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MGT601 - SME Management - Lecture Handout 37

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Definition and Role in Economy

The small and medium-sized sector is a varied one and plays a predominant role in the economies of most developing countries. It comprises factories, workshops, traders and other service facilities. It ranges from the most modern and up-to-date to the simple and traditional, from independent enterprises to ancillaries and subcontractors, and from units mainly catering to the domestic market to exporters.

Small and medium-sized enterprises (SMEs) are a key component in economic life, not only because of their number and variety but because of their involvement in every aspect of the economy, their contribution to regional development, the complementary role they play in support of the large sector, and their role as proving ground for innovations and adaptations. They can be seen as a kind of industrial breeding ground, a source of constant renewal of industry and commerce, and a wellspring of competition and dynamism.

There is no universally accepted definition of an SME. One study has identified more than 50 definitions in 75 countries. Frequently, criteria defining as SME in a country may be based on the purpose for which the identification is required.

Again it is possible notionally to group manufacturing SMEs in three broad categories:

  • Cottage or Artisan Units.( less than 10 employees)
  • Small Scale Units.( up to 50 employees)
  • Medium Sized Industries.( Between 50 and 200)

These would not be watertight compartments and such a grouping would be arbitrary. SMEs play a significant role in the economies of most countries, industrialized as well as developing. Organized small and medium-scale industries in many African countries are relatively smaller in number and their contribution to GNP more limited.

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MGT601 - SME Management - Lecture Handout 21

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What a Bank Needs to Know About You

This section discusses the information lenders may need to have before they can assess your request for finance. As stated earlier, it is good to policy to be as open and transparent with your bankers or financial advisers as you can. This will enable them to grasp the full situation and to give you appropriate advice. To withhold important information, such as your possible liabilities with other lenders or the fact that you have already pledged your assets, may cause difficulties at a later stage.

General Credentials

If the leader you have approached does not already know you well enough, it is best to have some general background information ready. This may include the following:

  1. Letters of introduction
    If you are relatively new in business and not yet known in your business community, you may find it worthwhile to seek the sponsorship of someone respected by other business people who is sufficiently acquainted with you to be able to give you a reference. A short letter, setting out your achievements and testifying to your good character and integrity, is a traditional method of introduction. Its effect will be positive if the referee is a person well regarded in the business community.
  2. Your Profile
    This is a resume or curriculum vitae, setting out your educational achievements, professional training, qualifications and experience, and your employment record and achievements. It is a helpful introduction to you and need not be longer than a page or two. If you are a newcomer to the business community, your profile will help your bank to assess your capacity for conducting trade, producing goods and services for export, and managing people. You may also want to attach to your profile any certificate or reference from former employers if you feel this will help to show up your experience and capacities, especially if the employer is known and respected, and has written favorably about you.

  3. Read more: MGT601 - SME Management - Lecture Handout 21