This chapter analyses policies to support the adoption of digital technologies by SMEs in Egypt. It assesses the current level of digital development by SMEs in Egypt and identifies strong and weak points compared with other countries. It also assesses existing Egyptian government actions to enable SMEs and entrepreneurs to undergo a digital transformation, feeding into a set of policy recommendations.
SME and Entrepreneurship Policy in Egypt
Abstract
The digital transition presents sizeable opportunities for SMEs and entrepreneurs to become more efficient, resilient and competitive in domestic and global markets. However, the digital transition also brings challenges, and there is an important space for policies and programmes that support SMEs and entrepreneurs in overcoming these challenges in fully tapping into the opportunities offered by digital tools and technologies. This forms the basis of the following element of the OECD Recommendation on SME and Entrepreneurship Policy:
Recommendation 5: Supporting the adoption of digital technologies, services and data by all SMEs and entrepreneurs in line with their needs, digital maturity and aspirations by enhancing access to digital infrastructure; strengthening digital skills, data literacy and management of digital security risk; and ensuring open and well-functioning markets for digital goods and services.
This chapter sets out in more detail the benefits of SME digitalisation and the current state of SME digitalisation in Egypt. It also assesses Egypt’s current policy approach against the principles embedded in the OECD Recommendation, concluding with a series of policy recommendations.
Benefits of SME digitalisation
Performance and competitiveness
Digitalisation is the multifaceted process involving the adoption and application of a broad array of digital technologies across various business functions. This transformative journey encompasses tools and practices such as Enterprise Resource Planning (ERP) systems, which optimize back-office efficiency and strategic planning, and Customer Relationship Management (CRM) software, enhancing front-office integration and operations. Also integral to digitalisation are technologies like Cloud Computing, offering flexible and scalable IT solutions, and Big Data Analytics, crucial for efficient decision-making and strategic business insights. Additionally, digitalisation includes the use of social media for expanding market outreach and customer engagement, as well as e-commerce. Digital technologies can significantly increase performance and competitiveness of SMEs via a number of channels (OECD, 2021[1]):
Digital technology such as cloud computing, data analytics, and Internet of Things devices allow SMEs enhance the efficiency of their operations through automation, supply chain optimisation, improved inventory management, better collaboration with suppliers and partners, and improved customer engagement.
Online platforms, e-commerce, and digital marketing provide SMEs with opportunities to expand to new international markets. This can drive increased revenues, as well as a more diversified customer base and reduced dependence on local markets.
The Software as a Service (SaaS) model provides SMEs with cost-effective, scalable, and accessible software solutions. By outsourcing IT infrastructure and software management to SaaS providers, SMEs can benefit from automatic updates, quick deployment, and reduced IT complexity, allowing them to focus on their core competencies and improve collaboration. SaaS enables SMEs to access powerful software tools without large upfront investments, helping them stay competitive and agile in today's business environment.
Digital tools such as social media, online reviews, and customer relationship management (CRM) systems enable SMEs to better understand customer preferences, tailor their offerings, and provide personalised and differentiated goods and services. This can lead to increased customer loyalty, repeat business, and positive word-of-mouth marketing, helping SMEs to build a stronger and more stable customer base.
By lowering operation and transaction costs, reducing information asymmetries, and unlocking economies of scale, digital tools and technologies can help to offset some of the key factors that have historically placed SMEs at a competitive disadvantage relative to larger businesses.
Table 7.1 outlines in more detail the transformational benefits of SMEs performing business functions via digital platforms and services.
Note: The “SME end-user” column is used to highlight the different types of SMEs using different online platforms, and it is by no means exclusive as also large firms, non-profits etc. can (and generally do) use the same platform.
* The distinction between “Aggregators” and “Disruptors” is a qualitative assessment of the platforms’ business model proposed in (Bailin Rivares et al., 2019[2]). It distinguishes between online platforms focused on allowing incumbent service providers to reach their customers more effectively (“aggregators”, e.g. Booking, Deliveroo) and online platforms opening markets to previously almost non-existing competitors, usually self-entrepreneurs (“disruptors”, e.g. Uber, Airbnb).
Source: (OECD, 2021[1])
The population of SMEs in Egypt is dominated by the retail sector. Digital technologies can offer many benefits to these businesses specifically. Internet of Things (IoT) technologies can optimise stock management and transportation, and GPS apps can address logistical challenges and promote e-commerce. In areas where postal codes are lacking, GPS-enabled apps can help locate recipients using phone numbers, facilitating last-minute deliveries. Meanwhile, cloud services can alleviate financial and talent constraints by reducing upfront ICT (information and communication technologies) capital expenditures, providing ICT expertise, improving digital security, and offering cost-effective cloud-based communication services (Lukonga, 2020[3]). Box 7.1 explores further how SME digitalisation can boost the competitiveness of retail SMEs.
The digital transformation of retail SMEs represents a crucial aspect of the rejuvenation and modernisation of local retail sectors, thereby playing a significant role in revitalizing both rural and urban areas (European Commission, 2017; European Commission, 2018). Notably, brick-and-mortar retail SMEs actively contribute to the communities in which they operate. They exhibit a tendency to reinvest their revenues back into the local economy, as evidenced by studies indicating that their proportionate contribution to the community, relative to their revenue, surpasses that of larger chain retailers. Consequently, a local multiplier effect is established, resulting in amplified benefits for the community (Civic Economics, 2012; Rybaczewska and Sparks, 2020; Paddison and Calderwood, 2007). In this context, the adoption of digitalisation can serve as a catalyst in reinforcing the business activities of retail SMEs, enabling them to sustain their valuable contributions to the local economy.
Source: (OECD, 2023[4])
Resilience to shocks
By leveraging digital technologies, SMEs can better navigate economic disruptions, market fluctuations, and other challenges, and emerge stronger and more resilient (OECD, 2021[5]). This has become even more relevant in the face of recent economic shocks, such as the COVID-19 pandemic and geopolitical disruptions like Russia's war of aggression against Ukraine. SMEs that have adopted digital technologies have demonstrated greater resilience in navigating these challenges in a number of ways (OECD, 2021[6]):
SMEs that had already integrated digital technologies into their operations prior to the COVID-19 pandemic and ensuing social distancing measures could adapt more quickly to the need to adopt remote working and digital collaboration tools. This meant they were better able to maintain business continuity and continue serving their customers.
Traditional brick-and-mortar SMEs with established e-commerce channels or online sales capabilities were able to continue selling products or services through online channels, mitigating the impact of reduced foot traffic in physical stores. Digitalisation enabled SMEs to quickly pivot to online sales, expand their customer base, and diversify revenue streams, thereby reducing their reliance on a physical presence and mitigating the economic impact of the crisis.
Disruptions in global supply chains have been a significant challenge during recent economic shocks. SMEs that have implemented digital supply chain management systems can better monitor and manage their supply chains in real-time, allowing them to identify potential bottlenecks and make adjustments as needed. This agility in supply chain management allows SMEs to quickly adapt to changing market conditions, switch suppliers, and maintain operational continuity.
Supporting inclusion
SMEs are often key drivers of employment and inclusive economic growth. By reducing barriers to entry and providing SMEs with tools and resources to compete and grow, digitalisation can contribute to reducing income, geographic, age and gender inequalities within society. Digitalisation offers other employment advantages beyond job creation, including the ability to adjust to new technological demands and more flexible working cultures, such as self-employment and remote work. This is particularly relevant in the Middle East and North Africa (MENA) region, where women's labour force participation and youth unemployment are pressing issues, as digital solutions can provide women and youth with more opportunities to participate in the labour force (Lukonga, 2020[3]).
Encouraging enterprise formalisation
In Egypt, a significant portion of economic activity occurs in the informal sector, where businesses operate outside the formal regulatory framework. Digitalisation can help SMEs in the informal economy to formalise their operations by facilitating access to formal financial services, improving record-keeping and accounting practices, and enabling compliance with regulatory requirements. Formalisation can in turn help SMEs to access formal markets, gain credibility with customers and suppliers, and contribute to broader economic development. On the government side, the digitalisation of registration systems for enterprises and workers can simplify administrative procedures, saving time and costs for businesses and individuals (Chacaltana, Leung and Lee, 2018[7]). This also allows SMEs to access government support programmes more easily, which can be a powerful incentive for formalisation. MSMEDA can play a major role in this regard through Law 152 of 2020 on small, medium, and micro companies by digitising the law’s services and facilities and making them available via the MSMEDA digital platform. A case in point is a government programme in Mexico (see Box 7.2) that promotes the adoption of digital tools in small businesses to encourage formalisation and increase productivity while also creating a broader tax revenue base. Similar initiatives are also underway in Egypt, where the government, through the Ministry of Communications and Information Technology (MCIT), has launched programs like the G-2-G initiative to unify the SME ecosystem. These efforts focus on restructuring government services for SMEs and creating governed digital solutions to facilitate formalisation and increase productivity.
Concanaco Tablet Programme
The Confederation of National Chambers of Commerce, Services, and Tourism of Mexico (Concanaco Servytur) partnered with the National Committee for Productivity (CNP), the Tax Authority (SAT), and the National Institute for the Entrepreneur (INADEM) in 2014 to promote productivity and formalise the economic activities of Mexican SMEs. The programme was designed to provide digital tools to micro- and small enterprises to formalise their operations, with beneficiaries receiving an Android tablet that could be used as a sales point terminal. The tablets were equipped with credit and debit card readers, allowing entrepreneurs to accept card payments, record sales, and manage inventory. In addition to the tablet, on-site training was provided to the beneficiaries on how to use the tablet and manage their businesses.
The cost of the tablet was approximately MXN 5,600 (approximately USD 350), and businesses were only required to cover one-seventh of the cost. For each transaction, a bank commission fee of 2.86% was charged, in addition to VAT. Furthermore, one year of Internet connection was provided to the businesses free of charge.
By 2018, four years after the launch of the programme, a total of 15 086 micro- and small businesses benefited from the programme, including 2 000 youth entrepreneurs. The programme contributed to an increased tax base by formalising businesses’ activities, with around 90% of the beneficiaries making tax declarations. The use of the tablet also facilitated the formalisation of the workforce, with many SMEs going on to register their employees. An assessment of the programme showed that over 25 600 workers benefited from the programme, 54.5% of who were female workers.
Facilitating the green transition
Digitalisation can play a crucial role in enabling SMEs to undergo a green transition and participate in a more sustainable economy. By adopting digital technologies, SMEs can optimise resource use, reduce waste, and improve environmental performance. For example, digitalisation can enable remote work, thus reducing commuter journeys and the associated carbon dioxide (CO2) emissions. Digitalisation can also support the implementation of more sustainable production practices, for example through the use of data analytics for better energy management or through the adoption of circular economy models. SMEs can therefore contribute to sustainable development goals through their digital transformation efforts.
Barriers to SME digitalisation
There are several important barriers that hinder the adoption and implementation of digital technologies among SMEs, particularly in developing countries and the MENA region. These can be broadly categorised into supply-side and demand-side barriers (OECD, 2021[1]).
