SMEs are also relevant in developed and developing countries alike, bearing in mind that definitions of SMEs differ by the size of the economy. Estimates suggest that more than 95% of enterprises around the world are SMEs, accounting for about 60% of private-sector employment. In the industrialized countries, Japan had the biggest percentage of SMEs, accounting for more than 99% of total enterprises in 2007. India had 13 million SMEs in 2008, equivalent to 80% of the country’s businesses.
Estimated data for the 27 countries in the European Union for 2012 (the EU-27 excludes Croatia, which joined in 2013) showed that SMEs accounted for 99.8% of enterprises and employed 67% of workers.4 They contributed 58% of gross value added, defined as the value of outputs less value of intermediate consumption, and were an important factor in gross domestic product.
In developing countries, the formal SME sector is competing with a large informal sector. Of the estimated 365–445 million micro, small and medium enterprises (MSMEs) in emerging markets, over 70% operated informally, says a World Bank study.5 This number is as high as 90% in some countries. Moving informal SMEs into the formal economy tops the agenda in countries where informality is high. Improving on the World Bank’s “doing business” parameters and providing fiscal incentives are needed to formalize the MSME sector, as are attractive financial sector solutions that support government agendas for the gradual reduction of informality.