# Market Insights

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Why Small Businesses, Not Big Corporations, Will Drive Job Growth in the Developing World The Pattern Behind the Numbers Across low- and middle-income countries, the next wave of jobs is far more likely to come from a family workshop, a roadside repair stall, or a ten-person trading firm than from a multinational subsidiary. World Bank estimates put the share of formal jobs generated by micro, small, and medium enterprises (MSMEs) in emerging markets at roughly seven in ten. A separate International Labour Organization study covering 99 countries found that self-employment, micro-enterprises, and small firms together account for around 70 percent of total employment worldwide, with the share climbing toward 100 percent in the lowest-income countries. Large corporations remain vital for productivity and exports, but given the sheer volume of new labor-market entrants across the developing world, small businesses will carry most of the hiring load in the years ahead. Why the Structure Favors Small Firms Several structural features push job growth toward small businesses. They require far less capital per worker than large-scale manufacturing or extractive industries, so they can absorb labor even where investment capital is scarce. They also reach places large firms rarely go, including rural towns, secondary cities, and informal settlements, where most of the developing world's working-age population actually lives. Because SMEs are simpler to start and close, they respond quickly to local demand, spreading employment across many small units instead of concentrating it in a handful of large plants. Researchers have also documented a "missing middle" in developing economies, where very few mid-sized firms exist between micro-enterprises and large corporations. This suggests future job growth will most plausibly come from scaling up today's small firms rather than waiting for more big companies to arrive. Evidence from Four Emerging Economies The pattern holds across regions. In India, the micro, small, and medium enterprise sector employs over 110 million people, ranking second only to agriculture as a source of jobs, with government figures crediting MSMEs for roughly 30 percent of GDP. In Nigeria, MSMEs make up about 96 percent of businesses and provide roughly 84 percent of employment, according to the national statistics agency and the ILO. In Indonesia, UMKM (micro, small, and medium enterprises) employ close to 97 percent of the national workforce, according to the World Economic Forum and Statistics Indonesia. In Kenya, the informal sector, dominated by small and micro enterprises, has held near 83 percent of total employment for years, underscoring how thoroughly small-scale enterprise, rather than large formal firms, absorbs new workers across East Africa. The Constraints That Could Slow This Trend This is not an unqualified success story. Most small firms in developing countries remain informal, with low productivity, limited access to credit, and little capacity to grow beyond a handful of employees. The IFC and World Bank estimate a financing shortfall of roughly $5.7 trillion facing MSMEs across emerging and developing economies, meaning millions of viable businesses cannot access the capital needed to hire more staff. Large firms, for their part, still generate a disproportionate share of productivity growth, tax revenue, and higher-wage formal employment, so a strategy focused only on small business risks locking workers into low-paying, insecure jobs. The realistic path forward is one where small firms supply the volume of jobs while policy works to formalize them and help more of them graduate into that missing middle tier. Implications for the Decade Ahead The stakes are rising quickly. The World Bank projects that around 1.2 billion young people will reach working age in developing countries over the next decade, while only about 400 million formal jobs are expected to be created under current trends, leaving a substantial gap that large corporations show little sign of closing on their own. Whether that gap narrows will depend heavily on whether small businesses can be financed, formalized, and helped to grow, since they are already where most developing-world workers find employment today, and they are positioned to remain the primary source of jobs for the foreseeable future.     Sources World Bank – "SMEs Finance" overview: https://www.worldbank.org/en/topic/smefinance World Bank – "Creating Jobs for a Better Future" (7 in 10 jobs statistic): https://www.worldbank.org/ext/en/jobs World Bank – "SMEs and Jobs" policy report (PDF): https://documents1.worldbank.org/curated/en/577091496733563036/pdf/115696-REVISED-PUBLIC-SMEs-and-Jobs-final.pdf ILO – "Small businesses and self-employed provide most jobs worldwide" (Small Matters report): https://www.ilo.org/resource/news/small-businesses-and-self-employed-provide-most-jobs-worldwide-new-ilo OECD – "SMEs and Entrepreneurship": https://www.oecd.org/en/topics/smes-and-entrepreneurship.html India, Ministry of MSME / Press Information Bureau – MSME contribution to GDP and exports: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2142170&reg=48&lang=2 Related YouTube Videos World Bank – "Creating Jobs for Young People | World Bank Annual Meetings 2024": https://www.youtube.com/watch?v=6xH1HkdAay0 IFC (World Bank Group) – "IFC SME Toolkit: Helping Small Businesses in Developing Countries Grow and Succeed": https://www.youtube.com/watch?v=Uafh2Dn7GBA ILO – "The ILO at Work": https://www.youtube.com/watch?v=55xQTgUJqhQ OECD – "Financing SMEs and Entrepreneurs 2024": https://www.youtube.com/watch?v=O5QBA7Bm8l0