Small and medium enterprises facts for kids

Small and medium-sized enterprises (SMEs), also known as small and medium-sized businesses (SMBs), are companies that are not too big. They have a certain number of employees and earn a certain amount of money, which is less than very large companies. Many important groups around the world, like the World Bank and the European Union, use the term "SME."

SMEs are super important for a country's economy. There are way more SMEs than huge companies, and they hire a lot more people too! Globally, about 90% of all companies are SMEs, and they provide jobs for more than half of all workers. For example, in Europe, 99% of all businesses are SMEs. In Australia, SMEs make up 98% of all businesses and create one-third of the country's total wealth. They also employ 4.7 million people there.

In developing countries, there are often even more small and medium-sized businesses. These companies are also key to bringing new ideas and healthy competition to many different industries. Even though they create many new jobs, SMEs can also lose jobs more easily than bigger companies.

What Are SMEs?

SMEs are important for both money and people because they create so many jobs. Because they are smaller, the person in charge, often called the CEO or managing director, has a big influence. This CEO is often the person who started the business, owns it, and runs it. Their job is to decide how to use time, energy, and money to guide the company. The CEO is usually the main person who plans, supports, and leads the SME to success, or sometimes, to failure.

The European Union believes SMEs are very important for making economies grow, creating new ideas, and moving towards economies based on knowledge. Studies show that when there are more SMEs, people in society tend to trust each other more. So, helping SMEs grow can also help build trust among people.

Businesses that grow past being "small" but are not yet "large" are called medium-sized. They might need different kinds of help than smaller businesses. Their contribution to the local and national economy can also be different from what a very small business offers.

How Countries Define SMEs

Different countries have different ways of deciding what counts as a small or medium-sized business. This means that a company considered "medium" in one country might be "small" in another! Here are some examples of how different parts of the world define SMEs.

SMEs in Africa

Many small businesses in Africa find it hard to get the money they need to grow. In 2017, the money gap for African SMEs was about 17% of the total wealth produced in those countries. The World Bank says that women own 58% of all micro, small, and medium-sized businesses in Africa.

Egypt's Businesses

Most businesses in Egypt are small. About 97% of them have fewer than 10 workers. Medium-sized businesses, with 10 to 50 employees, make up about 2.7% of all companies. Very large businesses, with over 50 employees, are only 0.4% of all companies. This shows that Egypt has very few medium-sized businesses.

Kenya's MSMEs

In Kenya, they use the term MSME, which means "micro, small, and medium-sized enterprises."

• Micro-enterprises have up to 10 employees.
• Small enterprises have 10 to 50 employees.
• Medium enterprises have 50 to 100 employees.

Nigeria's SMEs

The Central Bank of Nigeria defines SMEs based on how much money they have (assets) and how many people they employ. A small or medium enterprise in Nigeria has assets between about $15,400 and $1,538,000 and between 11 and 100 employees.

South Africa's Business Sizes

In South Africa, businesses are defined by their number of employees and how much money they earn (turnover):

• Micro-businesses: Have 5 or fewer employees and earn up to about $6,900.
• Very small businesses: Have 6 to 20 employees.
• Small businesses: Have 21 to 50 employees. Their earnings can vary a lot depending on the type of business.
• Medium-sized businesses: Usually have up to 200 employees (or 100 in farming). Their earnings also vary widely.

Overall, in South Africa, an SME usually has:

• Fewer than 200 employees.
• Annual earnings less than about $4.4 million.
• Assets less than about $690,000.
• Owners who are directly involved in managing the business.

SMEs in Asia

In developing countries in Asia, SMEs make up almost 90% of all companies. They are the main private sector employers, providing 50-80% of all jobs. In Southeast Asia, SMEs are 97-99% of all businesses and contribute a lot to each country's wealth. For example, they contribute 46% in Singapore and 57% in Indonesia.

India's MSMEs

India defines Micro, Small, and Medium Enterprises based on how much they invest and how much they earn. This definition was updated in 2025.

• Micro Enterprises: Invest up to about $300,000 and earn up to about $1.2 million.
• Small Enterprises: Invest up to about $3 million and earn up to about $12 million.
• Medium Enterprises: Invest up to about $15 million and earn up to about $60 million.

Businesses that are officially recognized as MSMEs can get special loans and support from banks. MSMEs are a big part of India's growth and contribute 48% to India's total exports.

Indonesia's UMKM

In Indonesia, micro, small, and medium enterprises (called UMKM) are defined by their assets and earnings:

An annual revenue of 50 billion Indonesian Rupiah is about $3.1 million.

Even though they help the economy a lot, Indonesian MSMEs face challenges. One of the biggest is getting money: many MSMEs cannot get loans from banks. Other problems include poor infrastructure, difficulties getting business permits, high taxes, and improving their image in the digital world.

Philippines' MSMEs

In 2020, the Philippines had over 957,000 registered businesses. About 99.5% of these were MSMEs, and only 0.49% were large companies. MSMEs created more than 5.38 million jobs, which was about 62.66% of all jobs in the country.

Singapore's SMEs

Since April 1, 2011, Singapore defines SMEs as businesses that earn no more than $100 million a year or have no more than 200 employees.

SMEs in Europe

Small and medium enterprises that invested in becoming more digital because of COVID-19 and received public financial support.

Small companies are very important to the European economy. They make up 99.8% of all non-financial businesses in the European Union (EU) and employ two-thirds of the workers. Most European companies are SMEs, employing over 100 million people. During the COVID-19 pandemic, many SMEs saw their earnings drop.

Medium-sized businesses (with 250-3000 people) also play a big role in Europe, providing about 17% of all jobs and 21% of the total earnings in the EU.

