Introduction to SMEs in the Middle East and North Africa
Small and medium-sized companies (SMEs) in the Middle East and North Africa (Mena) are considered the new engines of economic diversification. From Saudi Vision 2030 to the UAE’s projects, the leadership of the SME region has placed national development plans at the forefront. In the UAE alone, the SME base is expected to reach 1 million by 2030. However, a persistent and growing liquidity gap remains the only factor that limits this decisive sector.
The Financing Gap
Since Saudi Arabia aims to increase the SME contribution to GDP from 30 percent to 35 percent, a financing gap of more than 300 billion SAR still looms on the horizon. The dynamics for policy progress are visible through various efforts in Mena countries. However, there is a yawning gap between the available financial capacity and the needs to develop strongly growing SMEs. Structural barriers such as stiff security requirements, an underdeveloped infrastructure for credit assessment, fragmented regulatory environments, and limited data for data participation limit access to financing.
A System Built for Large Companies
The SME financing trip via Mena remains fragmented, outdated, and often exclusive. Traditional lenders continue to apply legacy credit models that are strongly based on collateral, formal balance sheets, and lengthy payment time plans developed for companies, not for agile, technologically controlled small companies that drive today’s economy. The result: Countless SMEs with strong sales pipelines and growing markets are locked out of the financial system just because they do not fit the mold of decades past.
The Urgency of the Situation
Timing couldn’t be more critical. If Mena economies are to intensify their efforts to diversify outside of oil, SMEs are expected to play a crucial role in creating jobs, promoting innovation, and improving resilience. However, they remain the most endangered by liquidity, as seen during the Covid-19 pandemic and the continued global re-calibration of interest rates.
The Role of FinTech
The digital transformation leads to one of the greatest changes in the current time: the emergence of fintechs that redefine SME financing. In contrast to conventional banks with legacy systems, fintechs access SME workflows – marketplaces, accounting software, or ERP systems – and deeply embedded financial services. This integration at the in-depth level enables SMEs to access financing, make payments, and pursue cash flow without leaving the very digital ecosystem in which they operate.
New Approaches to Financing
New programs, such as part of the Financial Sector Development Program (FSDP) Saudi Arabia, aim to increase loans from 5.7 percent to 20 percent by 2030. Similarly, the Nextgenfdi initiative of the United Arab Emirates focuses on enabling digital companies, many of which are quick. These policy shifts are considerable. However, bridging the gap between promise and reality requires faster measures, deeper innovations, and, above all, a financial system that is designed for how SMEs work and not how they have been operated in the past.
Overcoming the Gap
There is no doubt that initiatives supported by the government are more important. However, the guideline alone can only carry out systemic changes if the underlying financial infrastructure contracts with it. SMEs do not require more complex credit applications or longer evaluation times. They need real-time credit decisions, cash flow-based underwriting, and flexible financing options that reflect the dynamic nature of the modern company.
Conclusion
The region’s SME sector is at a turning point. The goals set by Saudi Arabia’s Vision 2030 and the national strategies of the United Arab Emirates are brave and accessible. However, they will only determine whether the financing models develop with the realities of SMEs. Policymakers, banks, fintechs, and ecosystem actors have to shift their perspective to SMEs and go beyond a legacy lens to recognize them as the cornerstone of a digital, resilient economy. There is liquidity in the system. The challenge – and the possibility – is to combine them sensibly with the companies that can convert national visions into reality.