On the supply-side, connectivity challenges can be a bottleneck for SME digitalisation. This is because access to fast and reliable internet is crucial for effective digitalisation. In the MENA region, SMEs face challenges in accessing high-speed broadband in certain areas, limiting their ability to fully leverage digital technologies. Another supply-side obstacle is SMEs’ lack of access to affordable financing options for investing in digital technologies coupled with the high costs of undergoing a digital transformation, which can prevent SMEs from adopting and implementing digital solutions.
On the demand-side, digital skills are critical for SMEs to effectively adopt and utilise digital technologies. However, many SMEs may lack the necessary digital skills among their workforce, which can limit their ability to fully embrace digitalisation. SMEs may also face concerns related to digital security and data protection, including cyber threats, data breaches and privacy risks. These concerns can erode trust and confidence in digital technologies. In addition, SMEs often operate within fragmented digital ecosystems, which can create challenges in integrating various digital tools and platforms, further hindering digital adoption. SMEs may also face concerns related to intellectual property (IP) protection, as the shift to digital operations increases the risk of IP theft or misuse, especially when working across disparate systems or with third-party providers. As SMEs go online, effective risk management is crucial to mitigate digital security concerns. SMEs are particularly vulnerable to digital security risks due to a lack of in-house IT expertise and cybersecurity skills.
Digital readiness
Egypt performs relatively well compared to other MENA region countries with respect to the strength of the foundations for digital transformation. The Network Readiness Index1 – which combines indicators on internet speed, firm-level technology absorption, government online services, and the extent of businesses’ internet usage – ranks Egypt 73rd out of 131 countries in 2022. This marks a significant improvement from a ranking of 92nd in 2019, indicating Egypt’s ongoing efforts to enhance its digital infrastructure and readiness. (Portulans Institute and World Information Technology Services, 2023[8]).
As shown in Table 7.2, Egypt is one of the strongest players in the MENA region, with only Türkiye (ranked 48th) and Jordan (ranked 70th) scoring higher on the Network Readiness Index. Morocco, Tunisia, Lebanon, and Algeria all rank below Egypt, highlighting the country’s competitive advantage in digital readiness compared to several regional peers. For example, Tunisia and Morocco, which have historically been seen as digitally progressive in some areas, are now trailing behind Egypt, ranked 84th and 79th, respectively. Egypt’s improvement over the past few years underscores its commitment to digitalisation, but there is still room for growth, particularly in areas such as internet speed and firm-level technology absorption, which would allow it to close the gap with higher-ranked countries like Türkiye.
Network Readiness Index 2022
There is substantial variation in the use of different digital tools by businesses in Egypt. A 2019/20 survey conducted by the Ministry of Communications and Information Technology (MCIT) and the Central Agency for Public Mobilization and Statistics (CAPMAS) found that over 70% of surveyed enterprises use computers for accessing the internet and for office business (Figure 7.1). More than half of surveyed businesses use computers for the automation of business processes and for financial management and accounting. Meanwhile, nearly half of survey respondents use computers for project management, while less than a third use them for research and development or human capital development (Ministry of Communications and Information Technology, 2020[9]). It is important to note that this survey reflects private sector enterprises in general, primarily registered and official businesses. The situation for SMEs, particularly in non-urban regions, is more challenging, with higher rates of digital illiteracy and lower levels of digital adoption. This discrepancy highlights the need for targeted policies to support SME digitalisation, especially outside major urban centres.
Note: “Survey of ICT usage in government and public sector enterprises,” conducted by the Ministry of Communications and Information Technology (MCIT) in co-operation with the Central Agency for Government and Public Mobilization and Statistics (CAPMAS), 2019-2020
Among Egyptian firms active on the internet, between two-thirds and three-quarters use the internet to send and receive emails, research goods and services and provide customer service (Figure 7.2). Around one in three internet-using firms use the internet to acquire information from the government, with a slightly lower share using the internet to interact with the government. Other activities, such as instant messaging, staff training, or hiring processes were performed using internet-connected digital tools by only around quarter of respondents.
Note: “Survey of ICT usage in government and public sector enterprises,” conducted by the Ministry of Communications and Information Technology (MCIT) in co-operation with the Central Agency for Government and Public Mobilization and Statistics (CAPMAS), 2019-2020
Funding digital investments
One of the obstacles for SMEs in Egypt that are seeking to undergo a digital transformation is the limited access to finance. SMEs may require capital to invest in hardware, software, and other digital technologies, as well as to train their workforce and implement digital solutions. For example, cloud computing services, which are a key enabler for digitalisation, can represent a significant financial burden for SMEs in Egypt. While cloud solutions avoid the incurrence of fixed ICT costs, such as the installation and maintenance of servers, the fees charged by cloud service providers limit the affordability of these services for Egyptian SMEs. The high costs of digital technologies and tools mean that SMEs are reliant upon external financing in order to acquire them. However, as previously noted, accessing financial services is a challenge for many SMEs in Egypt, especially those with limited credit history or collateral.
Digital financial tools, including those that facilitate digital payments, can help in building a credit profile for SMEs by enabling financial institutions to perform more reliable credit assessments based on, for example, transaction and repayment histories. There are many initiatives conducted at the global level by fintech players in co-operation with traditional financial institutions to support the uptake of such tools by SMEs, with the goal of expanding financial inclusion through digitalisation. This is discussed in more detail in the chapter of this report on the role of fintech in SME and entrepreneurship development in Egypt.
SMEs in Egypt also face challenges in identifying and adopting cost-effective digital solutions, with a potential lack of awareness among SMEs about affordable or free digital tools and technologies. SMEs could therefore benefit from guidance and support in identifying and selecting cost-effective solutions that align with their businesses’ needs and financial capabilities. Training, mentoring, and digital skills development are key in helping to address this challenge. Such measures should adopt an “ecosystem approach”, by involving national and local government entities, private sector partners, universities, and business associations (OECD, 2021[6]).
In Egypt, the fintech sector is experiencing significant growth, particularly in the field of lending for SMEs, which is becoming an important channel for funding digital investments. Fintech solutions are gaining traction due to increasing internet and smartphone penetration, coupled with supportive government initiatives to promote financial inclusion and entrepreneurship. Several fintech companies in Egypt are focusing on developing innovative lending solutions tailored specifically for SMEs, leveraging technologies such as artificial intelligence, big data analytics, and digital platforms to streamline lending processes, improve access to credit, and reduce the traditional barriers faced by SMEs in obtaining financing. These fintech solutions offer SMEs faster approval times, flexible repayment options, and lower transaction costs compared to traditional banks, empowering them to grow their businesses and contribute to the country's economic development. Despite the progress, challenges remain, including regulatory hurdles, access to funding, and building trust among SMEs in adopting digital financial services. However, the overall outlook for fintech lending to SMEs in Egypt is promising, with increasing investor interest and continued innovation driving the sector forward.
Access to digital infrastructure
Internet access
Internet access in Egypt has increased considerably over the last 10 years. Indeed, according to data from the International Telecommunication Union (ITU), more than 70% of the population were internet users in 2021, bringing Egypt in line with the average among upper-middle income countries (Figure 7.3).
Internet users per 100 inhabitants
Note: Internet users are individuals who have used the Internet (from any location) in the last 3 months. The Internet can be used via a computer, mobile phone, personal digital assistant, games machine, digital TV etc.
Source: International Telecommunication Union (ITU) World Telecommunication/ICT Indicators Database; Accessed 2 June 2023
Egypt has a notably high mobile phone penetration rate of 94.2% (as of December 2022), with more than 99 million mobile subscriptions across the country (Ministry of Communications and Information Technology, 2023[10]). These results bode well for future digitalisation efforts. However, it is worth noting that the mobile phone penetration rate in December 2022 was lower than the corresponding figure (99.8%) in December 2021.
The results of a MCIT survey indicate that there were 69.1 million mobile internet subscriptions and 2.4 million USB modem subscriptions in December 2022. This compares to 63.4 million mobile internet subscriptions and 2.1 million USB modem subscriptions in December 2021. The MCIT estimates that the overall internet penetration rate in Egypt was 72.2% in 2021/2022, which is broadly consistent with the ITU’s estimates described previously (Ministry of Communications and Information Technology, 2023[10]). Despite recent improvements, there remains considerable scope to increase the number of mobile internet users and the overall internet penetration rate in Egypt. This would help to foster SME digitalisation.
Change of rate of internet broadband users in Egypt 2017 – 2021
Internet speed
Internet connection speeds impact the types of digital technologies that SMEs can use. To use basic digital tools such as web browsers and social media apps, SMEs do not necessarily need faster internet connections. However, fast and reliable connections become essential for the use of more advanced tools, especially when using cloud services. Indeed, OECD data show that there is a positive correlation between internet speed and usage of cloud computing services (OECD, Forthcoming[12]). April 2023 data from Ookla show that Egypt ranks 84th globally for fixed broadband connection download speed and 91st for mobile connection download speed. Egypt’s fixed broadband connection speed is similar to that of other MENA region countries, while mobile connections are faster, with a median speed of up to 47 Megabits per second in Egypt, as shown in Figure 7.5 below (Ookla, 2023[13]).
Median download speed, Mbit/s, April 2023
Source: Ookla Speedtest Global Index
Geographical variations
Digital infrastructure in Egypt is mostly targeted towards the Cairo region. As shown in Figure 7.6, there is a significant urban-rural divide in individuals using the internet. Only 60% of people living in rural Egypt using the internet in 2020, compared to a figure of 86% in urban areas. This gap in internet usage will have a knock-on effect for the rates at which SMEs connect online and access digital tools, which can stimulate economic growth and innovation, making these regions more attractive for investment and entrepreneurship. This development can also help balance urban-rural migration, as people find more opportunities and amenities in their local areas. Significantly, Figure 7.7 shows that the urban-rural divide in the proportion of individuals using the internet is widening, rather than narrowing. The case of Norway provides a good practice example of improving access to digital infrastructure in rural areas to reduce regional inequalities among SMEs (see Box 7.3).
Improving infrastructure and connectivity in underserved areas across Egypt, such as Upper Egypt can help SMEs overcome digitalisation barriers by creating a more territorially balanced availability of broadband services. Towards this objective, Egypt needs to expand the geographical coverage of mobile 4G+ broadband networks and increase fixed fibre optic broadband access. This could be achieved by promoting competition in fixed digital infrastructure through licensing specialised private wholesale carriers and developing and implementing a national spectrum2 plan in co-ordination with industry and government stakeholders. These reforms could drive innovation, improve service quality, and create a competitive environment that fosters economic growth in Egypt. It is recommended that the government carefully assesses the market conditions and engages in consultations with relevant stakeholders to ensure effective implementation of these measures (World Bank Group, 2020[14]).
