Interview: Ibrahim Al Hunaishel
How can linking small and medium-sized enterprises (SMEs) to large companies help localise skills and know-how? What is being done to support this?
IBRAHIM AL HUNAISHEL: We have introduced the Business Linkages Programme, whose main goal is to promote the creation of durable and mutually beneficial partnerships between SMEs and affiliates of multi-national corporations or large domestic companies. The aim is to enhance the productive capacity, efficiency, competitiveness and sustainability of their relationships.
The programme is built on the mutual interests of all actors. For domestic companies, business linkages are potentially one of the fastest and most effective ways to upgrade, enhance their competitiveness and gain access to international markets, finance, technology, management skills and specialised knowledge. For large anchor companies, moreover, entering into partnerships with local firms can reduce transaction and factoring costs, increase flexibility, and help them to better and more swiftly adapt technologies to local conditions.
For its part, the SCSB has formed a partnership with the Saudi Arabian General Investment Authority to contract an operator to run the Industry Leaders Development Programme, which will apply the Business Linkages Programme’s methodology of links between SMEs and large companies in the health care sector. The new programme is currently in the tendering process.
What role are SMEs playing in helping to grow the Kingdom’s non-oil economy? What more needs to be done at the policy level?
AL HUNAISHEL: In the Kingdom’s private sector, SMEs represent more than 99% of enterprises and provide 60% of the work opportunities. There are about 4.6m employees in the SME segment, nearly half of them in companies with fewer than five employees. The retail sector includes the largest number of SMEs, which account for almost half of the sector’s workforce.
SMEs’ contribution to overall GDP remains small, but the development of SMEs is one of the key goals of the 10th Development Plan, which covers 2015-19, so we see serious commitment at the strategic level. SMEs will assist in achieving the plan’s overall goals of creating jobs, diversifying national output and reducing dependence on oil revenues.
How is the government encouraging higher levels of lending to SMEs?
AL HUNAISHEL: The government has been directly supporting the development of SMEs in a number of ways. The first is by direct financing through the SCSB, which has funded more than 27,000 projects worth more than SR4bn ($1.07bn). It is working to increase the availability of financing for SMEs by expanding the capital of the SCSB, as well as by supporting other funding mechanisms at the bank. The government is also assisting indirectly by funding the Kafalah programme, which provides loan guarantees to commercial banks to encourage them to finance SMEs.
What non-financial actions need to be taken to better support entrepreneurs?
AL HUNAISHEL: For SMEs to succeed, we need to construct an entire ecosystem to support them. This entails the development of a group of non-financial services, including by establishing advisory services, facilitating licensing and registration procedures, providing business networks, launching a unified electronic platform, offering a set of common services, fostering linkages with large companies, facilitating access to government procurement and easing access to financing. Towards these ends, the SCSB has established the National Centre for SME Development, which has implemented several initiatives to support the development of an entrepreneurial culture by offering coaching, electronic services, business clinics, networking, business linkages and assistance with franchising. These sorts of programmes can assist the Kingdom’s small business owners in overcoming many of the problems they will encounter in developing a successful company.
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