The pandemic affected SMEs more than large businesses. SMEs lost about 26% of their sales, while large businesses lost 23%. Government help seemed to benefit SMEs more, showing that policies to help them with money problems worked.

SMEs were quicker to change what they produced during the pandemic. About 37% of SMEs changed their products or services, compared to 33% of large businesses. However, large businesses adopted digital tools more than small ones. For example, 26% of large businesses increased their online sales, compared to 22% of SMEs.

The EU defines SMEs based on staff, earnings, or total assets:

In Europe, generally:

• Micro-enterprises have up to 10 employees.
• Small enterprises have up to 50 employees.
• Medium-sized enterprises have up to 250 employees.

Even though SMEs are so important, only about 20% of European SMEs use a lot of digital technology, compared to almost 50% of major businesses.

Obstacles faced by small and medium enterprises when investing in digital technologies.

Smaller companies create more than 60% of the wealth in countries like Belgium, Italy, and Spain. It was thought that about 50% of Europe's small businesses might fail during the pandemic because they did not have enough money saved up.

In Bulgaria, SMEs and medium-sized companies are very important. In 2022, there were about 338,000 of them. They employ over 75% of the workers and create 65% of the country's wealth.

During the pandemic, in countries where governments gave more financial help, SMEs were more likely to struggle and close down, even with the help. This shows that getting loans and money can be especially hard for SMEs and new businesses.

Medium-sized companies are better at using digital technology than smaller SMEs, almost as good as very large companies. Over 84% of very large businesses invested in at least one digital technology, compared to about 75% for medium-sized companies.

Since early 2020, European SMEs have faced big economic challenges. In 2023, they continued to struggle with higher costs and uncertainty. Because of this, the value added by SMEs in the EU is still below what it was in 2019.

Rising energy costs led many SMEs to plan more investments in making their businesses more energy efficient. This increased from 52.3% to 57.9% in 2022. This trend fits with the European Green Deal, which encourages reducing pollution and energy use.

Poland's SME Sector

In Poland, the SME sector creates almost 50% of the country's wealth. In 2011, micro companies made 29.6%, small companies 7.7%, and medium companies 10.4%. Out of nearly 1.8 million businesses in Poland in 2011, only about 3,200 were "large." SMEs employed 6.3 million people out of 9 million workers in the private sector.

Polish small businesses employ almost 7 million people and create about half of the country's wealth. However, smaller businesses are less likely to invest in fighting climate change or saving energy. In October 2021, a Polish bank that helps with environmental projects received €75 million from the European Investment Bank to help these small businesses.

SMEs Outside the EU

Norway's Businesses

In Norway, small and medium-sized businesses usually have fewer than 100 employees.

• Small businesses: 1–20 employees.
• Medium-sized businesses: 21–100 employees.

A business with more than 100 employees is considered large.

Small and medium-sized businesses make up over 99% of all businesses in Norway. They employ 47% of all workers in the private sector and create 44% of the country's economic value each year.

Switzerland's Enterprises

In Switzerland, the government defines SMEs as companies with less than 250 employees:

• Micro-enterprises: 1 to 9 employees.
• Small enterprises: 10 to 49 employees.
• Medium-sized enterprises: 50 to 249 employees.
• Large enterprises: 250 employees or more.

United Kingdom's SMEs

In the United Kingdom (UK), a company is an SME if it meets two out of three rules:

• It earns less than £25 million.
• It has fewer than 250 employees.
• It has assets worth less than £12.5 million.

Very small companies are called micro-entities and have simpler rules for reporting their money.

In early 2014, 99.3% of UK private sector businesses were SMEs. They earned £1.6 trillion a year, which was 47% of all private sector earnings. The UK government aimed for 25% of its spending to go to SMEs by 2015, and they achieved this by 2013.

SMEs in North America

Canada's Businesses

Industry Canada defines a small business as one with fewer than 100 paid employees. A medium-sized business has at least 100 but fewer than 500 employees. As of December 2012, there were over 1.1 million employer businesses in Canada.

Mexico's PYMEs and MiPyMEs

In Mexico, small and medium-sized companies are called PYMEs. There's also another group called MiPyMEs, which includes micro, small, and medium-sized businesses. "Micro" businesses can even be just one person working alone.

Here's how they define them by number of workers:

United States' Small Businesses

In the United States, the Small Business Administration sets the rules for what counts as a small business. These rules depend on the industry, how the company is owned, how much it earns, and how many employees it has. Sometimes, a "small business" can even have up to 1500 employees, though it's usually capped at 500.

Both the US and the EU generally agree that a "small office" (SOHO) has fewer than 10 employees.

SMEs in Oceania

Australia's SMEs

In Australia, an SME has 200 or fewer employees.

• Micro Businesses: 1–4 employees.
• Small businesses: 5–19 employees.
• Medium businesses: 20–199 employees.
• Large businesses: 200+ employees.

Australian SMEs make up 98% of all Australian businesses. They produce one-third of the country's total wealth and employ 4.7 million people. They also represent 90% of all companies that export goods and over 60% of those that export services.

New Zealand's Small Businesses

In New Zealand, 99% of businesses have 50 or fewer staff. The official definition of a small business is one with 19 or fewer employees. It's estimated that companies with fewer than 20 employees create about 28% of New Zealand's total wealth.

See also

In Spanish: Pequeña y mediana empresa para niños

• Hidden champions
• Mittelstand
• Small business

Images for kids

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  Results from the European Investment Bank's Banking in Africa survey, 2021. Expected change in credit demand from small and medium-sized enterprises in 2021 in Southern Africa.

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  Results from the European Investment Bank's Banking in Africa survey, 2021, for the expected change in credit demand from SMEs in East Africa.