SMEs are considered as one of the ‘driving forces’ of modern economies. SMEs’ contributions in an economy are in terms of technological upgrading, product and process innovations, employment generation or export promotion. Therefore, helping SMEs to innovate is important not only because it improves their own competitiveness, but also through linkages and knowledge spill-overs with other firms, the entire industry and macro economy.

SMEs are a key vehicle for development and growth in any economy, as they constitute the majority of enterprises found even in the most industrialised countries (Masatak 1998 and Storey 1994). SMEs create employment, a source of innovation, generating export opportunities among other (Hall 1995).

In Mauritius, the contribution of the small scale sector in accelerating the economic development process and the democratisation of the economy is widely recognised. SMEs in Mauritius have experienced a rapid increase, especially with the government encouraging people to set up their own business by providing them with incentives, guidance and financial aid in their projects. The Government is committed to providing the conducive environment for the sustainable development of the sector and to respond to the changing needs of enterprises in a proactive manner. Over the years a number of incentives have been introduced to foster the development of the sector.

SME Definition

The term SME covers a wide range of definitions and measures, varying from country to country and varying between the sources reporting SME statistics (Gilaninia, Amiri & et al. 2011). Thus there is no universally accepted definition of a small and medium business. The definition of what constitutes a SME varies (Taylor and Adair 1994; Reed, 1998); it is generally based on the number of employees and financial turnover.

According to SMEDA Act 2009 in Mauritius, an “enterprise” means any form of trade or manufacture, craft by hand or foot, cultivation of fruits, vegetables or flowers, livestock breeding, or activity approved as such by the Authority. A small enterprise is an enterprise having an annual turnover of not more than Rs 10 million while a medium enterprise is an enterprise having an annual turnover of more than Rs 10 million but not more than Rs 50 million.

In Mauritius SME has been redefined, where previously the volume of investment in equipment which was one million up to Rs 10 million which was taken into account, is now classified as a small enterprises and with less than 50 and 200 employees for small and medium scale respectively.

SME Evolution in Mauritius

Since independence, Mauritius has practised a consistent policy to encourage the creation and promotion of SMEs. SMEs in Mauritius can trace their history back to the 1960s when Mauritius was in the wake of a timid industrialisation process with an import-substitution strategy. The country has moved away from a mono-crop economy with fast population growth and high unemployment to one that is more dynamic and diversified. The sources of diversification have been agriculture, textile, tourism and more recently international services with Offshore and Freeport activities. The sugar sector provided the start-up capital for the Export Processing Zones (EPZ). The rapid rate of growth of investment in the manufacturing sector led to the success of the EPZ and the Mauritian economy as a whole. This was made possible by the confidence of entrepreneurs and foreign investors prevailing in the country at that particular time.