Al Masah looks into regional SMEs, venture capitalism

Emirates Business

In yet another expert-led analysis of the regional as well as global market trends, Al Masah Capital Management Limited reviewed a rise in Venture Capitalism, the dynamic nature of Small and Medium Enterprises and their significant roleplay in fostering innovation and promoting global economies.
Suggesting a robust growth, the weight of SMEs in global economies have been increasing, with larger firms downsizing and outsourcing more functions, observed experts at Al Masah Capital. According to recent reports, the estimates suggest that ~90% of the world’s businesses are SMEs and it contributes to more than 50% of employment worldwide. For developing economies, SMEs contribute ~50% of gross value add (GVA) and ~60% of total private sector employment. According to the World Bank Group study, there are 420-510 million micro small and medium-size enterprises (MSMEs) worldwide of which 365-445 million MSMEs are domiciled in the emerging markets.
Highlighting the catalyst role SMEs have been playing in changing the face of developing economies, Shailesh Dash Entrepreneur and Founder of Al Masah Capital said; “Technology adoption is ruling it all. SMEs have become important in promoting competitiveness and introducing new products or techniques to the changing market dynamics around the world. Moreover, they are also responsible for increasing productivity, mostly through expansion and inorganic strategies.
The performance and development level of a national economy largely depends on the willingness and ability of the government to create a fertile environment for SMEs, which can improve the quality of services and promote
competitiveness that are important for an accommodative market environment. We also cannot
ignore e-commerce and mobile technologies that have proven
to be an enormous boon to the success of SMEs.”
A noteworthy trend that Al Masah Capital reviewed in its report is the emergence of financial technologies (FinTech) that has revolutionized the financial industry. More importantly, it has become a game changer for SMEs as it offers innovative tailor-made products, such as marketplace lending, Crowdfunding, tech-enabled payments etc., especially when lending from traditional banks were tiring and futile. FinTech companies attracted significant interest from VCs as the value of investments in FinTech grew multifold since 2010, from USD 1.8 billion to USD 22.3 billion at the end of 2015.
Reviewing the MENA SME industry, Al Masah’s report mentioned that the MENA region is currently witnessing a grassroots revolution in building a strong SME structure. Developing the region’s SMEs has so far moved in a positive direction with every GCC country establishing specialized bodies and developing regulations and programs to support and nourish them. The SME industry in MENA is becoming an increasingly important contributor to GDP, but still lags behind developed nations in terms of contribution to the economy. In the region, Egypt, Lebanon and UAE SMEs are important contributors to GDP, accounting for 80%, 99% and 60% respectively, but the contribution is significantly lower in Kuwait, Qatar and Oman. Given that SMEs represent over 90% of the total registered companies in most of the MENA countries, their contribution to overall GDP remains substantially lower, with exception of a few like the UAE, Egypt and Lebanon.
Explaining the ‘FinTech’ revolution further, the report mentioned that global banks are catching up with it after a ‘wait and watch’ period during the initial stages. Banks have started allocating funds towards FinTech, primarily aimed at making acquisitions, set up venture fund, start-up programs to incubate FinTech and partnering with a FinTech companies.