Individuals using the internet by urban and rural location (%), 2020
Source: (ITU, 2020[15])
Change of rate of proportion of individuals using internet in urban and rural areas
Note: “Survey of ICT usage in household and individuals,” conducted by the Ministry of Communications and Information Technology (MCIT) in co-operation with the Central Agency for Public Mobilization and Statistics (CAPMAS), 2019/2020, included 15000 households
Furthermore, gender gaps in digital skills and accessibility represent significant barriers to ensuring equal participation in the digital economy. Women, particularly in non-urban areas, are often disproportionately affected by limited access to digital tools and the necessary skills to leverage them for entrepreneurship. Addressing these gaps is crucial for fostering inclusive digitalisation and promoting women’s empowerment through entrepreneurship.
Targeted policies that improve digital literacy and access for women are essential, as they can help bridge these divides and encourage more women to participate in the entrepreneurial ecosystem. Promoting female-focused digital skills training and increasing access to affordable digital infrastructure can contribute significantly to reducing the gender gap, enabling more women-led businesses to emerge and thrive in the digital economy.
The Norwegian government recognises that in the coming years, digitalisation and the effective usage of data will hold considerable importance in various regional industries and puts a strong emphasis on supporting local communities through the development of digital infrastructure and digital skills. Since 2012, private developers have invested NOK 80 billion in digital infrastructure in mobile and broadband networks. Further, government efforts to expand broadband coverage in rural areas, including through grants for broadband expansion in underserved areas amounting to NOK 1.06 billion since 2014, have yielded positive results, most notably a five-fold increase in fibre broadband provision for rural households, from 11% to 55% between 2013 and 2020.
In line with the efforts to pursue the consolidation of the digital infrastructure network, the Norwegian government has focused on the development of the data centre industry in recent years. A data center is a physical room, building or facility that houses IT infrastructure for building, running, and delivering applications and services, and for storing and managing the data associated with those applications and services. Norway was in fact the first country in the world to launch a data centre strategy in 2018. The establishment of these data centres is perceived as an opportunity to better reap the benefits of the data economy with important impacts on rural areas. Data centres currently contribute to 2 400 jobs in Norway, and this trend is anticipated to persist, particularly in rural regions. Several data centres have successfully been established in rural areas, such as in Lefdal Mine and Bluefjords in Western Norway and Green Mountain at Rjukan. Additionally, digitalisation and enhanced utilisation of data play a critical role in the advancement of industries such as aquaculture and agriculture, which are typically associated with rural areas. The efficient use of data in these industries requires a well-developed infrastructure to access data centres. Overall, the development of the data centre economy along with the emergence of 5G technology, the Internet of Things (IoT) and Artificial Intelligence will create important opportunities for growth in rural areas, bolstering the competitiveness of Norwegian suppliers compared to imported goods.
Finally, the Norwegian government has sought to increase the resilience of the trunk network1, with significant investment in the development of alternative transmission routes. It has also set objectives to continue performing risk analysis in vulnerable regions. This is done in conjunction with continued investment by state-owned companies like Bane NOR and Statnett in fibre infrastructure, which is key for establishing new data centres in rural Norway.
1. A network trunk is a communications line or link designed to carry multiple signals simultaneously to provide network access between two points.
Source: Norwegian Ministry of Local Government and Modernisation (2021), Norwegian Data Centres – Sustainable Digital Powerhouses. Available at: https://www.regjeringen.no/en/dokumenter/norwegian-data-centres-sustainable-digital-powerhouses/id2867155/?ch=1
The implementation of digital innovation hubs across Egypt has the potential to accelerate the digital transformation for rural SMEs
Digital innovation hubs, which act as one-stop shops for digital technology use, could help bridge the gap between rural and urban areas, enabling SMEs in rural areas to compete on a more equal footing with their urban counterparts. Modelled off the European Digital Innovation Hubs, these centers across Egypt would connect players in the digital ecosystem and provide accessible and high-speed broadband connection to SMEs. Digital Hubs can also serve as information and resource centers for SMEs in rural areas, providing access to mentoring, access to funding opportunities, digital tools, training programmes, and resources for business development, such as diagnostic tools (European Commission, 2023[16]). By bringing SMEs together, these hubs can also facilitate knowledge-sharing, business partnerships, and peer-to-peer learning, which can further contribute to their digital transformation. In addition, Digital Hubs can provide incubation and innovation support services, helping SMEs in rural areas to develop and test innovative ideas, products, and services. Another function of the hubs can be to work with local governments and policy makers to advocate for policies that promote digitalisation in rural areas.
Digitalisation of government services
For a number of years, digital technologies have been a strategic driver to improve the efficiency of the public sector and support the creation of more transparent, innovative, participatory, and trustworthy governments (OECD, 2014[17]). The OECD proposes a Digital Government Policy Framework, which indicates that a government is digitally mature when it is “digital by design”, “data-driven”, “acts as platform”, “open by default”, “user-driven”, and “proactive” (OECD, 2020[18]).
Egypt has taken substantial steps towards the adoption of digital technologies for government services, including through increasing digital service availability and quality, improving digital infrastructure, and enhancing the capacity of government institutions to implement the digital transformation. This progress aligns with the strategic goals of Egypt's digital transformation journey, which focuses on:
Citizen-centric digital services;
Infrastructure development;
Institutional reforms;
Industry capacity building, and;
Fostering a digital-first culture and mindset.
Egypt has been actively promoting digital transformation in government services, aligning with its strategic objectives. This includes initiatives specifically tailored for SMEs, such as the implementation of online business registration systems, e-government procurement platforms, digital licensing and permitting processes, and the promotion of digital financial services. For instance, SMEs can now register their businesses online, apply for government contracts electronically, obtain licenses and permits through digital portals, and access digital financial tools to support their operations. These efforts aim to streamline administrative procedures, enhance transparency, and improve access to services and resources for SMEs, ultimately fostering their growth and competitiveness in the digital economy.
This shift is illustrated by the examples of the Central Bank of Egypt issuing mandates for cash payments and government bodies such as the Industrial Development Authority digitalising internal processes with electronic contracts and signatures. As explained in Box 7.4, the Egyptian Postal service is central to the delivery of electronic government services, especially for SMEs.
In recent years, Egypt Post has made significant strides in enhancing its services and expanding its offices, with a focus on digital government services. With over 4 200 post offices across the country, Egypt Post has become a destination for accessing a wide range of digital government services, including those related to Digital Egypt, civil status, traffic, consular, and various certificates such as birth, marriage, divorce, and death certificates. Other services offered include National ID renewal, utility bill payment, pension disbursement, current accounts, money transfer, mail, parcels, and express shipping.
As part of its expansion plan, Egypt Post has recently opened 238 new post offices and introduced 110 mobile post offices equipped with cutting-edge technologies to provide financial, postal, and government services to communities nationwide. This expansion is in line with Egypt Post's comprehensive plan, which involves re-engineering the office structure and services to establish itself as a prominent outlet for Digital Egypt services and a key pillar of the national financial inclusion strategy.
To support these efforts, Egypt Post has invested over EGP 4 million in upgrading and optimising its digital infrastructure, with the aim of improving the customer experience and keeping pace with global advancements in fintech and e-commerce. This comprehensive overhaul seeks to provide postal, financial, and governmental services in an efficient, reliable, and safe manner, while also ensuring affordability for Egyptian citizens. Through these developments, Egypt Post is committed to meeting the evolving needs of its customers and contributing to the digital transformation of government services in the country.
Egypt Post facilitating e-commerce
Through its shipping of products and services, Egypt Post has enabled SMEs to transport products and receive payments efficiently and increase domestic e-commerce. One of Egypt Post's key initiatives is its shipping service, which allows SMEs to ship products through its network of 4 300 post offices and request payment upon delivery. Payments can be received on a savings or current account with Egypt Post or via a prepaid electronic card. Once the money is deposited, an SMS notification is sent to the merchant. Since its launch in July 2020, over 4 800 merchants have used this service to ship more than 140 000 parcels, providing a convenient and reliable shipping solution for SMEs.
In 2022, Egypt Post introduced “Wassalah”, a shipping app that further enhances its services for SMEs. Wassalah allows customers to request and communicate with a courier, manage shipments, and track orders and financial deposits. This digital platform streamlines the shipping process and provides SMEs with real-time tracking and communication capabilities, improving their efficiency and customer service. Meanwhile, Egypt Post’s “Yalla” Super App offers a broader range of e-commerce services, including online marketplaces, payment solutions, and digital marketing tools. These apps provide SMEs with digital platforms to reach customers, promote their products, and facilitate transactions, contributing to the growth of e-commerce among SMEs in Egypt.
Source: MCIT
These steps have resulted in Egypt making significant progress in enhancing its digital government services and capabilities, bringing the country ahead of others in the region. Indeed, in 2022, Egypt was categorised as a “Group A” country in the World Bank's GovTech Maturity Index (GTMI)3, which indicates a high level of digital maturity. This represents a strong improvement from Egypt’s “Group B” classification in 2020 and “Group C” classification in 2018 (The World Bank, 2023[19]). Meanwhile, as shown in Figure 7.8, Egypt is above the average of other North African countries and lower middle-income countries in terms of the quality of digital government services, as measured by the UN’s E-Government Development Index (United Nations, 2022[20]). Egypt is, however, just below the world average, ranking 103rd out of the 193 measured countries.
UN E-Government Development Index, 0 to 1 with 0 = lowest EGDI value and 1= highest EGDI value
Note: The EGDI is based on a comprehensive Survey of the online presence of all 193 United Nations Member States, which assesses national websites and how e-government policies and strategies are applied in general and in specific sectors for delivery of essential services. The assessment rates the e-government performance of countries relative to one another as opposed to being an absolute measurement.
Source: (United Nations, 2022[20])
In order to encourage more SMEs to go online to access government services, there are further steps the Egyptian government could take in delivering its services digitally. These could include the creation of online platforms for business registration, licensing, and other administrative processes, as well as the provision of digital access to information and resources. To ensure accessibility, it is crucial to ensure that e-services are user-friendly and do not require expensive equipment or software investments.
Digitalising public procurement processes also makes a difference for SMEs. Indeed, the use of digital tools to simplify, standardise, and streamline procurement processes has a disproportionally high impact on smaller businesses. For example, online tendering information and processes lower administrative costs for SMEs, while automation allows for shorter processing times and increased access, allowing SMEs to work more with governments at both the national and local level (OECD, 2018[21]). In 2018, Egypt adopted Law No. 182 of 2018 on Regulating Contracts Entered by Public Entitles, which includes specific provisions for SMEs and for local content, including the requirement to publish bids online on the Public Procurement Portal (Sharkawy & Sarhan Law Firm, 2019[22]). This, as well as the other provisions in the law, will help to improve SMEs’ access to public procurement opportunities in Egypt.4
In addition to general government services, there are sector-specific digitalisation initiatives designed to support key industries like agriculture. The Academy of Scientific Research and Technology, in collaboration with the Central Bank of Egypt through the NilePreneurs initiative, is providing digital extension services through AgroGate Masr, an online platform that has served 90,000 users over the past two years. AgroGate Masr offers agricultural knowledge content, economic feasibility assessments, and access to finance information, helping farmers and agribusinesses leverage digital tools to enhance productivity and access financial resources.
