What does IBEC mean by Small-Medium Enterprise (SME), and why is it important?

IBEC Ventures uses the acronym ‘SME’ in two very different ways. One is “Subject Matter Expert” and the other is “Small-Medium Enterprise.” The subject of this blog is the latter. What is a Small-Medium Enterprise, and how is that relevant to what we do?

Small-Medium Enterprise (SME) is defined in different ways in different countries. Even within the USA, there are some variances of definition.  The term is used globally by the European Union, World Bank, United Nations and within the USA by the Better Business Bureau, SBA and others.

In the USA, employer businesses with less than 20 workers make up 90% of all businesses. Not included are more than 22 million non-employer firms; indicating that small businesses play a gigantic role in our economy. Over 50% of Americans work in small businesses. See the interesting fact sheet from Forbes:  http://www.forbes.com/sites/jasonnazar/2013/09/09/16-surprising-statistics-about-small-businesses/

Likewise, overseas the majority of workers are working and hope to work in the SME sector – small companies up to 50 workers. Since IBEC works exclusively overseas in the world’s most destitute countries, we define an SME as a company with short-term plans to grow to five or more workers with scalability potential to employ more than 50 workers.  Start-up capital in these SMEs might range from $10,000 to $100,000.

SME sector companies are larger than microenterprises (or cottage industries) which typically employ only a handful of people or are businesses operated by one self-employed individual. They have no plans to scale their operation.

Why is IBEC involved in the SME sector?

  1. According to the Brookings Institute, “Advanced economies are paying new attention to small and medium enterprises (SMEs). One reason is their sheer quantitative importance. The OECD reports that SMEs account for more than 95 percent of manufacturing enterprises and an even higher share of many service industries in OECD countries; in most OECD countries, SMEs generate two-thirds of private sector employment and are the principal creator of new jobs. Additional interest in SMEs has been sparked by dynamic firms like Microsoft, which developed from tiny start-ups.”  http://www.brookings.edu/research/papers/2007/03/development-de-ferranti
  2. SME companies gain attention in the community, are able to devote capital and human resources to social projects, and create value for city leaders and multiple families (see the Barrington Gifts video)
  3. SME companies employ by definition, larger numbers of people than microenterprises and thus influence more families with kingdom values and the knowledge of who Jesus is.  One of the 4 items in the “Quadruple Bottom Line”  (http://www.understandbam.com/what/is/bam/) defines job creation as vital to a BAM endeavor.  Job Creation is IBEC’s way of obeying the Great Commandment of Jesus – to love our neighbor as ourselves.  Love in impoverished countries with high unemployment, poverty and victimization looks in part like a good job.
  4. SME businesses have the potential to train employees in a wider range of skills and thus increase the capacity to grow professionally and contribute to the growth of the company.  The self-improvement of individuals is a positive way to transform communities and individuals.
  5. Wealth creation is a key value for SMEs and for IBEC.  As a company grows and is successful it has a multiplying effect on the economics of the region often referred to as the “ripple effect” in the local economy, generating up to 5 times as many jobs in related industries and stimulating growth beyond what a micro-enterprise can do. 

Larry W. Sharp,  Director of Training – IBEC Ventures

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