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Why Mmes Are Important For Economic Growth

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Why Mmes Are Important For Economic Growth

It’s a common fact that businesses in a country are important because they help with economic growth by driving economic activity: big, multinational companies contribute the most to overall economic growth and expansion, while small businesses provide economic stability in the local communities and are supported by governments for further growth.

But how does the “middle market” fit into the economy and why are they as equally important as multinational companies and small-market businesses?

Mid-Market Enterprises (MMEs) are classified as firms that are not big enough to largely impact economic growth, but are not small enough to get full support and funding from government; this means they are capable of functioning, but have limited growth due to lack of support from government and available resources.  Mid-market firms have a moderate number of employees and are present in almost every industry.

An HSBC report describes MMEs as “middle children of the global economy – not large enough to be seen as influential stakeholders of government, but too big to benefit from the incentives and support afforded to smaller companies. However they play a very important role in driving economic prosperity.”

MMEs As Economic Movers

Just like big and small businesses, MMEs are a vital part of the economy as they create stability for the local economy.

According to HSBC’s “Hidden Impact  Unlocking The Growth Potential  of Mid Market Enterprises 2017” report, MMEs are one of the most underrated business sectors in the economy. “Despite their huge contribution – to gross domestic product, to employment and to their supply chain — these firms suffer as the ‘neglected middle child’ of business” says the HSBC report.

The report also mentions that the mid-market business sector is growing at a steady pace, reporting a nine per cent increase in the past two years.

“These growth rates outperform their economies overall, indicating that the importance of MMEs is not only large, but growing. This is significant because MMEs play an important role in challenging established larger firms, helping to strengthen competition and innovation and, in turn, driving productivity growth across the economy,” adds the report.

Mmes As Job Creators

One of the biggest contributions of MMEs is the job opportunities they give to the economy. In the HSBC report, they note that an average of 15 per cent of all market sector jobs are supported by MMEs and productivity, in general, is higher than the economy as a whole.

“MMEs have an economic impact from their direct activities, supporting Gross Value Add (GVA) and jobs, and as the effect of these activities ripples out through supply chains and the consumer economy.” The report notes.

The report also notes the high impact of MMEs in the 14 countries they studied, stating that the total impact ranges “from 23 per cent of market sector employment in Saudi Arabia, to almost 60 per cent in China and the US.” And that “The employment supported by MMEs was equivalent to between 12 and 20 per cent of national market sector employment in each of the, indicating that MME employment grew more quickly than across the economy as a whole in those countries”

In Singapore, most MMEs contributes the highest employment growth among MMEs globally. Another HSBC report states that Singapore’s mid-market enterprises are the cornerstone of Singapore’s economy, and with over 8% per annum growth, Singapore MMEs contribute the highest employment growth rate compared to their global peers.

“It estimates that Singapore MMEs employed 550,000 people, equivalent to 17% of market sector employment. On top of that, the total number of jobs supported, including through supply chain and consumption effects, was 900,000 (29% of total market sector employment).” The repost further notes.

How Automation Can Help MMEs

Sustainability is one of the biggest challenge of many MMEs, with manual processing of invoices and other documents hurting their cash flow the most.

According to a special report by AP & P2P, businesses are spending a lot of money on invoice processing, with an average cost to process an invoice pegged at $12.90. Manual processing is also highly-prone to error and poor cash-flow visibility.

Automation will greatly reduce the cost of invoice processing, while keeping information more secured and less prone to error. The special report notes an “average reduction in invoice processing costs of 29.2 percent, AIIM reports. A 29 percent reduction in average invoice processing costs translates into savings of approximately $300,000 per year for a business that processes 10,000 invoices per month at an average cost of $10 per invoice.”

Despite the contributions of MMEs to their respective economies and industries, they are still highly underrated and often disregarded. But many developed countries are beginning to notice the growth brought by MMEs and are slowly pushing for more support towards these businesses, and one way is through automation of processes.

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Kenneth Tan

Kenneth Tan

Kenneth is a Marketer at Nufin Data, who works with Enterprises of all sizes to help them discover more working capital and competitive financing options. Learn how an effective Supply Chain Finance (SCF) program can benefit your organisation today by getting in touch with him at kenneth.tan@nufindata.com

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