SMEs play a key role in national economies around the world, generating employment and value added and contributing to innovation. SMEs are central to the efforts to achieve environmental sustainability and more inclusive growth. However, these contributions vary widely across firms and across countries and sectors. Better access to global markets and knowledge networks can strengthen SMEs’ contributions, but trade and investment barriers undermine SME participation, and poor physical and ICT infrastructure prevents SMEs from operating efficiently and accessing international markets at competitive costs. Digitalisation offers new opportunities for SMEs to participate in the global economy, but SMEs are lagging behind in the digital transition and disruptive effects need to be considered.
According to African Development Bank Group Report (2012) Small and Medium Enterprises are the best candidates to achieve inclusive growth in Africa as they contribute significantly to the income generation and joint creation. However, financial access is consistently reported as one of the major obstacles to SME’s growth and development. Only 20 percent of African SMEs have a line of credit from a financial institution. There has been a growing recognition of the importance of the role that Small and Medium Enterprises (SMEs) play in the economic development globally and Tanzania in Particular. Nonetheless, in order for Tanzania’s Small and Medium Enterprises (SME’s) to continue to fulfill social economic needs, they need access to finance to carry out their business operation and expansion.
In Tanzania the full potential capacity of the SME sector has yet to be tapped due to the existence of the number of constraints such as unfavourable legal and regulatory framework, undeveloped infrastructure, poor business development services and planning, limited access of SMEs to finance, ineffective and poor coordinated institutional
support framework and so on.
Digitalisation offers new opportunities for SMEs to participate in the global economy
Digital technologies allow SMEs to improve market intelligence, reach scale without mass and access global markets and knowledge networks at relatively low cost. The digital transition facilitates the emergence of “born global” small businesses and provides new opportunities for SMEs to enhance their competitiveness in local and global markets, through product or service innovation and improved production processes. It also facilitates the emergence of “lean start-ups” that leverage the Internet to lower fixed costs and outsources many aspects of the business to stay agile and responsive to the market.
Furthermore, Big Data and data analytics provide a wide range of opportunities for SMEs, enabling a better understanding of the processes within the firm, the needs of their clients and partners, and the overall business environment. The use of digital technologies can also ease SMEs’ access to skills and talent, through better job recruitment sites, outsourcing and online task hiring, as well as connection with knowledge partners.It can also facilitate enhanced access to a range of financing instruments.
… but SMEs are lagging behind in the digital transition
While digitalisation offers new opportunities for SMEs to reach global markets, the reality is that a large number of SMEs have not been able to reap the benefits of the technological transition. Evidence shows that SMEs are lagging behind in adopting digital technologies. While, in most countries, the divide is narrow for simple connectivity and web presence, the gap broadens when considering participation in e-commerce and, especially, more sophisticated applications. We DMA we try to cover the gap.