Digital skills
Increasing access to digital infrastructure and the expansion of e-government services have improved the framework conditions for SME digitalisation. These improvements need to be matched by demand-side measures to stimulate an increased uptake of digital tools and technologies among SMEs. The requirement to enhance digital skills has been magnified by the COVID-19 pandemic. Stakeholders report that many businesses across Egypt are lacking the internal capabilities to capitalise on the benefits of digitalisation, notably due to a lack of digital skills. There is also a digital skills gap between large and small firms. Moreover, outside of the ICT sector, many owners, managers, and employees of more traditional SMEs do not understand the importance of digitalisation, which results in them failing to capitalise on the opportunities it offers.
Overall, Egypt demonstrates a relatively strong penetration of basic digital skills, but the presence of more advanced digital skills, particularly in frontier technologies like artificial intelligence (AI), remains modest. More than 75% of the occupations listed on LinkedIn Egypt report the utilisation of digital literacy skills, signifying a substantial proportion of professionals possessing essential digital competencies (Zhu, 2019[23]). Notably, however, the growth of frontier tech skills has lagged behind the expansion of basic digital skills. This trend is in line with the experience of other developing countries. The LinkedIn data show that in daily job roles, frontier tech skills, such as for example AI, robotics, genetic engineering, cloud computing, cybersecurity, nanotechnology and data science, are predominantly utilised by professionals in OECD countries and certain large middle-income countries (Zhu, 2019[23]). The challenges Egypt faces with respect to digital skills gaps are shared by many other countries in the region. In the MENAP region, which includes the Middle East, North Africa and Pakistan, digital skills levels are rated as the second lowest after Sub-Saharan Africa in basic, standard, and advanced digital skills. The skill gaps are particularly pronounced in areas such as cloud computing, AI, machine learning, mobile technologies, blockchain, data analytics, and advanced security (Lukonga, 2020[3]). To address these issues, more timely and high-quality data are needed on the level of digital skills within the Egyptian SME community and the specific digital skills gaps that exist.
Egypt should also prioritise the expansion of sophisticated digital skills to meet future demands. This entails developing intermediate skills such as data analysis, digital marketing, and utilizing professional software, as well as advanced skills required by ICT specialists, computer engineers, and digital finance experts. To achieve this, there is a need to increase the quantity and quality of STEM graduates, including women. Furthermore, efforts should be made to upgrade digital skills training for the existing workforce, with a focus on effective delivery methods. Scaling up initiatives, forming partnerships with the private sector, and utilizing ICT bootcamps can facilitate continuous and rapid upskilling and reskilling of the workforce, particularly targeting the youth (World Bank, 2020[24]).Egypt, like other MENA countries such as Lebanon, also faces the challenge of the “brain drain”, with highly skilled individuals leaving for other countries, including Gulf countries. This exacerbates the digital skill gaps described previously. Egypt is recognised as the largest source of migrant labour in the Middle East and has one of the world's largest diaspora populations. The key factors driving the emigration of Egyptian skilled talent are low wages, an unfavourable climate for research and development, and the unemployment rate among educated people in Egypt (Abdelbaki, 2019[25]). These are all areas that policy should target to minimise the loss of digital (and other) skills.
Despite these challenges, ongoing efforts to address the digital skills gap are underway, and while initiatives and policies aimed at enhancing digital skills may be introduced, their effectiveness may not be immediately apparent due to the complexities involved in implementation and the time required for tangible outcomes to materialise. Furthermore, there is a collaboration between the government, educational institutions, the private sector, and civil society organisations to achieve sustainable progress in bridging the digital skills gap. By leveraging the expertise and resources of multiple stakeholders, Egypt can develop comprehensive and tailored solutions that address the specific challenges faced by different segments of the population and various industries.
Overall, while the task of addressing the digital skills gap in Egypt is complex and ongoing, it is also critical for the country's future prosperity. By investing in digital education, training, and capacity-building initiatives, Egypt can position itself to fully harness the benefits of digitalisation and emerge as a competitive player in the global digital economy.
E-commerce
The majority of SMEs in Egypt are retailers, which means that e-commerce is one of the most important elements of SME digitalisation. The absence of official e-commerce statistics makes it challenging to accurately assess the market size, but estimates place the 2018 market between USD 552 million and USD 878 million, with retail e-commerce sites selling around USD 77 million worth of products (World Bank Group, 2020[14]). Data on e-commerce transactions by SMEs are limited, and e-commerce accounts for less than 2% of total sales and less than 1% of the global e-commerce market in the Middle East and North Africa (MENA) region (World Bank Group, 2020[14]).
Although there are new digital solutions available for both business-to-business (B2B) and business-to-consumer (B2C) transactions and interest in e-commerce is growing, data from a survey conducted by the MCIT finds that the share of SMEs that have embraced online trading as a consumer sales channel remains small.
Figure 7.9 shows that larger firms with more than 250 employees are significantly more likely to engage in e-commerce than smaller firms. Notably, the survey data do not include firms with less than 10 employees, which may well have even lower rates of e-commerce participation.
Percentage enterprises dealing with e-commerce according to enterprise size. Size defined by number of employees.
Note: “Survey of ICT usage in government and public sector enterprises,” conducted by the Ministry of Communications and Information Technology (MCIT) in co-operation with the Central Agency for Government and Public Mobilization and Statistics (CAPMAS), 2019-2020
Egypt lags behind other countries in the use of e-commerce platforms. This is despite the significant growth of digital platform usage in the areas of food delivery, ride-hailing, advertising, and even online shopping. Indeed, in the United Nations Conference on Trade and Development's (UNCTAD) 2019 B2C E-Commerce Index, Egypt is ranked 102nd out of 152 countries (UNCTAD, 2019[26]).
There are a number of important barriers to SMEs selling online that exist within Egypt, which need to be overcome in order to realise the potential of digital trade:
Egyptian SMEs face red tape and burdensome regulatory hurdles when selling online. In order to incorporate an e-commerce company in Egypt, Law No. 10 of 2003 on Telecommunications Regulation stipulates the firm must obtain a license from the National Telecommunications Regulatory Authority (Saleh, 2022[27]). The cost of obtaining the necessary licensing, when added to the costs of the digital tools needed to initiate e-commerce operations5, may be prohibitive for some SMEs, particularly those with limited experience or resources to establish and manage e-commerce operations., which may deter many firms. The time taken to obtain licensing and approvals is also an issue. It is reported that setting up a payment gateway from the CBE and receiving official approval to sell online takes approximately two months. These issues also exist internationally. A recent OECD “Digital for SMEs” (D4SME) E-Commerce survey and report on hybrid retail in six OECD countries indicates that complex e-commerce regulations are a key barrier to selling online, with 86% of survey respondents citing “understanding e-commerce laws and regulations" as a notable issue when engaging in online sales (OECD, 2023[4]).
Egyptian SMEs would benefit greatly from a streamlined and simplified regulatory framework for SMEs engaged in e-commerce. This framework could include business registration, licensing, taxation, customs procedures, and consumer protection. The aim should be to create a favourable and enabling environment for SMEs to sell online, while ensuring compliance with relevant laws and regulations. Similarly, to promote cross-border e-commerce and digital trade for SMEs, the government should facilitate customs clearance procedures, simplify export and import documentation, and explore opportunities for international co-operation and partnerships. This may include leveraging existing regional and international trade agreements, as well as negotiating new agreements to facilitate digital trade.
Access to finance for selling online remains a key barrier, with Egyptian firms reporting high costs of digital marketing and social media advertising as a barrier to engaging in e-commerce. This finding is again in line with recent OECD analysis, which shows that 74% of businesses express the need for financial support to facilitate their entry into the online marketplace (OECD, 2023[4]).
Online marketplaces and digital payment instruments are limited in Egypt, and many SMEs lack the skills to develop effective websites.
Due to the size of its informal economy, Egypt has a large population that is unbanked and unconnected, limiting the demand for e-commerce.
Another significant challenge to e-commerce adoption in Egypt is the lack of cybersecurity awareness, which contributes to widespread concerns among online buyers about the safety of their financial information. Many consumers fear their bank details could be compromised during online transactions, especially given the frequent exposure to bank fraud attempts. This lack of trust in the security of digital payments creates a major barrier for expanding e-commerce, particularly in an environment where financial inclusion is already limited.
Egypt faces several challenges in promoting e-commerce among SMEs, such as limited digital literacy, inadequate infrastructure, and regulatory barriers. Many SMEs also lack trust in online transactions and are not fully aware of the tools and platforms that could help them enter the e-commerce space. Despite these obstacles, the government has introduced initiatives aimed at increasing the adoption of digital platforms, including financial incentives, digital literacy programs, and support for SMEs to establish an online presence.
While Egypt faces these challenges in promoting e-commerce among SMEs, there are promising initiatives aimed at addressing these barriers and fostering a more conducive environment for digital trade. However, to fully unlock the potential of e-commerce, more targeted policies are needed. These include streamlining regulations, investing in digital infrastructure, and improving awareness of support programs. By doing so, Egypt can empower SMEs to thrive in the digital economy and position itself as a competitive player in global digital trade. The ongoing efforts to support SMEs in e-commerce adoption—such as online business training programs and initiatives to improve payment systems—are steps in the right direction. However, continued investment in these areas will be crucial to creating a sustainable e-commerce ecosystem that enables SMEs to grow and compete internationally.
Much support is needed to increase the internal capacity of Egyptian SMEs to sell online and accordingly to boost SME exports. However, awareness or uptake of support programmes among SMEs can often be limited. Indeed, according to the OECD D4SME E-Commerce survey, only 7% of SME respondents from the six OECD countries covered by the study reported benefiting from policy initiatives to foster their digital efforts. Possible explanations for these results include limited convenience in terms of service accessibility due to geographical or time factors, or a general lack of awareness regarding the availability and existence of these training programmes (OECD, 2023[28]). For the Egyptian government, learning from these results and investigating the underlying factors behind the low e-commerce adoption rate is of paramount importance. It is noteworthy for Egyptian policy makers that the OECD survey indicates that SMEs display a willingness to participate in government programmes once they become aware of their existence. As shown in Figure 7.10, the uptake of government support programmes among businesses aware of such programmes is a substantial 57%. This finding underscores the potential for a considerable number of businesses to benefit from support measures through enhanced dissemination of information regarding policy programmes.
As an average percentage of responses from France, Italy, Japan, Korea, and Spain.
Source: OECD D4SME E-Commerce Survey (OECD, 2023[4])
Governments can leverage diverse communication channels to effectively raise awareness of support programmes among the business population (OECD, 2023[28]). As seen in Figure 7.11, approximately 67% of businesses with knowledge of government support for online sales obtained information through government portals or websites directly operated by the government, while approximately 38% accessed this information via chambers of commerce or associations dedicated to supporting SMEs (OECD, 2023[28]). These findings emphasise the crucial role played by business associations within the SME ecosystem.
