Latin American Capital Markets

ACCESS TO FINANCING FOR SMALL AND MEDIUM ENTERPRISES 391Table 12-11 The European Union's Official Definition of SmallI and Medium EnterprisesCriteria Micro Small MediumNumber of employeesAnnual turnover ortotal balance sheetIndependenceSource: European Commission (1996).Fewer than 10 Fewer than 50Less than €7 millionLess than € 5 millionFewer than 250Less than € 40 millionLess than € 27 millionNot more than 25 percent of the capital orvoting rights held by one or more enterprises,which are not themselves SMEsof employment in most countries (OECD 2000). Numerous studies have beenconducted on the importance of SMEs for the economy, analyzing their role in jobcreation, performance and efficiency, innovation, and social and political matters. Researchershave attempted to challenge the role and size of SMEs in the economy.However, most studies have confirmed the sector's strong impact on the economy.In the OECD, the vast majority of enterprises are SMEs, and there is an ongoingtrend toward the reduction in firm size. In the United States, SMEs (firms withfewer than 500 employees, according to the U.S. definition) account for more than 99percent of businesses; in Japan, SMEs (firms with fewer than 300 employees) accountfor almost 99 percent of all enterprises; and in the European Union, there are almost19 million SMEs (firms with fewer than 250 employees), representing 99.8 percent ofall businesses (OECD 2000). Although the quantitative dominance of SMEs amongenterprises is clean a relatively large portion of new enterprises do not survive thefirst year of activity. On average, 87 percent of all European start-ups survive their firstyean 68 percent survive for at least three years, and 55 percent survive to the end ofthe fifth year 2The service sectors are generally the primary domain for SMEs, in particular,activities such as construction, wholesale trade, retail trade, and tourism. SMEs alsoplay an important role in strategic business services, such as computer software, informationprocessing, research and development, technical testing, marketing, businessorganization, and human resource development (OECD 2000). In some countries,SMEs account for a high percentage of manufacturing firms.2European Commission (1998); http://europ.eu.int/opnews/495/en/ r34l4.htm (17.05.2001)Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub