The number of MSMEs that export does not take off

September 13, 2023

The percentage of MSMEs that export has not yet reached pre-pandemic levels, according to ACOPI’s Business Performance Survey.

Those who start a business often dream of being part of the MSMEs that export their products. The Colombian Association of Micro, Small and Medium Enterprises (Acopi) conducts a quarterly Business Performance Survey to know the behavior of MSMEs, which investigates, among other issues, the export capacity of these companies.

The survey for the second quarter of 2023 showed that the percentage of MSMEs that export has not yet reached the levels achieved before the pandemic. Lack of financial resources is one of the main reasons for not exporting.

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Few MSMEs that export in Colombia

In our country the percentage of MSMEs that export is very low. In the second quarter, only 10.2% of all Colombian MSMEs exported. In the first quarter, 13% exported, according to ACOPI’s Business Performance Survey.

Those figures are reminiscent of 2017, when the percentage of MSMEs that export averaged 14%, according to the same survey. In the following two years there was improvement, bringing that indicator to an average level of 22% in 2019. After the pandemic ,the percentage fell and has not recovered since, as evidenced by the most recent data for 2023.

Although the percentage of MSMEs that export has not yet reached pre-pandemic levels, it does show improvement over the previous year. In the second quarter of 2022, the Business Performance Survey showed that only 7% of MSMEs surveyed exported at all.

To which countries do MSMEs that export send their products?

In the second quarter of 2023, the main destination of exports of Colombian MSMEs was Central America and the Caribbean, with 42% of exports.

This percentage represents a large increase with respect to the immediately preceding quarter and the second quarter of 2022. In the first quarter of 2023, Central America and the Caribbean accounted for 25.8% of exports, a percentage that was only 21% in the second quarter of 2022.

In the second quarter of 2023, North America and South America were the next regions that received the most exports from Colombian MSMEs. Each of these regions purchased 24.7% of exports.

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In the first quarter of 2023, 29% of exports of MSMEs surveyed went to South America and 22.6% to North America. As for the second quarter of 2022, 38.6% of external sales made by MSMEs went to North America and 28.9% to South America, according to the Acopi survey.

What are the obstacles for MSMEs to export?

In the second quarter of 2023, one of the main reasons why MSMEs did not export was the lack of financial resources. A total of 27.8% of those surveyed agreed that this was the main reason. On the other hand, 16.7% of those surveyed agreed that the main reason for not exporting more was the low level of international market relations.

This result is consistent with the results of the first quarter of 2023, when 25% of respondents agreed that they were unable to export due to lack of financial resources and 30% said they did not export due to low international market relations.

These results are also consistent with the World Bank’s research on MSME financing in 2022. There it is concluded that formal MSMEs in developing countries “have an unmet financing need of USD $5.4 billion each year”. According to this international organization, MSMEs in Latin America have a deficit of 23% of their financing needs.

What is clear is that the barriers to exporting have changed over the years. In the second quarter of 2018, 51% of respondents said the impediment to exporting was that they were in the process of making it happen and 35% said they did not have an exportable product or service.

In contrast, in the second quarter of 2019 the main impediment to exporting was the lack of an exportable product or service, weighing in at 30%, according to the Business Performance Survey.

MSMEs that export are key in international trade

MSMEs are fundamental to the economy, both in the domestic market and in international trade. A 2022 research by the World Trade Organization found that, in 2020, 60% of global employment was provided by companies with fewer than 250 employees, i.e. MSMEs. This is just one of the data demonstrating the importance of these companies for domestic markets.

Regarding their importance in international trade, in many developed economies MSMEs play a crucial role in exports. The same WTO research, carried out in 2022, shows that in developed countries MSMEs contribute on average 36% of the country’s total exports. In Italy, exporting MSMEs contribute 50% of the total and in the Netherlands they contribute 60%.

In emerging countries, MSMEs are relevant in the domestic market, but this is not the case with exports. The World Bank states that in emerging countries “formal MSMEs account for 40% of GDP”. However, between 2016 and 2021, MSMEs in these countries only exported 11.5% of all their sales, according to the WTO.