Small and medium enterprises

What is?

(also SMEs, small and medium businesses, SMBs, and variations thereof) are companies whose headcount or turnover falls below certain limits.

The abbreviation SME occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations and the WTO. The term small and medium-sized businesses or SMBs is predominantly used in the USA.

EU Member States traditionally have their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 250 employees, while, for example, in Belgium it could have been 100. But now the EU has started to standardize the concept. Its current definition categorizes companies with fewer than 10 employees as "micro", those with fewer than 50 employees as "small", and those with fewer than 250 as "medium" Small medium organizations need to have between 20-500 employees .[1] By contrast, in the United States, when small business is defined by the number of employees, it often refers to those with fewer than 100 employees, while medium-sized business often refers to those with fewer than 500 employees.

Enterprise category	Headcount	Turnover	or		Balance sheet total
medium-sized	< 250	≤ € 50 million		≤ € 43 million
small	< 50	≤ € 10 million		≤ € 10 million
micro	< 10	≤ € 2 million		≤ € 2 million

Both the US and the EU generally use the same threshold of fewer than 10 employees for small offices (SOHO).

In most economies, smaller enterprises are much greater in number. In the EU, SMEs comprise approximately 99% of all firms and employ between them about 65 million people.[2] In many sectors, SMEs are also responsible for driving innovation and competition. Globally SMEs account for 99% of business numbers and 40% to 50% of GDP.

In India, the Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39% of the manufacturing output and around 33% of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.[3]

In South Africa the term SMME, for Small, Medium and Micro Enterprises, is used. Elsewhere in Africa, MSME is used, for Micro, Small and Medium Enterprises.

The lack of a universal definition for SMEs is often considered to be an obstacle for business studies and market research. Definitions in use today define thresholds in terms of employment, turnover and assets. They also incorporate a reasonable amount of flexibility around year-to-year changes in these measures so that a business qualifying as an SME in one year can have a reasonable expectation of remaining an SME in the next. The thresholds themselves, however, vary substantially between countries. As the SME thresholds dictate to some extent the provision of government support, countries in which manufacturing and labour-intensive industries are prioritised politically tend to opt for more relaxed thresholds. [ref. European Commission (2003-05-06), Recommendation 2003/361/EC: SME Definition]

SMEs development

ASI activity on SMEs focuses in particular on approaches concerning entrepreneurship development and business linkages (between urban and rural economies, large and small enterprises, local and international operators, triggers of development and small business, etc.) as well as promoting vulnerable groups, such as start-ups and women entrepreneurs. ASI conceptualizes and formulates sustainable SMEs development programs based on two main principles:

Critical mass of assistance elements. International experience has shown the benefits of packaging within integrated programs various elements of assistance, such as financial, technical and technological, market related, etc. and in delivering such elements simultaneously, to achieve synergies and optimal results.
Linking SMEs development to triggers of growth, to accelerate SMEs proliferation and strengthen their initial growth. Such triggers may consist of (i) large projects taking place in a country - for instance large extractive industries, infrastructures, etc. requiring sub-contracting - or (ii) opportunities provided by specific cultural/natural resources assets - a specialized area of ASI interest and expertise is the Cultural Heritage valorisation, to enhance tourist industry and business development for local communities- or (iii) structural linkages offered by specialized business - for instance franchising - that by its nature enhance the chances of survival of emerging enterprises.Critical mass of assistance elements. International experience has shown the benefits of packaging within integrated programs various elements of assistance, such as financial, technical and technological, market related, etc. and in delivering such elements simultaneously, to achieve synergies and optimal results.

ASI comprises pools of international experts and industries (see list of ASI partner companies) with extensive, worldwide experience in the above fields, reflecting best international practices and proposing concrete, innovative approaches. Our experts are accustomed to operate in a multicultural environment, have broad working experience with Multilateral and Bilateral Development Organizations, and combine strategic and analytical skills.

ASI has a partnership with the University of Pavia, Italy for the training of graduate and undergraduate students on environmental project development. On SMEs development activities, ASI operates as a non-profit organization charging only direct costs for initiatives in this field, and collaborates with several U.N. Agencies and international NGOs.