6 The same is true for turnover, which is the measure used by most banks to classify their SMEs. As shown in Table 2, the average minimum turnover for defining a small enterprise in the nonGCC is US$61,000, a small number by comparison with the EU‟s threshold of US$2.9 million. Likewise, the maximum turnover for defining a medium enterprise in the non-GCC region is US$4.7 million, a small number by comparison with the EU‟s US$70 million. However, it is also noticeable that when turnover thresholds are divided by per capita income the differences vis-à-vis the EU are much smaller. This is not surprising, and reveals that MENA banks are adapting their definitions of SMEs to the reality of their markets, which generally comprise much smaller firms operating with fewer employees. That being said, it is also true that there are still differences in the definitions of SMEs across banks and countries, and therefore, there is always some measurement error that must be taken into account when comparing results.

# **4.  Main Survey Results**

## _4.1. Overall Extent of SME Lending in MENA_

The average share of SME lending in MENA is low – less than 8 percent of total lending – but there are significant differences between the two main sub-regions and individual countries, as shown in Table 3 and Figures 2a and 3a. The average share of SME lending in the GCC is only 2 percent, while the share of SME lending in the non-GCC region is 13 percent. This is a significantly higher figure, although still lower than those reported by Beck, Demirguc-Kunt and Martinez Peria (2008), for both developing and developed countries, and also lower than the average share of five OECD countries (OECD 2010), as shown in Table 4.

It is noticeable that the average share of SME lending is consistently low across all GCC countries, while there is more variation among non-GCC countries. The low share of SME lending in the GCC reflects to a large extent the structure of oil-based economies – less diversified, dominated by very large enterprises, and characterized by appreciated exchange rates and small non-oil traded sectors. These factors imply a more narrow space for SMEs to flourish, especially in non-oil sectors producing traded goods. Moreover, GCC countries tend to have small populations, and the nationals tend to find attractive positions in the public sector, which may also discourage risk-taking in the SME sector. By contrast, in the non-GCC countries there is probably scope for more SME growth across a wider range of economic sectors, including traded sectors, and also as part of supply chains linked to large enterprises.

In the case of non-GCC countries, three sub-groups can be identified: a first group with SME lending below 10% of total lending (Syria, Egypt), an intermediate group with SME lending between 10%-15% of total lending (Palestine, Jordan), and a third group with SME loans between 15%-24% of total loans (Tunisia, Lebanon, Yemen, and Morocco). There could be an element of error in country comparisons, related to different definitions of SMEs adopted by the banks. However, Figure 3b indicates that there is broad consistency between the results of enterprise surveys and the results of this survey (the comparison is only made where both survey results are available). The countries with the highest shares of enterprises with a loan tend to be the countries with the highest share of SME loans in total loans – Morocco, Lebanon, and Yemen, while the countries with the lowest shares of enterprises with a loan tend to also have small shares of SME loans – Syria, Egypt, and the Palestine (the correlation between the two variables is 0.54, and the ranking correlation is 0.68). Therefore, despite the different