Boosting MSMEs productivity for economic growth

by / ⠀News / May 8, 2024
"Productivity Boost"

Micro-, small, and medium-sized enterprises (MSMEs) play an integral role in economic development throughout the globe. They provide employment opportunities for nearly 80% of business employment in developing nations. Despite their significant penetrative impact, these businesses continue to face challenges regarding access to financial services. Financial institutions around the world are aiming to alleviate these challenges by offering tailored financial solutions like microloans and specialized credit facilities.

Alongside financial solutions, entrepreneurial skills building programs are also gaining momentum. These programs encompass aspects like financial literacy, managerial competence, and technical understanding, providing MSMEs with the necessary skills to manage their financial resources efficiently, thereby increasing their chances of success. Additionally, government policies that gear towards assisting MSMEs promote their expansion and prosperity while significantly contributing to economic growth.

Nonetheless, even with such supportive mechanisms, MSMEs still fall behind larger firms when it comes to productivity as they generate only half the value. Their productivity is hindered by their lack of access to finance and innovative technologies, and operating in sectors with low barriers to entry further fuels the productivity gap. MSMEs operate within a vicious cycle where they lack adequate resources to employ methods to increase productivity, which subsequently freezes their potential growth.

Addressing these disparities is crucial in fostering a balanced and inclusive economic landscape. Its effects extend beyond the businesses themselves to a greater contribution to job creation, social mobility, and local development. Hence, improving the productivity of MSMEs should be a subject of great concern for policymakers across the globe.

Productivity disparity varies from subsector to subsector and country to country.

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Amplifying MSMEs productivity through supportive policies

Strategies designed to bolster labour productivity can help to increase this competitive intensity. These include investments in advanced manufacturing technologies, skill upgrading, and innovation. Increasing financing options and availability could also push to bridge the revenue gap stride by implementing relevant policies.

Extracting success stories from the automotive and software industries, there are proven cases of growth and synergy when collaboration between larger corporations and MSMEs exists. This symbiosis allows for a sharing of resources, technologies, and market breadth, resulting in a boost in productivity and growth for both parties. Policymakers would do well to foster this type of integrative relationships, catalyzing an enhanced economy and stronger industrial support.

The implementation of better policies to support the collaboration between large and small businesses can radically transform productivity levels. Networks formed through these collaborations foster containing improvements, innovation, and sustainability, forming a stronger, more robust economy. Despite these benefits, MSMEs still lag in productivity when compared to larger firms. Bridging this gap could lead to substantial economic growth, with the potential growth projected at 5% of GDP in developed nations and an impressive 10% in emerging economies.

Fostering this growth requires unique approaches that consider the challenges inherent in MSMEs. Among these are the implementation of digital transformation strategies and comprehensive capacity-building initiatives. MSMEs continue to be challenged by access to sufficient funding and skill gaps, particularly in technology and management. Policymakers play an essential role in ensuring regulatory frameworks that favor the growth and expansion of MSMEs are put in place. Only when this happens can the real potential of MSMEs to power the global economy materialize.

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About The Author

Kimberly Zhang

Editor in Chief of Under30CEO. I have a passion for helping educate the next generation of leaders.

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