Micro, Small and Medium-Sized Enterprises are the spine of Euro-Mediterranean economies. In the Southern and Eastern Mediterranean (SEMED) countries, they account for over 90-95% of all firms in absolute figures, of which the majority are micro enterprises (e.g. in Tunisia, micro enterprises represent 98% of all firms). Notwithstanding their contribution to private sector development, their role in job creation and upward mobility is much more limited.

Indeed, the growing polarisation of enterprise ecosystems between the very few large enterprises that dominate the market and the majority of weak micro firms that struggle to survive, with a noticeable missing middle, is a factor of utmost concern in the development of vibrant and job-conducive private sectors. Whereas access to adequate funding remains the major impediment for SMEs to take off and grow, SMEs tend to be less productive and innovative than larger firms. Innovative firms are more likely to grow and thus generate long-term employment.

Hence, through thriving innovation, digitalisation and automation, SMEs can reduce production costs and make productivity gains, adapt their business models to a growing globalised competitive environment and increase access to funding. In this context, a number of blocking points for local and regional authorities (LRAs) in the field of SME digitalisation have been identified; they are divided into four areas: institutional and regulatory, human capital formation, use of digital innovation and infrastructure.