Moving away from their historical over-reliance on the public sector, Arab youth are empowering themselves by pursuing entrepreneurship avenues and these young Arab entrepreneurs are creating employment at scale
The eighth United Nations Sustainable Development Goal (SDG) calls for promoting “inclusive and sustainable economic growth, employment, and decent work for all.” A new report by the Brookings Institution reflects on the Arab uprisings and their economic fallout against the context of the SDG 8 and the new development consensus that it stands for.
Specifically, the Arab uprisings have forced regional governments to rethink their approach to job creation for a massive segment of unemployed or underemployment youth, whose dissatisfaction with the public sector is believed to be one of the root causes of the political revolution. Consequently, Arab governments have been increasingly concerned with the need to provide decent and productive work for their burgeoning youth populations.
It is an unfortunate fact that Arab states face higher youth unemployment rates than their counterparts in developing economies and the global context alike. According to estimates by the International Labour Organisation, almost all Arab countries have youth unemployment rates that exceed the global rate (13.1%) and that of developing countries (9.5%), with the rate being even higher in Egypt, Tunisia, Libya, and Iraq. Arab states face a youth labour force participation rate of around 30% compared to 46% in the rest of the world. Indeed, youth unemployment in the Arab states represents the highest regional average in the world (30.6%).
Even more worrying is that these rising unemployment figures are combined with high rates of underemployment, with many of the youth only employed because they have accepted sub-par jobs to eke out a livelihood. To provide a context, the public sector has historically absorbed excess labour, particularly the rising number of university graduates, and accounts for a staggering 60-80% of total formal employment in the Gulf states, Egypt, Iraq, Jordan, and Tunisia. However, this overreliance on public sector employment is posing increasing issues, as the bloated and inefficient public-sector crowds out private sector jobs and deepens unproductive work cultures and habits.
These harsh realities have turned government attention to ways of promoting entrepreneurship as a policy tool to create efficient and sustainable private sector jobs. Globally, entrepreneurs and SMEs are widely considered to be vital to national economies, particularly because they create a higher share of total jobs than other employers. Research supports the general observation that entrepreneurship can be a crucial generator of jobs. In the Middle East and North Africa (MENA) region, SMEs represent 80 to 90% of all businesses in the formal sector. No wonder then that, given the dismal state of their youth labour markets, Arab governments are increasingly encouraging upscaling of small- and medium-sized enterprises (SMEs) led by Arab entrepreneurs to power employment.
This favourable government stance aligns well with the positive attitude of Arab youth, who are increasingly open to working in the private sector. To illustrate, in 2012, 55% of Arab youth preferred a public-sector job, but this figure dropped to 43% in just two years to 2014, according to the 6th Annual Asda’a Burson-Marsteller Arab Youth Survey. Despite higher public-sector wages in countries such as the Gulf States, Arab youth continue to turn increasingly to the private sector for productive work avenues, highlighting the need for prioritising policies that motivate entrepreneurs and SMEs. This has also led to an increase in the number of young Arab entrepreneurs who are empowering themselves and their peers.
However, access to credit remains a challenge for such Arab entrepreneurs and SMEs, hindering their progress and limiting their potential to create jobs for the local community. A World Bank report notes that the overall region suffers from low levels of SME financing with only 8% of bank loans being allocated to SMEs, in stark contrast to SMEs in middle-income and high-income countries, whose share of bank financing ranges from 16 to 26%.
Besides access to credit, MENA entrepreneurs also face many other barriers in the path of expanding their ventures and making them sustainable. A survey of nearly a thousand Arab entrepreneurs conducted by Wamda Research in March 2014 showed that MENA SMEs need support in multiple areas such as marketing their products and services, identifying and recruiting the right talent, and finding partners to expand into new countries and markets.
As such, finding the right partner to provide them with both access to much-needed finance as well as the expert skill set to scale-up their ventures, can mean all the difference between survival-based entrepreneurship and business success at scale for such Arab entrepreneurs.
GroFin is one such SME financier that is aware of the unique challenges faced by entrepreneurs in emerging economies like those in MENA. Applying the learnings of a decade-long existence in emerging economies in Sub-Saharan Africa to the MENA context, GroFin has been successfully supporting SMEs in Egypt, Jordan, Oman and Iraq since 2014.
The Nomou programme run by GroFin across Egypt, Jordan, Oman and Iraq prioritises labour-intensive ventures that allow for significant job creation. GroFin MENA clients such as Egypt’s Five Builders for Construction, Jordan’s Arabella for Aluminium manufacturing, Oman’s National Private School and Iraq’s Shames Al Saduq for oil and marine services, are all pioneering examples of entrepreneurial initiatives that generate employment at scale.
By leveraging its award-winning model of appropriate finance and expert business support services for the benefit of SMEs in MENA, GroFin has supported more than 850 entrepreneurs, financed 81 SMEs, helped sustain 12,330 jobs and improved the lives of 61,660 people in MENA as at end-2016.
If you are an investor looking for meaningful avenues to empower SMEs in MENA towards creating impact in local communities, or an entrepreneur – with at least 10 years of professional experience – searching for finance and support towards upscaling your venture and achieving sustainable success, GroFin would be happy to hear from you. Let us join forces to ensure inclusive and sustainable economic growth, employment, and decent work for all.