SMEs as defined by international organisations

LIST OF ACRONYMS AND ABBREVIATIONS

CHAPTER 2: SMEs IN THE GLOBAL WORLD

2.2 DEFINITION OF THE CONCEPT OF SMEs

2.2.1 SMEs as defined by international organisations

The classification of SMEs into small and medium enterprises by the World Bank is based on the number of full-time workers, annual sales and/ or the total value of assets (Kushnir et al., 2010).The World Bank (Table 1) describes small enterprises as those formal sector businesses with between 10 and 50 employees, and total assets and/or total annual sales of up to US$3 million, while medium enterprises have between 50 and 300 workers and a balance sheet total or annual sales total that ranges from US$3 million to US$15 million (CBT, 2010; Kushnir et al., 2010; International Monetary Fund (IMF), 2013). The OECD (Table 2) defines SMEs as those non-subsidiary, private business entities having 10 to 250 full-time employees and not more than £10 million annual sales or assets (United States Agency for International Development (USAID), 2007; Dalberg, 2011; Independent Evaluation Group, 2013). The statistical descriptions of SMEs vary from one country to another (Cohen et al., 2004, cited in Faloye & Akinkoye, 2013; UNIDO, cited in Ekwem, 2011; World Trade Organisation (WTO), 2013; Christina et al., 2014). Differences in definitions stem from the varying socio-

economic structures among countries (Chisala, 2008; Christina et al., 2014) and the purposes which the definitions are meant to serve (Faloye & Akinkoye, 2013). The variable which is most commonly used in defining SMEs is the number of employees (OECD, 2004; Dalberg, 2011; WTO, 2013). The OECD also uses this variable across all member states (OECD, 2013a; OECD, 2014).

TABLE 1. WORLD BANK DEFINITION OF SMES

Size of enterprise Number of

employees Annual income Assets

Micro < 10 < US$100 000 < US$100 000

Small < 50 < US$3 million < US$3 million Medium < 300 < US$15 million < US$15 million

Sources: CBT (2010: 4); Dalberg (2011: 6)

TABLE 2. OECD ENTERPRISE CATEGORIES

Size of business Number of employees Assets

Micro ≤ 10 –

Small < 50 –

Medium < 250 < £10 million

Sources: Asian Development Bank & OECD (2014: 48)

The EC (Table 3) considers the size of a company’s workforce, its annual sales turnover, and its balance sheet total in determining whether or not it is an SME (USAID, 2007; EC, 2013).

According to the EC, SMEs are those entities that employ fewer than 250 workers and have an annual income of not more than US$67 million and/or a balance sheet total of not more than US$56 million (EC, 2005; EC, 2013).

The European Union (EU) (Table 4) describes SMEs as businesses that employ fewer than 250 employees, and whose annual sales turnover is not above €50 million and/or whose annual balance sheet does not total more than €43million (OECD, 2009; Dalberg, 2011; EC, 2013; Faloye & Akinkoye, 2013; Katua, 2014). Thus, the EU’s definition of SMEs is based on number of employees, annual income and total value of assets (Faloye & Akinkoye, 2013).

TABLE 3. EC DEFINITION OF SMES

Size of enterprise

Number of

employees Annual sales Assets

Micro < 10 ≤ US$3 million ≤ US$3 million

Small < 50 ≤ US$13 million ≤ US$13 million

Medium < 250 ≤ US$67 million ≤ US$56 million

Sources: USAID (2007: 5); EC (2013: 181)

TABLE 4. EU DEFINITION OF SMES

Size of business Number of

employees Annual income Assets

Micro < 10 ≤ €2 million ≤ €2 million

Small < 50 ≤ €10 million ≤ €10 million

Medium < 250 ≤ €50 million ≤ €43 million

Sources: Dalberg (2011: 6); EC (2013: 9); Faloye & Akinkoye (2013: 181)

UNIDO (Table 5) uses both the qualitative and quantitative characteristics to define SMEs (UNIDO, 2005; USAID, 2007). According to UNIDO (2005), micro businesses employ between 1 and 9 workers, and have a registered capital base of less than US$42 300, while small enterprises employ between 10 and 49 employees and have a registered capital base of more than US$42 300. Medium enterprises employ between 50 and 249 full-time workers, and have a registered capital base of more than US$42 300 (UNIDO, 2005; USAID, 2007).

TABLE 5. UNIDO QUANTITIVE DEFINITION OF SMES

Category of enterprise Number of employees

Registered capital base (US$)

Micro 1–9 Less than $42 300

Small 10–49 More than $42 300

Medium 50–249 More than $42 300

Sources: USAID (2007: 7); Sparrow (2011: 671); Faloye & Akinkoye (2013: 180)

UNIDO also considers the following qualitative features in defining SMEs (Table 6). A comparison with their criteria for large companies is shown.

TABLE 6. USE OF QUALITATIVE INDICATORS IN DEFINING SMES BY UNIDO

Indicator SMEs Large Businesses

Management

 Proprietor entrepreneurship

 Functions are linked to the nature of personalities of the proprietors

 Manager entrepreneurship

 Division of labour is according to the subject matter

Human resources

 Lack graduates from universities

 Should have knowledge about the whole business

 Have many university graduates

 There is specialisation

Communication  Communication is

personalised  Communication is highly formalised Relationship

with customers

 It is unstable because of lack of long-term contacts

 It is stable because it is based on long-term relationship and communication

Production

process  Labour is used intensively  There is intensive use of capital

Research and development

 Usually there is no research, and the business works according the market. An intuitive approach is used

 Research is usually part of the company’s strategy. Therefore, it is institutionalised

Finance

 Family funded

 Self-financing

 Have access to many sources of finance from the capital market Sources: USAID (2007:7); Sparrow (2011: 671); Faloye & Akinkoye (2013: 180) 2.2.2 Regional definitions of SMEs

COMESA (2013) defines SMEs according to the number of full-time employees (Table 7), arguing that it is the only factor that can be used to describe SMEs across all COMESA countries. COMESA therefore defines SMEs as businesses in the agricultural, manufacturing and service sectors of the economy that have between 5 and 150 employees.

TABLE 7. QUANTITATIVE DEFINITION OF SMES BY COMESA

Size of enterprise Number of employees

Micro enterprise 5–9 employees

Small enterprise 10–50 employees

Medium enterprise 150 employees

Source: COMESA (2013: 6)

Dalam dokumen Government policies and strategies in dealing with challenges confronting small and medium enterprises : a case of Harare, Zimbabwe. (Halaman 46-50)