Lagarde emphasizes importance of financial inclusion for SMEs
Lagarde emphasizes importance of financial inclusion for SMEs in the Arab world: IMF managing director Christine Lagarde spoke on Sunday in Dubai about the importance of convincing SMEs to join the formal economy in Arab states, according to Zawya — and banks need to increase their appetite for the segment. Lagarde said the region’s SMEs have attracted only 7% of bank lending, despite representing some 96% of registered companies.
Arab governments must come up with incentives for companies to go legit, including lower tax rates for certain segments of small businesses, says EFG Hermes’ Mohamed Abu Basha. Egypt has already passed laws on the SME sector and is looking to introduce incentives such as a proposed 1% VAT for SMEs, which could be an effective way to begin to widen the tax base. Low taxes could then be raised over time for each annual ‘class’ of new entrants to the financial system.
Want to dig deeper? Have a look at this piece from Ahram Online last year on SMEs as engines of job creation.