Social media platforms, such as Facebook, have been identified by stakeholders as instrumental for Egyptian SMEs selling online. These platforms can provide a quicker and less costly (notwithstanding high advertising costs) way of selling online than other alternatives, such as selling through SMEs’ own websites. In Egypt, while many SMEs have turned to social media platforms as an alternative to selling through their own website, there is a still a large gap between small and large firms in terms of social media usage. 70% of Egyptian firms with more than 250 employees engage with social media, compared to just over 40% of firms with 10-49 employees (see Figure 7.12).
As an average percentage of responses from the surveyed countries (France, Italy, Japan, Korea and Spain).
Source: OECD D4SME E-Commerce Survey (OECD, 2023[4])
Enterprises Using Social Media according to Enterprise Size
Note: “Survey of ICT usage in government and public sector enterprises,” conducted by the Ministry of Communications and Information Technology (MCIT) in co-operation with the Central Agency for Government and Public Mobilization and Statistics (CAPMAS), 2019-2020
This section reviews the strategies, policies and programmes to support SME digitalisation in Egypt. Many of the policy initiatives reviewed in other chapters of this report also impact upon SME digitalisation. Such policies are not covered in this section.
Policy framework for SME digitalisation
Egypt has several national strategies that are of relevance to SME digitalisation:
The MSMEs and Entrepreneurship National Strategy (2017-22) had technology and innovation as one of its cross-cutting themes. Specifically, the strategy calls for measures to increase the creation and utilisation of ICT and promote technology-based financial services.
Law No. 152 of 2020 (the MSMEs Law) establishes a robust legal framework for the digitalisation of SMEs. This legislation is aligned with Egypt’s policy priorities of fostering entrepreneurship, innovation, and digital transformation. It will help to create a supportive environment for SMEs to embrace digital technologies and enhance their competitiveness, for example through the streamlining of administrative procedures and simplification of regulations. The law also plays an important role in facilitating access to funding and resources for SMEs, enabling them to invest in digital technologies and skills.
The MCIT’s Digital Egypt Strategy aims to transform Egypt into a digital society. It encompasses three main pillars:
Digital Transformation: The objective is to digitally transform existing government services to eventually deliver all public services digitally across the country. Online payment methods have already been implemented to facilitate service fee transactions. The Digital Egypt e-platform has also been introduced, in order to improve access to public services by offering a wide range of fully-digitised services across multiple channels with various payment methods. Other initiatives under this pillar include digital infrastructure upgrading and the establishment of secure and technologically advanced big data centers to support data security. It is also recognised that the implementation of an electronic signature system plays a crucial role in digital transformation. The Egyptian Root Certificate Authority, overseen by the Information Technology Industry Development Agency (ITIDA), ensures the regulation and use of e-signatures for digital transactions.
Digital skills and jobs: The focus of this pillar is on developing the digital capabilities of individuals in order to strengthen workforce skills. Recognising the need for a skilled workforce to support the digital transformation, the MCIT provides training and capacity building for various segments of society, including youth, students, graduates, professionals, women, and people with disabilities. Collaboration with major technology companies and international universities facilitates the integration of traditional and remote digital learning models, establishing a comprehensive strategy to enhance digital competences. This strategy adopts a hierarchical approach, starting with digital literacy and progressing to intermediate and advanced technological training programmes.
Digital innovation: The MCIT endeavours to foster an ecosystem that promotes entrepreneurship, creativity, research and development, and innovation in the field of ICT. To this end, it has adopted policies to help convert ideas into commercialisable products, and is engaging stakeholders from across the innovation ecosystem, including government entities, academic and research institutions, financial institutions, the private sector, entrepreneurs, and support networks.
The “Our Digital Opportunity” initiative aims to foster collaboration between the public and private sectors while enabling SMEs to contribute to national digital transformation projects. Managed by the Information Technology Industry Development Agency (ITIDA), the initiative provides SMEs with a digital platform that offers various opportunities for participation, collaboration, and skills enhancement. The platform serves as an information hub, offering three distinct pathways for SME participation in digital transformation projects:
SMEs can collaborate directly with government entities on digital transformation projects.
SMEs can engage with partner companies associated with these government entities.
SMEs can participate in competitions that provide training programmes to enhance their expertise in data science and Artificial Intelligence before undertaking projects.
The platform lists ongoing digital transformation projects across various government entities, with each project outlining a set of opportunities that can be assigned to SMEs for execution. For each opportunity, information is provided on the scope of work, technical specifications, implementing bodies, and key performance indicators. This transparent approach enables stakeholders to closely monitor project phases and track announced opportunities. Furthermore, the platform serves as a means to announce the selected SMEs responsible for project implementation. In total, the Our Digital Opportunity initiative has provided 33 participation opportunities to SMEs, with an estimated total business volume of EGP 90 million.
There is a need for the Egyptian government, led by MSMEDA, to develop a comprehensive SME digitalisation strategy
The Egyptian government is aware of the importance of SME digitalisation, as reflected in the various strategies and plans described above. However, there is a need for a national SME digitalisation strategy that can provide a comprehensive roadmap for future policy. The strategy should outline clear goals, priorities and actions to foster digitalisation in Egyptian SMEs, address challenges, and capitalise on opportunities.
Currently, support for SME digitalisation is fragmented across many different ministries and agencies, as illustrated by the range of strategies and initiatives presented above. To address this, Egypt's strategy should aim to co-ordinate efforts among various ministries, industry associations, and technology providers to facilitate efficient resource allocation, streamlined implementation and the tracking of progress over time. Singapore's whole-of-government approach in its national SME digitalisation strategy provides an illustration of how this can be achieved (see Box 7.5). The proposed strategy should also include sector-specific plans targeting strategically important industries. This aligns with the OECD's recommendation of a clear vision of how digital tools can advance the country's wider ambitions. Sectors such as agriculture, manufacturing (4th industrial revolution), tourism, and textiles (as an avenue for women empowerment) could be targeted, following Singapore's Industry Digital Plans (IDPs) approach. The Singapore case also shows how robust monitoring and evaluation mechanisms to track implementation progress are an important facilitator of data-driven policy refinements.
Singapore’s SME Go Digital programme is a successful example of a national SME digitalisation strategy. Launched in 2017 by the Infocom Media Development Authority (IMDA), it outlines the national plan to provide SMEs with access to digital tools, training and funding support to embark on their digitalisation journey. The programme brings together government agencies, industry associations, and technology providers in a coordinated effort to drive SME digitalisation. In 2022, 80 000 SMEs had adopted digital solutions from the programme.
More specifically, the services offered by the programme include:
Chief Technology Officer as-a-service (CTO-as-a-Service): A comprehensive platform that helps SMEs assess their digital readiness, identify their specific digitalisation needs, receive tailored recommendations and information about relevant financial support options. They can also access a pool of consultants who can assist in developing project implementation plans and tracking progress. The initial usage of these services is provided free of charge, and further assistance is available based on commercial agreements.
Industry Digital Plans (IDPs): Sector-specific guides that provide SMEs with information on digital solutions and relevant trainings based on the Industry Transformation Maps (ITMs) of each sector. These plans are regularly updated to incorporate the latest technological advancements and best practices. SMEs also have access to pre-approved, cost-effective, and market-proven digital solutions.
Start Digital Packs: Run in partnership with Enterprise Singapore (ESG) to offer digitalisation solutions to newly founded or non-digitalised SMEs. These packs cover various categories, including Human Resource Management Systems (HRMS), digital transactions, and cybersecurity. Banks and partner telecommunication companies offer these packs at competitive prices, with the possibility of obtaining cost waivers.
Grow Digital Programme: In collaboration with ESG, this programme enables SMEs to engage in pre-approved e-commerce platforms, allowing them to sell overseas without a physical presence.
Advanced Digital Solutions Programme: Supported by lead agencies and industry players, this programme facilitates the adoption of emerging technologies such as Artificial Intelligence (AI) and cloud-based solutions. SMEs can apply for funding support to cover costs related to hardware, software, connectivity, cybersecurity, and more.
Source: IMDA (2022), Factsheet SME Go Digital. Available at: https://www.imda.gov.sg/-/media/Imda/Files/Programme/SMEs-Go-Digital/SMEsGD-Factsheet.pdf
Success factors for setting priorities and managing the digital transformation process
Leadership from a central body such as a president’s or prime minister’s office helps identify needs and strengths, build support, and manage trade-offs
Political backing helps turn strategies into reality, generating the required underpinning finance, skills, and long-term and integrated approach to building digital systems
A clear vision of how digital tools advance the country’s wider ambitions can guide strategic decisions
Prioritising voices of those most likely to be disadvantaged by digital transformation strengthens the strategy process
Quick gains relevant to local context can indicate the opportunities
A whole-of-government approach can manage sectoral interdependencies in policy areas such as trade, taxation, social protection, energy and environment, and support for new business models
Partnering with the private sector helps manage network quality
Success factors for becoming a digital government
Build capacity to regulate specialised technical areas
Align government processes, such as procurement, to remove barriers to putting digital solutions in place
Support e-government capacity to expand access to services such as social protection and digital payments. Simply digitalising a service, however, does not necessarily mean more people are reached or outcomes improved
Keep pace with the changing technology landscape using context-specific approaches to agile policy making. Working towards agreed principles can guide regulation and technical standards
Source: OECD, “Development Co-operation Report 2021: Shaping a just digital transformation”.
Consideration should be given to establishing a national panel of industry representatives that feeds into government decision-making and strategy formulation. This panel can serve as a platform for dialogue and consultation between the government and private sector stakeholders, providing valuable insights and feedback on policies related to SME digitalisation. By ensuring private sector perspectives are taken into account during policy formulation, the panel can also enhance the inclusivity of the digitalisation process. Box 7.7 provides a description of the approach taken in Korea.
According to the "Act on the Promotion of Technology Innovation of Small and Medium Enterprises," which was implemented in 2001 as part of the policy efforts to enhance competitiveness of Korean SMEs, the government has established a legal basis for promoting technological innovation and providing policy support to SMEs. This Act designates the Ministry of SMEs and Startups as the responsible government institution for implementing SME innovation-related policies, granting the Minister the authority to formulate strategies related to SME innovation and request data from other government agencies.
Digitalisation is explicitly included as a category of technical innovation under the Act, and the Ministry is mandated to support the development of ICT infrastructure necessary for digitalising SMEs and facilitating the diffusion of technologies among small businesses. Furthermore, the Act emphasizes the Ministry's responsibility in developing and disseminating digital standards of business systems targeted at SMEs.
As a result of the introduction of the Act, the Korea Technology and Information Promotion Agency for SMEs (TIPA) was created as a dedicated government agency to support SMEs' innovative activities and their efforts towards digitalisation. TIPA, in accordance with the Act, also conducts policy research and evidence gathering, and carries out detailed annual surveys on SME digitalisation.
Source: Korea Legislation Research Institute, “Act on the Promotion of Technology Innovation of Small and Medium Enterprises”.
