An MSME (Micro, Small, and Medium-sized Enterprises) refers to a company whose size, determined by the number of employees, balance sheet, or turnover, does not exceed certain limits, which vary depending on the country and prevailing regulations. World MSME Day is celebrated on June 27th every year.
In Tunisia, there is no fixed definition of MSMEs. The criteria used to determine this status vary depending on the legislative and regulatory texts that establish specific support mechanisms for MSMEs. The National Business Directory (RNE), managed by the National Institute of Statistics (INS), has adopted a specific statistical definition for different categories of enterprises in Tunisia. According to this definition, the classifications are as follows: micro-enterprises employ fewer than 6 employees, small enterprises employ between 6 and 49 employees, medium enterprises employ between 50 and 199 employees, and finally, large enterprises employ more than 200 employees.
Tunisian MSMEs face the obstacle of financing:
MSMEs represent a significant portion of the country’s economic fabric, contributing to job creation and diversification of economic activities. MSMEs also play a crucial role in innovation, competitiveness, and reducing inequalities by providing employment opportunities to marginalized populations.
Despite their importance, MSMEs face numerous structural challenges. Access to financing is one of the main obstacles they encounter. Restrictive loan conditions and a lack of strong collateral limit their ability to invest in new technologies, modernize their infrastructure, and increase their productivity. This hampers their competitiveness in domestic and international markets. According to a survey conducted by the World Bank, 21.9% of Tunisian MSMEs considered lack of access to financing as a major obstacle in 2013, and this figure reached 43.9% in 2020. Companies that do have access to financing are mainly granted short-term loans due to a shortage of long-term liquidity in the banking sector. This is primarily due to the still limited development of financial markets and contractual savings institutions in Tunisia, which are the main sources of long-term financing in many emerging markets.
According to the Tunisian Association of Venture Capital Investors (ATIC),1 this financing access problem has significant impacts on the labor market, as several MSMEs are increasingly forced to lay off employees in order to balance their finances. Although venture capital for MSMEs in Tunisia reached 2.7 billion dinars, approximately 3% of the country’s GDP, the planned recovery for January 2020 was slowed down by the COVID-19 pandemic. A survey conducted by the World Bank and the National Institute of Statistics (INS) in July 2020, involving 2,500 companies operating in different strategic sectors, showed that 44% of these companies belonged to the trade sector, 18.4% to services, 15% to transportation, 6.5% to manufacturing, 5.9% to hospitality and accommodation, 2.8% to textiles and leather, and 2.3% to healthcare. Among these companies, 14.9% are MSMEs, mainly small businesses, while 5.9% are large enterprises. In terms of revenue, 88.8% of the surveyed companies experienced a decline, with the exception of 14.8% in the pharmaceutical sector. Exporting companies were the most affected, with a revenue decrease of 93.3%, compared to 88.8% for non-exporting companies. Additionally, 69.8% of companies reported a reduction in working hours.
Furthermore, Tunisian micro, small, and medium-sized enterprises (MSMEs) are faced with high tax burdens, which limit their ability to grow and thrive. High tax rates, multiple taxes, and administrative costs associated with tax compliance exert overwhelming financial pressure on these businesses. As a result, many SMEs struggle to maintain profitability and are forced to close down within two years of operation.
Regarding trade union representation, since these companies employ a limited number of employees, they often call on various union structures to make an exception to the minimum number of workers’ rule in order to form a basic union for each MSME.
Promoting the expansion of Tunisian MSMEs: Approaches and possible actions:
Despite the government’s implementation of a range of measures such as tax exemptions or reductions, the targeted businesses have not seen an improvement in their situation, which contrasts with the expectations of increased liquidity. Support measures have primarily benefited 48.8% of large enterprises, 28% of exporting companies, 23.6% of the construction sector, and only 9.4% of non-exporting companies.
To continue their operations, 12.5% of these businesses have opted for digitalization of services and remote work. Despite the impact of COVID-19, 64.2% of the surveyed companies remain optimistic, and 58.8% even anticipate an increase in investments in the coming months.
Among the measures aimed at fostering the growth of Tunisian MSMEs, it is crucial to provide them with financing credits and facilitate business relationships to strengthen their networks. Private sector representatives have a key role to play in establishing a dedicated strategy for MSMEs. A national development strategy should prioritize eliminating or reducing the obstacles and gaps faced by these businesses. It is beneficial to connect Tunisian MSMEs with foreign investors, which will help them overcome their limitations and integrate better into global supply chains, thereby enabling job creation.
In February of last year, the World Bank’s Board of Directors approved a $120 million loan for Tunisia under the MSME Economic Recovery Support Project. This project aims to address liquidity problems faced by Tunisian enterprises by providing long-term financing in the form of credit lines. These credit lines will be provided by the Ministry of Finance to participating financial institutions, which will use them to grant loans to eligible MSMEs.
Alexandre Arrobbio, World Bank’s Operations Manager for Tunisia, explained that “SMEs play a key role in the Tunisian economy. The COVID-19 pandemic and the war in Ukraine have caused macroeconomic imbalances in Tunisia, exacerbating the difficulties faced by SMEs and weakening their performance and financial health.” To address these challenges, the project plans to establish two credit lines. The first line, amounting to $24.5 million, will be dedicated to rescheduling loans granted to viable SMEs by extending repayment periods to ease the debt burden. The second credit line, totaling $93.7 million, will be used to provide new long-term loans to viable SMEs.
To support the project’s implementation, efforts will be made to modernize the Tunisian Guarantee Company (SOTUGAR). Technical assistance programs and a memorandum of understanding between the Ministry of Finance and the Central Bank of Tunisia have been established to strengthen the governance and oversight of this institution.
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