Policy Research Reports
In the Context of the Renewable Energy: Transition in MENA – The Role of MSMEs in Fostering Inclusive, Equitable, and Sustainable Economic Growth – Jordan Case Study
No.
PRR 50
Publisher
ERF
Date
October, 2024
Summary
In Jordan, micro, small, or medium enterprises (MSMEs) make up over 99 percent of enterprises and employ around 60 percent of the workforce, spanning sectors such as manufacturing, services, and trade. These firms, typically with fewer than 100 employees and generating under 1 million Jordanian dinars (JOD), face challenges like access to finance, regulatory hurdles, and market competition. Despite these obstacles, MSMEs significantly contribute to Jordan’s GDP and employment. International organizations, including the World Bank, have supported reforms to improve the business environment for MSMEs. As Jordan advances in renewable energy (RE) adoption, MSMEs play a crucial role—especially given the country’s heavy reliance on energy imports and grid limitations. Decentralized energy production and smart-grid technology offer potential solutions, aligning with population distribution more effectively than large-scale power plants. This report explores the developmental context of Jordanian MSMEs, focusing on their role in clean energy initiatives, summarizing regulatory frameworks, examining ongoing projects, and identifying best practices within the broader MENA clean energy transition.
The report aims to develop a comprehensive framework for enhancing the involvement of MSMEs in Jordan’s RE transition, exploring their relationship with the economic and policy environment, identifying challenges and opportunities, and contributing to the Sustainable Development Goals (SDGs). Specific objectives include assessing the role of MSMEs in the clean energy transition, analyzing the impact of energy policies on MSMEs and economic growth, evaluating sectoral implications—particularly regarding gender equality (SDG 5) and decent work (SDG 8)—and providing decision-makers with data-driven insights to inform policy formulation and revision to support MSMEs in the energy transition.
The report employs a comprehensive mixed-methods approach, integrating quantitative and qualitative research tools to examine the role of MSMEs in the clean energy transition and their contribution to sustainable economic growth. The quantitative component involves a structured questionnaire survey of 400 MSMEs using a stratified random sampling method to quantify their engagement with RE technologies and identify barriers and supports. The qualitative component includes focus group discussions (FGDs), key informant interviews (KIIs), and a desk review, engaging multiple stakeholder groups to provide deeper insights and contextualize quantitative findings. The data gathered from these methods were analyzed to assess the current state of MSMEs in the clean energy sector, identify gaps and opportunities, and recommend strategies for enhancing their role in sustainable economic growth, ensuring that the report’s outcomes are robust and actionable for decision-makers.
Jordan is transitioning from fossil fuels to RE, which is crucial for addressing its economic, environmental, and security challenges. This shift is particularly significant for MSMEs, which can benefit from cost savings and increased competitiveness despite facing new taxes and regulatory challenges. Key hurdles include bureaucratic, financial, and infrastructural constraints, emphasizing the need for innovative government policies and MSME responsiveness. Success stories and evolving awareness are encouraging more MSMEs to adopt RE for environmental and competitive reasons, potentially leading to job creation and skill development in the RE sector. Surveys and interviews reveal that maintaining national order is a priority during the transition, with a majority of MSMEs supporting electricity cost subsidies and viewing RE technologies positively despite financial and grid stability challenges. Most MSMEs plan to invest in RE, underscoring a growing commitment to sustainability; however, improved access to information, supportive policies, and infrastructure are needed for a more effective transition.
The report’s recommendations focus on enhancing the RE transition for MSMEs through several key areas: improving RE financing by attracting investment and exploring innovative models; refining policy frameworks and regulations to ease adoption and offer incentives; investing in capacity building and raising public awareness; implementing monitoring and adaptation measures to track progress and enhance resilience; upgrading infrastructure to support RE integration; and developing sector-specific strategies tailored to different energy demands, including targeted measures for MSMEs to build awareness and capacity for the energy transition.
Policy Affiliates
Ibrahim Saif
CEO, Jordan Strategy Forum
Speakers
Ahmad Awad
General Director, Phenix Center for Economic and...