The Egyptian government, led by MSMEDA, could look to replicate elements from the successful SME digitalisation strategies of Singapore and Korea. For example, drawing inspiration from Singapore's SME Go Digital programme (Box 7.5), Egypt could establish a dedicated platform that offers services like "Chief Technology Officer as-a-service" (CTO-as-a-Service), to assist SMEs in assessing digital readiness, identifying digitalisation needs, and accessing tailored recommendations and financial support options. By adopting this approach, Egypt can prioritise the voices of those most likely to be disadvantaged by digital transformation, a key success factor highlighted by the OECD (see Box 7.6).
On the basis that MSMEDA and other relevant government entities have identified digital trade to be a priority for SMEs, a strategy for SMEs selling online should also be developed alongside the national digitalisation strategy. The strategy could include measures to promote digital literacy and export training development, as well as support mechanisms to stimulate an SME export culture and provide export financing solutions. The Egyptian government could consider implementing a programme similar to Türkiye's International Market Support Programme by the Small and Medium Enterprises Development Organisation (KOSGEB) (see Box 7.8). Türkiye’s initiative aims to develop the skills and capabilities of SMEs for foreign market entry, with a focus on increasing the number of SMEs engaging in overseas sales through e-commerce.
While drawing inspiration from successful SME digitalisation strategies in Singapore, Korea, and Türkiye holds promise for Egypt, it's essential to carefully consider the suitability and adaptability of these approaches to Egypt's specific context. Several factors should be taken into account:
Egypt faces its own socio-economic challenges, including a large informal economy, high unemployment rates, and varying levels of digital literacy among SME owners and workers. Any initiatives implemented should be tailored to address these specific circumstances.
Egypt's regulatory framework may differ from those of Singapore, Korea, and Türkiye. It is essential to align any proposed initiatives with Egypt’s laws and regulations and address potential regulatory hurdles that could impede their implementation.
Egypt may face resource constraints, both financially and institutionally. Therefore, initiatives should be designed to be cost-effective and feasible within budgetary limits. Building the institutional capacity to support SME digitalisation efforts is also critical.
Technology adoption may be influenced by local cultural norms and behaviours. Digitalisation strategies must resonate with Egyptian SMEs' preferences and practices to ensure successful implementation.
In line with these considerations, the Prime Minister has issued a decree to establish a sector for the follow-up and evaluation of national strategies at the Information and Decision Support Center (IDSC). This sector is actively involved in the formulation of many national strategies in partnership with key stakeholders, drawing on best practices from other countries to ensure Egypt's strategies are effective and contextually appropriate. By leveraging this institutional mechanism, Egypt can ensure that its SME digitalisation initiatives benefit from global insights while being tailored to local needs.
The Turkish government has a number of programmes in place to promote SME integration in global value chains and the take up of e-commerce (OECD et al., 2019[29]). For instance, the International Market Support Programme by KOSGEB – the Small and Medium Enterprises Development Organisation under the Ministry of Industry and Technology – was implemented in 2020 to develop the skills and capabilities of SMEs entering foreign markets. The aim was to increase the foreign market share of SMEs and enable them to effectively compete international markets, as well as to increase the number of SMEs engaging in overseas sales through e-commerce (KOSGEB, 2020[30]).
The Turkish e-commerce sector is fast growing, with rising internet penetration rates and increased use of credit cards driving the growth of online shopping in the years leading up to the pandemic. To support SMEs during COVID-19 pandemic, the Ministry of Trade set up a platform (“e-ticaret Bligi Platformu”) with easily accessible information regarding e-commerce and guidelines for SME e-traders (Republic of Türkiye Minitry of Trade, 2020[31]). The government has recently introduced additional measures specifically targeting e-commerce. For instance, in 2022, the government committed to subsidise 60% of the expenses incurred by companies for their membership in e-commerce sites approved by the Ministry of Trade (Republic of Türkiye Ministry of Trade, 2021[32]).
SME exporters can additionally benefit from financial support. The Ministry of Trade provides a wide range of supports including export refund aid, buyer credit and support for logistics centres. Furthermore, the Turkish export credit bank Turk Eximbank offers specialised export credit through loan programmes like the SME Export Readiness Credit (Republic of Türkiye Ministry of Industry and Technology, 2023[33]). Additionally, as the KOSGEB’s International Market Support Programme, grants are offered for software and hardware related expenses, participation in international fairs and service procurement expenses.
Strengthening collaboration across relevant stakeholders is key to accelerating SME digitalisation
In order to accelerate SME digitalisation in Egypt, it is crucial to strengthen collaboration with non-government bodies, such as the Chamber of Commerce, sector associations and private sector actors. This should include the formation of partnerships between MSMEDA and different sector associations across Egypt to enable networking and matchmaking services that connect "traditional" SMEs with SMEs operating in the ICT sector. For example, the IMC (Industrial Modernization Centre) programme can be expanded to facilitate connections between traditional SMEs and tech start-ups, promoting knowledge exchange and collaboration. Communication channels between the government and non-government bodies involved in SME digitalisation should also be strengthened. This could involve the organisation of regular meetings, workshops, and forums to facilitate knowledge sharing, exchange of best practices, and co-ordination of efforts, thus helping to create synergies and avoid the duplication of efforts.
Collaboration over digitalisation should not be limited to national and sub-national authorities but should also include other stakeholders such as civil society, private sector representatives, academia, and international institutions. This multi-stakeholder approach can bring diverse perspectives, expertise, and resources to the table, resulting in more holistic and effective policies for e-commerce and SME digitalisation in general. Particular attention should be given to including representatives from lagging and underserved regions, as well as population sections that are excluded from digitalisation processes, in order to address the digital divide and ensure inclusive growth (Sidlo et al., 2019[34]).
Capacity building programmes for SME digitalisation
The Egyptian government has undertaken many initiatives to upskill and build the capacities of individuals and SMEs to participate in the digital transformation. Table 7.3 provides a summary of these different policies and programmes.
Several common threads emerge from these initiatives, including a strong focus on capacity building and technology transfer. Each initiative addresses specific challenges faced by SMEs in their digital transformation journey. For example, while TIEC focuses on incubation, mentorship, and access to funding and resources, AMELI serves as a comprehensive digital hub offering website development, e-commerce capabilities, online payment systems, and digital marketing support. Both Archemus, a component of AMELI, and Nilepreneurs emphasise knowledge-sharing and capacity building. While not all programmes are SME specific, the vast majority of firms operating in Egypt are SMEs. There is also a focus on minorities in some of these upskilling programmes, for example "Our Future is Digital" on youth, and the Qodwa-Tech Initiative on women empowerment.
Source: OECD Study Mission to Cairo
The Egyptian government should take proactive measures to provide targeted support to SMEs in Egypt for the development of digital skills. This can be achieved through the implementation of training programmes, workshops, and capacity building initiatives aimed at bridging the skills gap and fostering a culture of continuous learning and innovation among SMEs. MSMEDA could play a key role in promoting existing initiatives and developing an awareness campaign to highlight the benefits of digitalisation for SMEs, particularly those that are not at the technological frontier.
It is important to differentiate between general digital upskilling and reskilling programmes and those targeted at SMEs with more ambitious digital plans involving advanced technologies such as artificial intelligence, data analytics, and the Internet of Things. The demand for advanced digital skills in Egypt is growing rapidly due to various ICT initiatives undertaken by the government, but the country still lags behind the MENA (Middle East and North Africa) average in terms of the supply of digital skills (World Bank Group, 2020[14]). Therefore, recent programmes initiated by the MCIT and MSMEDA to improve digital skills need to be further strengthened to meet the evolving demand for human capital in the era of Digital Egypt.
The Creativa Innovation Hubs project is a notable initiative implemented through the Technology Innovation and Entrepreneurship Center (TIEC). With eight hubs spread across a range governorates in the country, including Sohag, South Valley – Qena, Menoufia, Minia, and Mansoura, the hubs provide spaces conducive to ideation, mentorship, co-working, networking events, workshops, venture demos, and product launches. The project's core objective is to support and empower students, entrepreneurs, SMEs, and startups to advance the digital transformation and actively participate in the digital economy. Additionally, the MCIT is concurrently developing six technology parks in Minya, Menoufiya, Mansoura, Sohag, Qena, and Aswan. These technology parks will further augment entrepreneurship and innovation by offering hardware design labs, startup incubators, training institutions, and integrated systems for artificial intelligence training, data science, and cybersecurity.
Sector-specific digitalisation programmes
Emphasising the heterogeneity of the SME population, Egypt has developed sector-specific digitalisation support initiatives that are tailored to strategically important industries.
Creative and textiles sectors
The creative and textiles sectors are central to the Egyptian economy. The Industrial Modernization Center’s (IMC) Creative Hub Egypt initiative provides non-financial assistance to creative sector SMEs, offering supports in digital marketing, website development, export readiness, customer relationship management (CRM), and enterprise resource planning (ERP). Notably, the hub conducts online sessions focused on digital marketing for handicraft SMEs, fostering knowledge dissemination and capacity-building within the sector. For this initiative, the IMC acts as an intermediary, connecting approximately 75 businesses each year with relevant service providers, facilitating access to business development services and technical support.
Industry and Agro 4.0
Policies targeting technology uptake in manufacturing SMEs and the adoption of Industry 4.0 and Agro 4.0 technologies are a focus of Egyptian policy makers. Industry 4.0 and Agro 4.0 are the digital transformations of manufacturing and agricultural practices respectively, characterized by the integration of advanced technologies such as the Internet of Things, artificial intelligence, and machine learning to enhance productivity, flexibility, and decision-making in real-time, ultimately aiming to increase profitability and sustainability. As an example, the Industry 4.0 Innovation Center (IIC) is a collaborative initiative between ITIDA, the IMC and Siemens Egypt. Under this initiative, the first IIC has been established in the Knowledge City in the New Administrative Capital. The centre aims to increase the deployment of Industry 4.0 and digital transformation technologies within local industry. The IIC started its operations in the first quarter of 2023. It provides tools, equipment, simulations, best practice sharing, workspaces, and consultation services in order to support local start-ups and SMEs in developing and integrating Industry 4.0 technologies. In addition, ITIDA has contracted with 26 local and international companies specialised in designing electronics to establish their branches in the IIC.
Egypt could build out the IIC to raise awareness and capacities among SMEs. Specifically, the IIC can serve as a hub for providing information, resources, training, and technical assistance to SMEs interested in adopting or developing Industry 4.0 and Agro 4.0 technologies. It could also promote partnerships with universities, federations of industry, and other sources of knowledge and expertise in the local ecosystem (OECD, 2021[36]). Encouraging partnerships between SMEs and academic institutions would be particularly valuable for fostering innovation, enabling SMEs to access cutting-edge research and technological advancements that can drive their digital transformation and competitiveness. Furthermore, integrating sustainability into digitalisation initiatives would ensure alignment with national and global sustainability goals. Promoting environmentally-friendly technologies and practices, such as energy-efficient production processes and sustainable supply chains, can contribute to the green transformation of SMEs while enhancing their resilience and long-term growth prospects.
Greece’s “Acceleration for Smart Manufacturing” programme provides an international learning model for supporting SMEs in the adoption of digital technologies through the provision of grants (see Box 7.9).
