SMEs Contribute Up to 40% of GDP of Emerging Economies
Dr. Mahmoud Mohieldin, UN Climate Change High Level Champion for Egypt and UN Special Envoy on Financing 2030 Sustainable Development Agenda, said that bridging the financing gap and providing adequate support and finance to SMEs are necessary to correct the pathways of achieving various SDGs.
This came during his participation in Private sector event focused on SDG investments and SMEs organized by UNCTAD within the events of the SDG Mobilization Day in preparation for SDG Summit in New York, with the participation of Amanda Abrom, Director of Global Schools Program at the United Nations Sustainable Development Solutions Network, Hannah Levinsion, Managing Director of Lahayim Cooperative, Alexandra Donnelly, COO at Collaborative Cash Flow Optimization (C2FO), and a number of project and company officials.
Mohieldin stated that developing economies are increasingly suffering due to the limited fiscal space, high borrowing costs and, thus, their inability to properly deal with successive global shocks and crises, which negatively affected their ability to finance recovery and invest in climate action and sustainable development as required, adding that the financing gap also affected the access to finance at the local level at the required rates, which placed a major impediment to growth.
Mohieldin explained that the broader call at the global level for an SDG Stimulus and reform the international financial architecture comes in conjunction with the growing recognition of the importance of SMEs as a major engine for sustainable and inclusive economic growth.
“Entrepreneurs and SMEs are integral to our industrial and commercial ecosystems. They generate more than half of the total added value by businesses, represent about 90% of businesses and more than 50% of employment worldwide. Formal SMEs contribute up to 40% of national income (GDP) in emerging economies.” Mohieldin said, underscoring the importance of ensuring the sustainability and growth of SMEs, and the inclusion of women, youth and marginalized groups, in order to achieve the SDGs.
He noted that despite their importance in global and national economies, SMEs have been under extreme pressure in recent times, due to soaring energy prices, inflation, and supply chain disruptions caused by coronavirus pandemic and the war in Ukraine, stressing that SMEs need new investments to create conditions for innovation and growth, and access to liquidity and finance at an affordable cost is critical to the survival of these firms.
Mohieldin underlined the need for SMEs to build capacity, adapt and innovate to meet current challenges and seize available opportunities, adding that supply chain financing is a crucial financing option that can help SMEs deal with unexpected risks, optimize their working capital, expand operations, and successfully meet customer needs and market demand.
Mohieldin called for long-term vision and strategic work to bridge finance gap and support SMEs as a means to achieve sustainable, inclusive and just transformation.