{
  "title": "Digital Solutions for Small Businesses in the Middle East and North Africa",
  "publication": "IMF Blog, September 22, 2020",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2020/09/22/blog-digital-solutions-for-small-businesses-in-the-mena",
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  "summary": "Small and medium-sized enterprises (SMEs) account for more than 90 percent of the region’s businesses.",
  "sections": [
    {
      "heading": "Overview and key facts",
      "content": "- Small and medium-sized enterprises (SMEs) account for more than 90 percent of the region’s businesses.\n- In some countries, SMEs contribute as much as 50 percent of employment and 70 percent of GDP.\n- SMEs face limited access to credit, unfavorable business environments, and talent gaps that constrain growth and employment contributions.\n- SMEs in the region have been slow to embrace digital technologies and e-commerce; businesses trail governments and consumers in internet usage.\n- Consumers are rapidly shifting to online shopping and increasingly prefer rapid and convenient services, creating competitive pressure for SMEs to adopt digital solutions."
    },
    {
      "heading": "Potential benefits of digital technologies for SMEs",
      "content": "- Emerging technologies and broadband internet can facilitate:\n  - operational efficiencies,\n  - innovation,\n  - access to markets and finance,\n  - ability for firms to operate remotely during lockdowns.\n- Remote working can help integrate women and youth in the labor market."
    },
    {
      "heading": "Supply-side constraints and recommended reforms",
      "content": "- Infrastructure and market structure:\n  - While all countries have easy access to international fiber optic networks, many maintain barriers to entry such as government monopolies or restrictions on foreign participation and network peering.\n  - High capital investment requirements have slowed deployment of advanced network technologies and internet exchange points.\n  - Apart from the Gulf Cooperation Council states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (GCC), many countries have limited access to high speed broadband internet; internet services are often slow, unreliable, and unaffordable.\n- Digital skills and labor market:\n  - Digital skills are in short supply across the Middle East and North Africa region.\n  - Some countries with high levels of digital expertise, such as Lebanon and Egypt, sometimes suffer brain drain to higher income countries, including the GCC.\n  - Recommended actions: mandate science, technology, engineering and mathematics subjects; provide technical and vocational education and training through public-private partnerships; ease labor restrictions to facilitate expatriates in highly technical areas.\n- Logistics and utilities:\n  - Deficiencies in E-commerce logistics—unified address systems, area codes, postal service, land and customs clearance—delay delivery and increase costs for online trading.\n  - Reliability of electricity is essential to internet functioning and requires improvement.\n- Digital financial infrastructure:\n  - Infrastructure and instruments for accepting electronic payments—such as point-of-sale terminals, credit and debit cards—have limited penetration.\n  - Payment systems are mostly not interoperable.\n  - Regulatory and other reforms are essential to facilitate development of digital financial infrastructures.\n- Public sector digitalization:\n  - Digitalization of government services and procurement can incentivize SMEs to digitalize, given the significant size of the public sector and prevalence of payments to and from governments."
    },
    {
      "heading": "Demand-side constraints and recommended reforms",
      "content": "- Digital usage gap:\n  - The digital usage gap—the disparity between people who live in areas covered by broadband but who are not using internet—is several times the coverage gap, indicating demand constraints beyond availability.\n- Measures to increase demand:\n  - Develop digital literacy and awareness programs.\n  - Foster consumer trust by strengthening frameworks for cybersecurity, digital identification, data privacy, and consumer protection.\n- Specific demand-side issues:\n  - Consumers reportedly do not trust websites to handle their information and are unaware of their consumer rights.\n  - Large segments of populations in some countries are not connected to the internet and are unbanked.\n  - In parts of the region, including North Africa and Iran, ownership of smartphones and other internet-enabled devices is below the global average."
    },
    {
      "heading": "Enabling reforms to realize digital benefits",
      "content": "- The digital strategy must be underpinned by financial sector and business environment reforms, including:\n  - strengthening financial infrastructures—credit registries and bureaus, modernized bankruptcy laws, collateral registries;\n  - business support measures to help SMEs access credit.\n\nSource: Digital Solutions for Small Businesses in the Middle East and North Africa (Inutu Lukonga, September 22, 2020).\n\n---\n\n\nSource: https://www.imf.org/en/blogs/articles/2020/09/22/blog-digital-solutions-for-small-businesses-in-the-mena"
    }
  ],
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    "[Markdown version](/en/blogs/articles/2020/09/22/blog-digital-solutions-for-small-businesses-in-the-mena/index.md)",
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    "Authors: Inutu Lukonga",
    "Published: September 22, 2020",
    "Small and medium-sized enterprises (SMEs) account for more than 90 percent of the region’s businesses.",
    "In some countries, SMEs contribute as much as 50 percent of employment and 70 percent of GDP.",
    "SMEs face limited access to credit, unfavorable business environments, and talent gaps that constrain growth and employment contributions.",
    "SMEs in the region have been slow to embrace digital technologies and e-commerce; businesses trail governments and consumers in internet usage.",
    "Consumers are rapidly shifting to online shopping and increasingly prefer rapid and convenient services, creating competitive pressure for SMEs to adopt digital solutions.",
    "Emerging technologies and broadband internet can facilitate:",
    "Remote working can help integrate women and youth in the labor market.",
    "Infrastructure and market structure:",
    "Digital skills and labor market:",
    "Logistics and utilities:",
    "Digital financial infrastructure:",
    "Public sector digitalization:",
    "Digital usage gap:",
    "Measures to increase demand:",
    "Specific demand-side issues:",
    "The digital strategy must be underpinned by financial sector and business environment reforms, including:"
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