Efforts under way to support Algeria's small and medium-sized enterprises

The Algerian government, with the backing of foreign donors, has been making efforts to develop the country’s small and medium-sized enterprises (SMEs). There are around 900,000 SMEs and, in October 2015, Rabea Kherfi, secretary-general of the Ministry of Industry and Mines, told media that the failure rate of companies in the segment had fallen in recent years to around 7-9% on the back of the government’s ongoing efforts.

Government Backing

The National Agency for the Development of SMEs (Agence Nationale de Développment de la PME, ANDPME) was established in 2005. In 2009 Algeria and the EU launched a €44m joint initiative called the Programme for the Support of SMEs and Mastery of ICT, known as PME II, to finance advice, training and research in the area. This was followed in 2010 with the Programme for Modernising and Upgrading Algerian SMEs (Programme National de Mise à Niveau de la PME Algérienne, PNMPMEA) aimed at boosting the competitiveness of 20,000 SMEs by 2014 by financing consultants to work with beneficiary firms on their development as well as investing in equipment. The initiative was implemented by the ANDPME, on a budget of AD386.7bn (€3.56bn). Young entrepreneurs can also receive support from the National Agency for the Support of Youth Employment (Agence Nationale de Soutien à l’ Emploi des Jeunes, ANSEJ), which provides grants and access to loans with subsidised interest rates for projects of up to AD10m (€92,000) in value.

ANSEJ provided support for a total of 292,186 projects between 2007 and 2013, which it estimates created around 710,788 jobs; Minister for Work, Employment and Social Security Mohamed El Ghazi in November said that between them ANSEJ and the National Fund of Unemployment had helped create 475,000 micro-enterprises. The loan reimbursement rate for projects guaranteed by ANSEJ is over 80%, which government officials have described as highly satisfactory.

Mixed Success

However, not all initiatives in the segment have achieved their goals. By mid-2014 the PNMPMEA had provided support to only 7000 SMEs rather than the 20,000 it had targeted. ANSEJ has also had mixed reviews. “ANSEJ has come in for criticism for providing money to young entrepreneurs without also providing sufficient support such as training,” Rafik Bouklia-Hassane, Professor of Economics at the University of Oran, said.

The IMF has also argued that guarantees for SME loans have not helped to significantly improve lending to the sector, and states that SMEs’ access to finance is hindered by what it describes as high demand for collateral and difficulties dealing with non-performing loans. The fund has also urged the creation of a credit information registry for SMEs, which could bolster lending to the segment by reducing information asymmetries.

Renewed Push

State-owned firms are also providing the segment with a range of opportunities; for example, fixed-line telecoms provider Algérie Telecom is running a roadshow to recruit SMEs throughout the country to roll out fibre optic cabling on its behalf. The government has established a committee that is dedicated to working on this issue, as well as a joint project with the World Bank, which Boubacar Traoré, resident representative at the African Development Bank, said was important to helping the segment develop. “Algerians are natural entrepreneurs – but some rules are stifling them,” he told OBG. “For example, completing all the procedures to open a business can take months in Algeria, according to some businessmen, whereas similar activities in other emerging countries that Algeria seek to emulate don’t take more than 48 hours,” Traoré said, calling for the establishment of a one-stop shop for these purposes.