Small and medium enterprises (SMEs) in the GCC region are forecast to grow by 156 percent in the next five years, with the sector set to be worth $920 billion.
According to a new study by MENA Research Partners (MRP), the SME sector in the Gulf will employ 22 million people in five years.
While the GCC region accounts for 34 percent of SMEs in the Middle East and North Africa, it has the largest potential for SMEs regionally, the study noted.
It added that the SME sector in MENA is estimated at around $1 trillion per year.
Anthony Hobeika, CEO at MENA Research Partners, said: “Most of this growth is expected to come from key geographies such as Saudi Arabia and the UAE, which are giving high priority to SMEs across many new regulations, policies and initiatives with the aim of boosting their share in the national economy."
In its Vision 2030, Saudi Arabia has set a target to increase the share of SMEs to its GDP from the current 20 percent to 35 percent while the UAE, in its Vision 2021, set a target to increase the share of SMEs to its non-oil GDP from the current 60 percent to 70 percent, he added.
“SMEs are the main engine for job creation in the GCC region. Current SME employment is estimated at around 17 million people with a potential to reach 22 million in five years, a rise of around 30 percent,” said Hobeika.
The GCC's SME sector is seen as a key partner to regional governments in absorbing the large number of youth entering the job market in the next decade.
Hobeika added: “Such a positive outlook for SMEs and entrepreneurship in the GCC is clearly reflected by the enthusiasm of private and institutional investors gearing up their funding into the sector. Venture capital firms have invested around $1 billion into SMEs and start-ups in the past five years.
"Although such numbers remain low, they have been on a fast growth trajectory, driven by many success stories in sectors like technology. These initiatives are filling the large gap created by regional banks and capital markets, in failing to provide adequate funding to SMEs.”
The report said banks currently allocate only 2 percent of their loans to SMEs in the GCC, compared to 13 percent in the rest of MENA, and well beyond those numbers in other peer countries.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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