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Small business financing

Different models for financing SMEs needed in Middle East region, Dr Khaled Soufani of Cambridge Judge writes in the Middle East Economic Digest.

Small business financing
Small and medium-sized enterprises play a vital role in Middle East economies – creating jobs, fostering entrepreneurship and innovation. According to a study by the International Finance Corporation, part of the World Bank, SMEs account for 80 to 90 per cent of businesses in the Middle East and North Africa Region.

Dr Khaled Soufani
Dr Khaled Soufani

Yet even though SMEs contribute hugely to GDP, they could achieve much more with improved financial and management support, writes Dr Khaled Soufani of Cambridge Judge Business School in the Middle East Economic Digest (MEED).
“As such, it is important to define an economic, financial, legal and regulatory framework, obtain government backing, and explore new entrepreneurial and management models,” says Khaled, Senior Faculty in Management Practice at Cambridge Judge.

Following the financial crisis, smaller businesses have experienced an increased funding gap as banks now have stricter conditions for business loans, so new models are needed, Soufani says.
These models could be based on a combined or syndicated funding structure and involve banks, private equity firms and invoice-factoring companies. Middle East countries could also establish entrepreneurship centres that could support the start-ups and provide management training and business monitoring.

With such support, “SMEs will once again be able to act as a crucial source of new jobs, innovation and competition, and as an engine for economic growth,” Khaled writes.