Why Small Businesses Must Be Heard in Economic Policy

OPINION, May 12, 2025 — Small and medium enterprises (SMEs) account for over 90% of businesses worldwide, contributing significantly to employment and GDP growth. However, despite their vast economic footprint, SMEs continue to be overlooked in policy discussions and resource distribution. As the backbone of the global economy, they deserve more than just lip service. They need practical support, a seat at the decision-making table, and policies tailored to their unique needs.

SMEs face a range of challenges that larger corporations often don’t, from limited access to capital to navigating complex regulatory environments. The issue isn’t just about financial resources, though that remains a critical barrier. SMEs also struggle with technological integration, labor shortages, and insufficient support from both government and industry. Without strategic intervention, many SMEs are at risk of being left behind in the fast-evolving global marketplace.

The Forgotten Engine of Economic Growth

While policymakers often focus on attracting large multinational corporations to their countries, the true growth engines lie in the small businesses that operate within their borders. According to the World Bank, SMEs represent more than 60% of total employment in low and middle-income countries and up to 70% in high-income countries. Yet, when it comes to policy decisions, SMEs frequently find themselves at the periphery.

The lack of support for SMEs is not just an economic oversight; it’s a missed opportunity for job creation, innovation, and community development. SMEs drive local economies by supporting supply chains, creating jobs, and fostering entrepreneurship. Their role in ensuring a diversified economy cannot be understated.

Access to Funding Remains a Persistent Barrier

One of the most significant challenges facing SMEs is access to financing. Traditional banks are often reluctant to lend to smaller enterprises, seeing them as too risky or resource-intensive. As a result, SMEs are forced to rely on alternative lending sources, which often come with higher interest rates or stringent repayment conditions. In an environment where innovation and expansion are key to survival, the inability to secure affordable capital severely hampers growth potential.

Even though fintech solutions have made headway in providing alternatives, many SMEs still face hurdles when it comes to digital financing options. Regulatory frameworks often lag behind, leaving small businesses navigating a fragmented and sometimes hostile financial landscape. Governments must introduce policies that streamline access to credit and provide guarantees or incentives to lenders who support small enterprises.

Outdated Regulations Stifling Growth

Beyond financial hurdles, outdated and complex regulations pose another significant barrier for SMEs. From tax compliance to labor laws, the regulatory burden on small businesses can be overwhelming. In some cases, these regulations are better suited to large corporations with dedicated compliance departments than to SMEs that operate with lean teams and limited resources.

While larger corporations have the infrastructure to handle regulatory compliance, SMEs often lack the capacity to navigate these systems effectively. Simplifying and streamlining regulations can provide SMEs with the breathing room they need to focus on innovation and growth. Additionally, governments should consider providing tax breaks or grants for small businesses that prioritize compliance, further incentivizing adherence to these regulations.

Bridging the Digital Divide

The digital transformation sweeping across industries presents both an opportunity and a challenge for SMEs. On the one hand, embracing digital tools can help small businesses reach new customers, streamline operations, and enhance customer experiences. On the other hand, the costs and complexities of integrating digital technologies can be prohibitively expensive for many SMEs, especially in developing economies.

Investing in digital infrastructure and training programs for SMEs is critical. Governments and industry leaders should work together to ensure that small businesses can access affordable, scalable digital solutions that enable them to compete on the global stage. Public-private partnerships could help bridge the digital divide by offering subsidies or low-cost access to essential digital tools, such as cloud-based accounting software or e-commerce platforms.

SMEs and the Road Ahead

SMEs are the heart of local economies, creating jobs, driving innovation, and ensuring economic resilience. However, without dedicated policies and resources, many small businesses will continue to struggle in an increasingly competitive and digital economy. Policymakers must recognize that supporting SMEs isn’t just good for business—it’s good for the economy at large.

To give SMEs a real chance to succeed, governments need to provide targeted support in areas such as funding, regulation, and technology adoption. By streamlining processes and removing barriers, policymakers can empower SMEs to reach their full potential. It’s time for small businesses to have a voice in shaping the future of the global economy.

SMEs are the economic engines that drive growth, yet they remain largely sidelined when it comes to decision-making and resource allocation.