Targeted Support for SMEs: A Missing Pillar in Iran’s Sanctioned Economy
Tehran - BORNA - As Iran navigates challenges stemming from international sanctions and constraints on capital access, small and medium-sized enterprises (SMEs) — considered the backbone of production and employment in many high-performing economies — remain an area for significant policy focus. Meanwhile, the experience of East Asian countries demonstrates that accelerating sustainable development requires strengthening the SME sector.
Globally, SMEs are decisive drivers of job creation, wealth generation, and economic resilience. In Iran, their contribution presents a significant potential for growth, which, compared to global benchmarks, is yet to be fully realized.
According to official estimates, SMEs account for more than 90 percent of the country’s production units. Yet their share of GDP and non-oil exports remains significantly lower than international standards — a gap shaped by structural inefficiencies and weak policy support.
Iran vs. East Asia: Leveraging Untapped Potential
A look at successful Asian economies such as Malaysia, China and South Korea shows that:
SMEs function as the core engine of industrial growth;
Governments play an active role in financing, training, exports and technology;
Policies are data-driven, institutionalized and long-term — not reactive or short-lived.
In Malaysia, SMEs account for over 60 percent of employment and around 40 percent of GDP. In China, their share reaches 80 percent in job creation and up to 70 percent of exports in several industrial segments. By comparison, while the Iranian SME sector is active, the country needs a more unified, long-term policy approach to unlock its full export and production capacity.
Expert View: Flexibility and Capacity Hidden in Plain Sight
Speaking to Borna News, Mehrdad Omrani, university lecturer and industrial economics researcher, emphasized the broad advantages of SMEs. “In a volatile economy, SMEs possess a high degree of flexibility,” he said while adding: “Unlike large industries that move slowly and at high cost, these units can quickly adapt to shifts in the economic environment.”
He added: “SMEs provide an effective platform for developing skilled labor. With lower overhead and centralized decision-making, they operate faster and more efficiently. Another key factor is the overlap between ownership and management, which shortens decision-making pathways and improves agility.”
Lessons from Developed Economies
Omrani noted that in advanced economies, supporting SMEs is a core policy priority. Citing OECD data, he pointed to the main pillars of support:
provision of credit and loan guarantees,
government-backed export participation,
low-interest production subsidies,
technical and advisory services,
tax exemptions or long-term installment-based tax payments.
“These measures are neither decorative nor temporary,” he said. “They are tools that allowed countries like South Korea and Malaysia to grow.”
Addressing Structural Challenges for Future Growth
Omrani also pointed to the challenges facing Iranian SMEs: “In our country, many problems emerge right from the start: limited economic and managerial knowledge, the absence of a dedicated support institution, and lack of government assistance during fluctuations such as currency shocks or shortages of raw materials.”
He continued: “SMEs struggle to attract and retain skilled labor due to rising living costs and a stagnant market. The absence of specialized advisory centers and the lack of government-backed marketing and export support have left a significant portion of SME potential untapped.”
A Viable Path Forward
Given the financial constraints and market volatility under sanctions, shifting focus toward the inherent resilience of the SME sector offers the most viable path forward for easing economic strain. Global experience shows that the most realistic approach involves targeted, sustained support for SMEs — not symbolic packages, but practical tools: specialized financing, high-level training, export facilitation, and lowering production costs.
If the government seeks sustainable growth, stable employment and a more shock-resistant economy, it has little choice but to place SMEs at the center of its economic strategy.
About the author: Basim Laleh is the Economic Desk Editor at Borna News Agency. He specializes in macroeconomic policy, agriculture and food-security analysis, and the political economy of production in Iran. His reporting focuses on evidence-based evaluation of government decisions, sectoral inefficiencies, and their broader impact on national economic stability.
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