Description of approach
“Acceleration of Smart Manufacturing” is a state-aid programme financed by the EU’s Recovery and Resilience Facility. It supports manufacturing SMEs through the provision of grants. It is implemented by the Hellenic Ministry for Development according to the European Union’s regulatory framework for competition, the European Commission’s Regional Aid Map for Greece and the EU’s General Block Exemption Regulation (GBER) 651/2014.
The aim of the programme is to accelerate SMEs’ digital transition and their adoption of Industry 4.0 production models in order to increase their competitiveness. It does this by supporting SMEs in upgrading their operational and production processes. The adoption of digital technologies helps manufacturing SMEs to improve their productivity and competitiveness, stimulate their access to new markets and create more quality jobs. The main condition for the support of SMEs through the programme is the submission of an investment plan which includes expenses for digital production equipment, consulting services and vocational training. The investment plan is evaluated by the Ministry of Development with certain criteria to certify:
1. The scope of the investment plan aligns with Industry 4.0 requirements regarding artificial intelligence and big data analysis, smart manufacturing technologies such as Machine to Machine (M2M) learning, Manufacturing Execution Systems (MES), Supervisory Control and Data Acquisition Systems (SCADA) or robotics and automation systems.
2. Grants are determined and circulated according to the EU competition regulatory framework and European Commission’s Regional Aid Map for Greece, and.
3. The sustainability of the SME and its investment plan.
SMEs whose investment plans have been approved during the evaluation process are beneficiaries and will receive a grant covering a certain percentage of the approved budget which is determined according to their size. SMEs are supported to implement an approved investment plan to upgrade their production equipment and infrastructure with smart manufacturing and artificial intelligence systems. 70% of the programme’s budget is allocated to micro and small enterprises while 30% is allocated to medium-sized enterprises in the manufacturing sector.
Success factors
“Acceleration of Smart Manufacturing” is a focused programme which covers a significant part of manufacturing SMEs’ digital transformation gap in Greece. It contributes to the modernisation of SMEs’ production equipment with contemporary technologies which accelerate their adoption to Industry 4.0 production models and help them increase their productivity and competitiveness. A crucial factor for the success of the programme is that it addresses a certain problem of manufacturing SMEs, the digital transformation of their operational and production processes. Another success factor is that it offers significant aid in the form of grants to manufacturing SMEs according to their size and the region they are activated in. Finally, the evaluation procedure for SMEs’ investment plans takes place electronically through the Ministry’s digital platform for state-aid programmes, which contributes to transparency and increased accountability. The programme stands as a good practice and a guide for the implementation of more focused actions for the digital transformation of Greek SMEs in other sectors.
Relevance for Egypt
Initiatives similar to Greece’s “Acceleration of Smart Manufacturing” could significantly support Egyptian SMEs in the digital transition. MSMEDA could design and implement similar state-aid programmes to finance SMEs’ investment plans focused on the adoption of emerging technologies, innovative business models, or the digitalisation of their operational and production processes. Such state-aid programmes could mitigate Egypt's lag in the adoption of frontier technologies such as Artificial Intelligence, robotics, data science, cloud computing, cybersecurity, or nanotechnology.
ICT sectors
The Information Technology Industry Development Agency’s (ITIDA) Export-IT programme is specifically geared towards supporting SMEs to develop their resources, enhance competitiveness, and reduce export-related costs. With a primary focus on assisting Egyptian ICT SMEs in penetrating key markets, the programme aims to provide financial incentives that contribute to boosting companies' competitiveness and improving the quality and pricing of their exports. Companies receive direct cash support up to 10-35% maximum of the value-added exports based on their size (micro / small / medium). The program accepts local ICT companies with more than 50% of Egyptian ownership, have a headquarter in Egypt, and export ICT services, embedded software, and IT-enabled services such as call centre services, consultation and training services related to IT. By fostering SMEs' development and increasing their ICT services' exports, Egypt has earned recognition as a regional leader in providing export support to its ICT industry.
Over 170 Egyptian exporting companies, all of which were SMEs, participated in the 30th round of the Export-IT programme, which launched in 2022 with a budget of EGP 70 million. The programme has been instrumental in empowering SMEs to expand their business and promote their ICT exports. Throughout the past 12 years, ITIDA's support to SMEs in this programme has surpassed EGP 549 million in incentives, culminating in cumulative revenues from beneficiaries' exports estimated at over EGP 9.6 billion, reflecting the substantial impact on SME growth and export promotion in Egypt's ICT sector.
To increase the adoption of Industry 4.0 and Agro 4.0 technologies by SMEs, the Egyptian government should update its policy mix to ensure firms across all sectors can benefit from government support. This can be achieved by creating incentives (e.g. tax credits for R&D, training) and services specifically targeted at SMEs, as well as by establishing institutions for technology diffusion to facilitate SMEs’ adoption of Industry 4.0 and Agro 4.0 technologies (OECD, 2021[36]). Here, Egypt can draw inspiration from Malaysia’s approach, as described in Box 7.10. In particular, Malaysia’s use of tailored policy tools, such as the Readiness Assessment programme, can help identify gaps in SMEs' readiness for Industry 4.0 and direct financial assistance accordingly.
Egypt should also amplify the support targeted at SMEs by strengthening the programmes implemented by MSMEDA (for example, AMELI, Archemus, Qodwa-Tech initiatives) and the IMC (Creative Hub Egypt initiative and Industry 4.0 Innovation Center) and expanding their digital components. This can include providing matching funds and services to SMEs to facilitate their adoption of Industry 4.0 and Agro 4.0 technologies, as well as improving the accessibility and affordability of testing and certification processes for SMEs to enhance their competitiveness in the agro-food sector (OECD, 2021[36]).
Egypt should increase cross-ministerial and institutional co-ordination to facilitate the implementation of Industry 4.0 and Agro 4.0 initiatives. This can be achieved through effective collaboration among relevant government entities, such as the Ministry of Trade and Industry, Ministry of Agriculture and Land Reclamation and the MCIT (OECD, 2021[36]). Moreover, as seen in the good practice of Malaysia, collaboration with the private sector ensures that the Industry 4.0 policy agenda is driven by industry needs (see Box 7.10).
In Malaysia, the Ministry of International Trade and Industry (MITI) launched Industry4WRD, the country's strategy to promote Industry 4.0, in 2018. To operationalize the strategy, Malaysia has allocated at least USD 107 million in 2019 for various support actions, along with making up to USD 1.2 billion available in low-interest loans and guarantees. These funds are utilized through a combination of tools, including matching grants for investment in automation equipment, R&D and innovation activities, soft loans, and tax allowances. In line with the strategy's focus on inclusive involvement of small and medium-sized enterprises (SMEs), Malaysia has also implemented policy tools specific to SMEs, such as the Readiness Assessment (RA) programme.
The RA programme involves online questionnaires and on-site visits to identify potential gaps in SMEs' readiness for Industry 4.0. Based on the outcomes of the assessment, SMEs can apply for reimbursement of up to 70% of eligible expenditures, up to approximately USD 120,000. Industry4WRD was developed through extensive consultation with the private sector and in co-operation with several different ministries. The strategy also features multi-ministerial and multi-stakeholder mechanisms for its implementation. MITI oversees and chairs an Industry4WRD council that includes stakeholders from government and industry, and meets twice a year. High-level task forces and specialized technical working groups, led by different ministries and co-chaired by the private sector, have also been established under the Council. These encompass areas such as funding, infrastructure, regulations, skills and talent, and technology, and they meet quarterly to drive the implementation of the strategy.
It's important to note that Malaysia's Industry4WRD strategy is aimed at promoting Industry 4.0 and supporting SMEs through a combination of funding, policy tools, and multi-stakeholder collaboration. The strategy's implementation is overseen by a dedicated council and supported by high-level task forces and working groups, indicating a comprehensive and coordinated approach towards driving Malaysia's Industry 4.0 agenda.
Source: (Cayzer, 2020[37])
Retail sector
MSMEDA has introduced a series of innovative initiatives in collaboration with private sector partners and prominent online platforms such as Amazon, Jumia, Alibaba, and Huawei to support SMEs in expanding their exports by selling online. Through the strategic protocol with Amazon, SMEs receive valuable assistance in exhibiting their products on the platform, including support with photo sessions and access to training programmes for digital marketing and export readiness. MSMEDA collaborates closely with Amazon to identify specific product demands, based on consumer needs and market trends. This tailored approach enables SMEs to introduce new products through the platform and access Amazon.eg’s seller support and account management services, enhancing their online presence and global exposure. Amazon further strengthens SMEs' online presence by providing professional product images and valuable data insights to help them improve their performance on the platform. The partnership also includes advice on packaging and technical support, with Amazon covering the associated costs. As Amazon Egypt extends its market reach to 16 countries from 2024, SMEs can benefit from the scalability potential and global exposure offered by the platform. In addition to the partnership with Amazon, MSMEDA is working towards an initiative with Alibaba to support digital exports through Alibaba. A promising deal with DHL is also currently in the pipeline.
Financial incentives for SME digitalisation
Financial incentives for digitalisation are needed for SMEs to overcome the challenges associated with the cost of digitalisation and limited access to finance. This represents a gap in Egypt’s SME digitalisation policy framework.6 Egypt would benefit from financial support programmes that specifically target the adoption of digital tools and services in key industries. This could include digital vouchers that can be used for e-commerce, website development, cloud hosting services, customer relationship management (CRM) systems, social media advertising, or consultants for advanced digital projects. Box 7.11 explains the OECD best practices for governments developing innovation vouchers, while Box 7.12 describes the Brazilian case of innovation vouchers aimed at supporting technology adoption in micro and small enterprises through the provision of subsidised consulting services and the facilitation of partnerships with larger firms. Furthermore, tax incentives could be introduced for SMEs that adopt digital practices, such as moving their invoicing online. Grace periods could also be provided for previously unregistered SMEs that choose to transition from the informal economy to the formal digital economy (Sidlo et al., 2019[34]).
Simplicity: given the small sums involved, the administration of innovation vouchers should be as simple as possible, for example avoiding heavy reporting on the use of the funding.
Effective promotion: because innovation vouchers also aim to overcome an information barrier between SMEs and knowledge institutions, it is important that they are advertised widely among potential users.
Clear purpose: Applications should be simple but still ask firms how they plan to use the vouchers. This will facilitate the match of the enterprise with the appropriate knowledge institution.
Effective brokerage: Brokerage of the scheme is best performed by a government agency, rather than by another organisation such as a university. Government institutions are, in fact, in a better position to connect voucher users with other national support programmes.
Brazil has implemented two technology voucher programmes aimed at supporting micro-enterprises and small companies:
The SEBRAETEC programme offers consulting services in areas such as design, intellectual property, quality control, innovation, sustainability, and digital services. Brazilian Micro and Small Business Support Service (SEBRAE), which manages the programme, operates a national web portal and 13 state-level portals to facilitate the matching of the demand and supply of technology-oriented services. The programme subsidises up to 70% of the consulting costs for eligible companies. Between 2015 and 2017, the SEBRAETEC reached a total of 268 000 companies with a budget of BRL 603 million (equivalent to BRL 2 250 per company).
