An interpretive study of the failure of SMEs in the kingdom of the Saudi Arabia - Essay Example

Findings indicate that that main problems impacting growth and success of SMEs in the KSA are regulatory difficulties, credit and funding options, human capital, marketing and operational factors. Human capital (resource management), regulatory constraints and credit/funding options appear to be the main factors impacting SME success and growth in the KSA. Data released by the Riyadh Chamber of Commerce and Industry reveals that approximately 96% of Saudi businesses employ below 100 workers (Hertog, 2010).

According to the Jeddah Chamber of Commerce and Industry, 95% of commercially registered businesses in the KSA are owned by SMEs and 71% of industrial businesses are SMEs (Hertog, 2010). Moreover, Hertog (2010) reports that SMEs account for 28% of the KSA’s overall economic activities. 7 The latest figures release demonstrate that as of 2008, there were over 700,000 SMEs actively in business in the SDI primarily owned by a sole proprietor. A further breakdown demonstrated that 47% of the KSA’s SMEs were attached to commercial and hotel industries; 27% were attached to construction; 12% were engaged in social services; and 8% were involved in “sundry other sectors” (Hertog, 2010, p. 17). Be that as it may, SMEs in the KSA only contribute to about 10% of the employment rate in the KSA and only contribute 14% of the entire production in industries and 8% “of the value of industrial goods exported” (Hertog, 2010, p.19). 7 Despite the growing interests in SMEs in the KSA, all indications are that SMEs have faced significant challenges in moving forward successfully and economically.

SMEs in the KSA are said to have difficulties in terms of funding and credit; the function in a business climat that is decidedly “unfriendly”; they face regulatory challenges; and they operate “without the availability of basic statistics and data needed to ensure sound business decisions” (Bundagji, 2005, p. 1). It is