Wednesday 22, November 2017 by Jessica Combes

UAE entrepreneurs have the highest fear of failure rate for the MENA region

 

Research shows that despite positive perceptions and intentions about entrepreneurship in MENA, the region is, on average, lagging behind when it comes to starting and running a business relative to other world regions.

Almost three-quarters of people in the Middle East and North Africa (MENA) region see entrepreneurship as a good career choice and 38 per cent of the adult population express intentions to start a business. This is higher than the averages for all other world regions. However, new research from the Global Entrepreneurship Monitor (GEM) shows that these positive markers are not translating into a robust entrepreneurial ecosystem in the region.

The MENA Regional Report, which draws on data from the 2015 and 2016 GEM national surveys, reveals that there is a marked drop off between intending and active entrepreneurs. The number of total early-stage entrepreneurs (TEA) in the MENA region is 70 per cent lower than the number expressing entrepreneurial intentions. Just 10.8 per cent of the adult population had started a business in 2016.

Additionally, the MENA region had the lowest rate of established entrepreneurs at 6.8 per cent compared to other regions and a high rate of business discontinuance at 6.2 per cent. For every person exiting a business in MENA there were only 1.7 people engaged in early-stage entrepreneurial activity. The global average is one person to every three.

“The MENA region has experienced significant economic and social losses from poor economic management and conflicts since the 2011 Arab Spring. Our research shows that there is an urgent need to deploy the region’s substantial human, natural, and financial assets more efficiently through adopting economic and social policies that create long-term sustainable and inclusive economic growth,” said lead author of the report Ayman Ismail, Abdul Latif Jameel Endowed Chair of Entrepreneurship at the American University in Cairo School of Business.

GEM’s MENA Regional Report is a point-in-time snapshot of entrepreneurial and business activity. It offers an analysis of entrepreneurial trends in the region and explores the needs and challenges of entrepreneurs with a view to allowing policymakers to make more informed decisions. Eight countries participated in the research: Egypt, Iran, Jordan, Lebanon, Morocco, Qatar, Saudi Arabia and the United Arab Emirates. Although Tunisia did not participate in the 2016 GEM research cycle, data from 2015 from that country was also included in the report.

While these countries range in economic development and show divergent levels of entrepreneurship, they almost all face common problems including job creation, low education and skills levels, especially among women, and access to technology.

Across the region, the high rate of business discontinuance was a cause for concern, the report highlighted.

“The fact that positive perceptions and intentions to start a business are not turning into business activity is concerning, and even when businesses are started–too many of them close within three years. This suggests that there are key gaps in support being offered to entrepreneurs throughout their lifespan that need to be addressed,” said Ismail. 

Most often, entrepreneurs cited lack of profitability or problems accessing finance as concerns. In Jordan and Morocco, these reasons together account for over 70 per cent of business exits.

Gender disparity is also a key concern in the region. Women in the MENA region were only half as likely to be engaged in TEA (Total Entrepreneurial Activity) as their male counterparts, the report found. In Africa, Latin America and the Caribbean, in contrast, eight women were engaged in TEA for every ten male entrepreneurs.

Gender parity was stronger in Qatar and Saudi Arabia, where there were around eight women for every ten male entrepreneurs. Jordan, by contrast, reported the widest gender gap, with fewer than three women entrepreneurs for every ten men.

Of interest is the fact that in six of the nine MENA countries surveyed, women entrepreneurs were more likely to be motivated by opportunity than men. This puts them on a par with female entrepreneurs in Europe and suggests that developing women entrepreneurs in the region would result in more opportunity-driven businesses that are more likely to last and create jobs.

The report recommends extensive policy shifts to facilitate a more enabling environment for entrepreneurs.

“The opportunity to leverage change exists mostly in the under developed SME sector, as many of the larger organisations in the region have achieved international status and a high degree of competitiveness. In ten of the twelve entrepreneurship areas considered by GEM to be important to foster entrepreneurship growth in a country the MENA experts report scores below the GEM average,” said Mike Herrington, co-author of the report and Executive Director of GEM.

He added that the report’s recommendations would help policymakers and business leaders put into place precise, practical and targeted solutions to address each area of concern.

“It is difficult to propose a ‘one solution for all’ approach. However, the research did flag three key areas that would benefit the region overall if given attention: education, the regulatory environment, and strategies to uplift women,” noted Herrington.

Other areas needing attention are school-level entrepreneurship education and R&D transfer. The MENA experts reported average ratings for existing government policy on taxes and bureaucracy, government entrepreneurship programmes, and market burdens or entry regulations.

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