The Ministry of Science, Technology, Innovation and Communication (MCTIC) and the National Council for Scientific and Technological Development (CNPq) operate Bonus Tecnológicos, which provides vouchers for partnerships between micro or small companies and medium to large companies in the field of advanced manufacturing. The funds are typically used for sharing technological R&D infrastructures, contracting specialised technical services, or technology transfer. The most recent public call for vouchers in the third quarter of 2018 offered a total of BRL 2 million.
Source: (OECD, 2020[38])
The financial risks are not equal for all digitalisation journeys, with advanced digitalisation projects requiring an often-riskier investment. Financial support provided should therefore be tailored to the specific needs of each SME and their digitalisation project. To encourage SMEs to undertake relatively risky or advanced digitalisation projects, it is recommended that the Egyptian government pilot a financial support programme tailored specifically for such projects. This programme could be designed to provide targeted financial assistance to SMEs that are pursuing digitalisation initiatives with a higher level of risk or complexity compared to traditional projects. The programme should adopt a risk-based approach, providing higher levels of financial support to SMEs undertaking digitalisation projects that are more complex. This could include projects that involve emerging technologies, innovative business models, or significant changes to operational processes.
Box 7.13 describes a French initiative that offers loans to support SMEs in making significant investments required for adopting modern production processes. A similar scheme could be implemented in Egypt to encourage Egyptian SMEs to embrace the opportunities of digitalisation, potentially aligning with the Egyptian Industry 4.0 strategy. As seen in the case of France, strict eligibility criteria should be established to identify SMEs that are eligible for the financial support programme. This could include criteria such as the level of digital maturity, the potential impact of the digitalisation project, and the capacity of the SME to manage the risks associated with the project.
The Prêt Industrie du Futur - Technologies et usages du futur (Industry of the Future Loan - Technologies and uses of the future) programme was introduced by Bpifrance, the French public investment bank. The programme provides co-financing for investment projects that focus on increasing the industrial capacity of SMEs in France through the adoption of modern technologies and processes, resulting in the development of new products. Notably, the programme targets investments in technologies that are new to the firms, rather than just capital expansion. This approach incentivises SMEs to adopt unfamiliar production technologies, which can be perceived as daunting. The programme encompasses five themes: production and control technology, augmented humans, connected, piloted, and optimised company, innovative digital technologies, and customer relations, suppliers, and the supply chain.
The strict eligibility criteria of the Prêt Industrie du Futur programme are expected to enhance its effectiveness in achieving its goals of modernising the capital stock of French SMEs. The programme specifically targets SMEs that are over three years old and in good financial health. The loan has a duration of seven years, with amounts ranging from EUR 100,000 to EUR 5 million. The loan must be co-financed on a one-to-one basis with bank credit or capital contributions from shareholders or private equity companies for a minimum period of five years. Administrative fees amount to 0.4% of the loan amount.
The Egyptian government could also explore subsidising the expenses incurred by companies for their membership of approved e-commerce sites. Similar to Türkiye's approach, such incentives can encourage more SMEs to participate in online trade (see Box 7.8). Providing such financial support to SME exporters can boost their capacity to compete globally. The Egyptian government can also consider offering export refund aid, buyer credit, and support for logistics centers, akin to Türkiye's initiatives. Moreover, specialised export credit programmes, such as the SME Export Readiness Credit, can cater to the specific financing needs of SME exporters. Offering grants for expenses related to software and hardware, participation in international fairs, and service procurement can help SMEs enhance their global reach and competitiveness, as exemplified in Türkiye's International Market Support Programme.
Technical assistance, mentoring, and capacity-building could also be included alongside the financial supports to help SMEs plan, implement, and manage their digitalisation initiatives. Given the likely high costs of the programmes, robust monitoring and evaluation mechanisms should also be in place to track the impacts so that adjustments can be made, where necessary. Collaboration with relevant stakeholders, such as industry associations, academic institutions, and private sector partners, should be fostered to ensure that the financial supports align with the needs and realities of SMEs in Egypt. Furthermore, regular consultations with SMEs should be established to gather insights and incorporate feedback into the programmes’ design and implementation.
Digitalisation has the capacity to enhance the performance and competitiveness of SMEs in Egypt significantly. Key technologies like ERP systems and CRM software are essential for enhancing back-office efficiency and front-office operations, while the adoption of cloud computing and big data analytics is critical for decision-making and strategic insights, and digitalisation through social media and e-commerce platforms significantly expands market outreach. Despite these benefits, SMEs in Egypt encounter considerable challenges in adopting digital technologies. Supply-side barriers include limited access to high-speed broadband in certain areas, restricting the ability to fully leverage digital tools. Another notable obstacle is the lack of affordable financing options for digital investments. On the demand side, a significant gap in digital skills and concerns about digital security and data protection are prominent, inhibiting the full embrace of digitalisation.
Egypt's digital readiness is relatively commendable, especially compared to other countries in the MENA region. The country shows increasingly stronger foundations for digital transformation, evidenced by its ranking on the Network Readiness Index which climbed from its 92nd position in 2019 to 73rd out of 131 countries in 2022. This reflects advancements in internet speed, technology absorption by firms, and the expansion of government online services. However, the use of digital tools varies significantly among businesses. While a majority use computers and the internet for basic operations, more sophisticated uses like research and development or human capital development are less prevalent. This uneven digital readiness signals the need for strategic initiatives focused on specific sectors and regions.
Internet connectivity is a crucial aspect of digital readiness. While there has been a substantial increase in internet users over the past decade, with over 70% of the population online, the digital divide between urban and rural areas remains pronounced. High mobile phone penetration and a considerable number of mobile internet subscriptions indicate potential for future digitalisation. However, the speed and quality of internet connections, especially for mobile broadband, still require improvement.
In Egypt, a commendable and forward-thinking approach towards the digitalisation of SMEs is evident in the comprehensive policies and initiatives spearheaded by MSMEDA. This proactive stance is instrumental in paving the way for a more inclusive and digitally advanced economic landscape for SMEs. MSMEDA, under the ambit of the MSMEs Law (Law No. 152 of 2020), has played a pivotal role in establishing a robust legal framework that not only facilitates the digital transformation of SMEs but also aligns with Egypt's broader policy priorities of fostering entrepreneurship, innovation, and digital progression. This law serves as a cornerstone, creating a nurturing environment for SMEs to embrace digital technologies, thereby enhancing their competitiveness and operational efficiency. The agency's efforts in streamlining administrative procedures and simplifying regulations have been critical in enabling SMEs to navigate the digital landscape with greater ease and confidence.
The Egyptian government has implemented various strategies and initiatives to boost SME digitalisation, including the MSMEs and Entrepreneurship National Strategy and the Digital Egypt Strategy. These strategies encompass broad goals like improving digital service availability and quality, upgrading digital infrastructure, and fostering a digital-first culture. However, there is a need for more cohesive policy frameworks to streamline these efforts effectively. The government’s commitment is evident in the comprehensive strategies and laws enacted to support digital transformation. However, the need for further improvements in connectivity, especially in rural areas, and more cohesive policy implementation to ensure the equitable spread of digital advantages remains a priority.
Going forward, it will prove crucial to:
1. improve collaboration and communication across ministries and agencies, as well as with private sector actors such as sector associations;
2. continue to implement a mix of financial and non-financial instruments, as well as a combination of broad-based policies and narrowly targeted interventions;
3. improve data collection capacities to closely monitor and evaluate the impact of the policy changes and revise public initiatives accordingly.
In Egypt, the formulation of policies directed towards SMEs must continue to acknowledge the diverse and varied characteristics of the SME landscape. By aligning policies with the specific needs of key industries to digitise, Egypt can optimise its SME support mechanisms.
Establish a national SME digitalisation strategy that can provide a comprehensive roadmap for SMEs in Egypt to embrace digital technologies effectively.
Enhance SME access to high quality and affordable broadband internet and data centres.
Improve collaboration with non-government bodies such as Chambers of Commerce, sector associations and private sector actors in the SME ecosystem.
Establish digital innovation hubs across the country to provide rural areas with reliable and high-speed broadband connection, provide access to digital tools and training programmes on digital skills, and resources for business development such as diagnostic tools.
Provide targeted support for SMEs in their early stages of digitalisation through support to develop digital skills and business development services. This can be achieved through the implementation of training programmes, workshops, and capacity building initiatives aimed at bridging the skills gap and fostering a digital culture.
Provide incentives for traditional SMEs to digitalise, including financial support programmes (digital vouchers) and tax incentives. Pilot a financial support programme to encourage SMEs to undertake advanced SME digitalisation projects. Provide targeted financial assistance to SMEs that are pursuing digitalisation initiatives with a higher level of risk or complexity compared to traditional projects, e.g. projects that involve emerging technologies, innovative business models, or significant changes to operational processes.
Develop a more coordinated and coherent effort on fostering ecommerce and digital trade, including removing regulatory barriers for SMEs selling online, improving access to finance for ecommerce and increasing the awareness of programmes to enable SMEs to sell online.
To ensure wider adoption of Industry 4.0 and Agro 4.0 technologies, extend digitalisation support (e.g. training and investment support and institutions for technology diffusion) to firms across all sectors of the economy and strengthen the elements of digitalisation support within existing business development services and supports.
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← 1. The Portulans Institute Network Readiness Index (NRI) is a global index on the application and impact of information and communication technology (ICT) in economies around the world.
← 2. A strategic framework or policy designed by the Egyptian government to manage and allocate the radio frequency spectrum, particularly for mobile and broadband services like 4G+ and potentially 5G in the future. The radio frequency spectrum is a limited resource that is essential for various types of wireless communication, including mobile telephony, data transmission, and broadcasting.
← 3. The GTMI index of the World Bank takes into consideration various dimensions of GovTech, including the availability and quality of digital services, the maturity of digital infrastructure, the capacity of government institutions to implement digital transformation, and the mindset and culture towards digitalisation.
← 4. Since the law came into force in 2018 authorities issuing tenders have been required to consider SMEs when drafting the pre-qualification conditions of the tenders and to direct at least 20% of their contracting to SMEs. Moreover, the law also gives a 15% price preference to bidders that can demonstrate to integrate the minimum “local component” percentage in their services or products, which should also impact Egyptian SMEs (Riad&Riad, 2018[39]).
← 5. In a 2022 OECD survey among retail SMEs selling through e-commerce platforms in six OECD countries, the main investment for starting to sell online was identified as “product inventory”, followed by “Setting up e-commerce website-marketplace” (OECD, 2023[28]).
← 6. During the COVID-19 pandemic, one of the key financial products offered by MSMEDA was preferential loans tailored specifically to incentivise SMEs to invest in digitalisation tools. Additionally, MSMEDA provided preferential loans to support the process of digitalisation itself. This financial scheme aimed to assist SMEs in their transition from traditional business practices to digital platforms and systems. These loans could be used for various digitalisation initiatives, such as adopting e-commerce solutions, implementing digital marketing strategies, upgrading IT infrastructure, and incorporating online payment systems.