Abstract:
Recent studies have indicated that SMEs play an important role in economic growth, export promotion, and employment creation. Considering that the majority of Arab countries are currently trying to make progress in these areas, this paper aims to evaluate how SMEs fit into the regional economy and what steps need to be taken to ensure that they help attain higher rates of overall economic growth in the short, medium and long terms.
The study proposes a new taxonomy of SMEs differentiating between Traditional, Niche- finding, and Avant-garde SMEs, and shows that while Traditional SMEs already have some systems of financing in place, Niche-finding and Avant-garde SMEs, which show the greatest potential to enhance economic growth, export orientation, and attractiveness to inflows of foreign savings, do not lend themselves to conventional financial methods. It is argued that the creation of an enabling legal and regulatory environment for lease and venture capital financing may encourage the growth of these latter types of SMEs and thus boost the growth of Arab economies at large.
