The role of SMEs on economic development

The role of SMEs on economic developmentSMEs has an classic role in the development of an economic of a do of import (both develop and developed countries). They bring lots of benefits like employment generation, exports, foreign currency, investment, income and wealth distribution. These benefits lead to an economics growth of a country and mevery countries has been promote the setting up of sm solely and mean(a) business.Organization like innovation Bank Group approved more than $ 1.5 billion to SME support chopine in 2002 as it is believed that SME play and contribute to future expansion of an economy.SMEs is star of the most important economic pillars in Mauritius. The main role of SMEs in Mauritius is to create jobs so as to reduce unemployment stride. Not to forget that in early 1980s, when there was economics recession in Mauritius result in oversize unemployment rate, it was specified that SMEs could create 10% of jobs. As this was proof of the splendor of SMEs The Government of Mauritius bugger off come and provide new facilities and help to these companies by making availability of finance at low interest rate and taxes lowered on export , machinery and parts also. A special memorial tablet has been found by the Government called SMEDA to assist the bantam and medium loaded to grow and establish them self. Most of the SMEs generate fund internally or by taking loans. SMEs wasting disease a combination of long verge sources of finance which is called capital structure.Financial instrument SMEs ordinarily use little CreditGovernment loans and grantsLeasingLoans from financial potentsPersonal savingsThere atomic number 18 some internal and external factor that affect microscopic, micro and medium firm , namelyCompetition from bigger firm.Financial resource constraint. entre to research and development tool.Assistance for new ideas and creativity.Liability issues.Fluctuation in the economy.Difficult to obtain significant market sh ar .Government law and policy.Narain, 2004 SMEs argon born out of individual initiatives and skills, offer low cost product, product flexibility and can adopt new technology and innovate and export, maintain high employment orientation, utilize locally available human and actual resources and reduce regional imbalances.SME distinctionAutonomous firm(either a proprietor, partnership or linked enterprise )Partner firm( which does not cause problem in self-control and decision making)Linked firm ( has a small dowery in the firm and few authority) small firmDefinition little firms form part of small firm and are often unregistered. They unremarkably single owner and have no employees and are generally young. small firm produce and distribute goods in unregulated but rivalrous markets. These firms are usually independent, largely family owned, employ low level of skills and use low and affordable technology and are highly labor intensive.micro firm provide income and employment to a reasonable proportion of sight in a country by producing goods and services for the population gloomy firmDefinition teensy-weensy firm are usually a business that is privately owned (corporations, partnership or sole proprietor) and have a low masses of sales.One of the most used explanation of small firms sensation with a relatively small share of market, one that is managed by its owners in a personalized and independent way, i.e. free from away(p) control in decision making. Stanworth (1991).These small firms are not usually dominant in the market and are not a big threat to large and quoted firms intermediate firmDefinitionMedium firm are normally engaged in industrial and more mazy activities that small and micro firms and are registered companies. They usually import and export goods.Small, micro and Medium firm can begin or commerce activities on a low budget and can be managed easily on a full time or part time basis. Decisions are take freely and there is no interfe rence in the oeuvre done.Demarcate between Micro, Small and Medium firm.According to OECD, Small and Medium firm are usually defines according to the number of employee, capital, asset, sales volume and production ability to produce adequate goods. The differentiation bill varies from country to country like the employment criterion which is usually used to distinguish hem, for example a country may limit medium employee to ccc when others may limit it to 200 employees.As per SMEDA Act, it definition include all Enterprise in the economic sector and they use dis ready criterion to demarcate them.Medium firm are define separately from small firm as they have different needs and objective. They usually are more sophisticate firms and well technology averse while small firm are usually in a developmental state. commonly there are three criteria to differentiate Micro, Small and Medium firms from each(prenominal) otherStaff headcountAnnual turnoverAnnual symmetricalness planeCompa ring these 3 criteria allow you to determined the type of the firm, i.e. Micro, Small or Medium.Staff headcount.The number of employee is an important factor to determine in which category SME the firm falls. It include full time, part time and seasonal worker employee.The employees head count is expressed in annual work unit. unspoilt time staff is count as 1unit whereas part time and seasonal worker are count as a fraction of 1 full time worker.Annual turnover and Balance poll.The annual turnover is determined by calculating the income of the firm during its financial year afterwards all debt has been paid. disorder should not include VAT or any indirect taxes and the Balance sheet should refer to the value of the form main assetsYou are autonomous when no other people have association in ur firm or you in other firm.Classification of SMEMauritiusMicro firm Small Firm MediumTurnover N.A Balance Sheet N.A Employees N.A 0-10 0-250EuropeMicro firm Small firm MediumTurnover Balan ce Sheet Employees 0-10 10-50 50-250To qualify as an SME, both staff and ownership criteria must be satisfied, and either the turnover or the balance sheet criteria, i.e any of these two criteria must be meet in order to qualify.