more sustainable farming practices. This is just one of many stories highlighting the impact that trade, aid and development policies can have for MSMEs, particularly in a country such as Pakistan, which has been so affected by recent climate change disasters.
As we mark Micro-, Small and Medium-sized Enterprises Day, stories like Bahauddin’s remind us of the important role MSMEs play in ensuring that economic growth is inclusive, sustainable and connected.
At a time when many trendlines of global sustainability are shifting into reverse, MSMEs are important partners and agents of change that can help get the Sustainable Development Goals back on track. MSMEs are playing a critical role in creating the 600 million jobs needed to meet the demands of a growing global workforce by 2030. MSMEs and smallholder farmers also comprise the majority of the world’s food producers and are critical to sustainable agrifood value chains in many countries. They are drivers of innovation, creativity and new technologies, making them catalysts towards attaining more sustainable production and consumption systems.
Yet—as seen in the multiple crises of COVID-19, conflict, climate change and cost-of-living increases—MSMEs are often hit the hardest when external shocks occur. found that 60 per cent of micro-sized and 57 per cent of small businesses were affected by the pandemic, compared with 43 per cent of large firms. Up to a third of MSMEs we surveyed are estimated to have permanently shut down because of the pandemic.
It is more important than ever for the international community to recognize the contributions made by MSMEs and for governments to create a business ecosystem for MSMEs that allows them not only to survive but to thrive. As ITC Executive Director, I would like to suggest three key areas where governments and key stakeholders can support MSMEs.
First, build and support a clear business case for MSMEs to make the green transition. MSMEs in developing countries are particularly exposed to climate-induced shortages and price fluctuations. According to , nearly 70 per cent of small firms in sub-Saharan Africa say that environmental risks are significant for their business, but less than 40 per cent have been able to invest in measures to reduce environmental risks.
To create an environment where MSMEs are climate resilient and adaptive, a range of stakeholders from policymakers to large corporations have a key role to play. ITC offers a for policymakers and value-chain actors to support small business climate resilience.
In addition to ecosystem support, the business case for small firms going green is clear. Climate-smart MSMEs are more resilient and gain a competitive advantage by anticipating the demands for sustainability-related products and services, or by operating under a more resource-efficient business model. To boost these efforts, ITC launched its programme to place environmental sustainability at the heart of MSME competitiveness. ITC has also partnered with the United States Government to launch the , which connects buyers with climate-smart SMEs.
Second, reshape supply chains in favour of women-owned MSMEs. Women play a major role in the global economy, and studies show that when women find paid work, the results are transformative for women and their communities. Sadly, women’s participation in the economy is far from equal to that of men, and the pandemic has set back the cause of gender equality by a half-century. Women continue to face significant challenges, including doing more unpaid care work, lack of access to finance, and a range of cultural and structural barriers. The business case for empowering women in trade is clear: women-owned exporting firms tend to be more profitable than women-owned firms that do not export, yet only are women-owned or women-led.
The international community can support women-led firms by taking measures to offer them targeted support, such as tailored training and networking opportunities, and ensuring a conducive policy environment for women’s participation in business and trade. Through the , ITC is working with partner governments to establish gender-responsive public procurement policies. Despite being a fairly specialized area of trade policy, the market is enormous: in developed countries, public procurement accounts for almost . Yet, shockingly, women-owned businesses make up only 1 per cent of a global market for public procurement that the —nearly 12 per cent of total global GDP. Gender-responsive public procurement is one key step that governments can take to champion women-led and women-owned MSMEs.
Third, help MSMEs make the digital leap. In our interconnected world, trade flows increasingly through digital channels. that for MSMEs, success is often closely linked to access to high-quality connected services, including transport and logistics, financial services, information and communications technologies and business and professional services. Access to connected services attracts foreign investment, spurs innovation and leads to greater exports for small businesses, while helping them integrate into international value chains.
As we saw during the pandemic, digital connectivity was often critical to the resilience and competitiveness of MSMEs. To support MSME digitalization, ITC has launched the to help MSMEs gain digital literacy skills that can turn an Internet connection into an economic opportunity. These efforts must be complemented by government action to ensure affordable and universal access to the Internet with necessary guardrails such as privacy protection and interoperability of services.
On 27 June, as we commemorate the ways in which MSMEs drive sustainable development for a better tomorrow, let’s work together to create the enabling environment for MSMEs to reach their full potential. Let’s all ensure that MSMEs are central to the transition towards a more inclusive, sustainable and connected future.
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