“Small businesses are the backbone of the economy.”
It is a phrase often repeated in policy discussions, budget speeches, and development strategies. In Barbados, it reflects a structural reality. Micro, small and medium enterprises (MSMEs) account for the overwhelming majority of formal firms and play a central role in employment and economic activity.
Yet, beyond that familiar framing, the experience of operating within the sector has been shaped by a decade of anemic growth. Economic adjustment, a global pandemic, and shifting market conditions have all left their mark. At the same time, longstanding structural constraints—particularly around finance, scale, and market access—have remained part of the landscape.
The latest national MSME research, published by the Small Business Association of Barbados in partnership with the Inter-American Development Bank, offers a detailed look at how the sector has evolved since 2016.
MSMEs continue to define the structure of the Barbadian economy, accounting for approximately 98% of all formal businesses and more than half of private-sector employment.
That central role has not diminished over time. However, the way economic activity is distributed within the sector appears to be evolving.
While the total number of firms has declined slightly—from 9,651 in 2016 to 9,196 in 2025—employment has increased from just over 100,000 to more than 112,000. This change suggests that fewer firms are now supporting a larger share of the workforce.
At the same time, employment patterns indicate a redistribution across firm sizes. Small firms, which accounted for a significant share of employment in 2016, now represent a much smaller proportion, while medium firms have expanded their role.
At an aggregate level, the sector has expanded. Estimated MSME revenue has grown from approximately BDS $3.47 billion in 2016 to as much as BDS $4.9, with the agriculture sector excluded.
However, the distribution of that growth presents a more nuanced picture. More than half of MSMEs—53%—report annual revenues below BDS $100,000. In addition, nearly half of all firms indicate that they are either breaking even or operating at a loss.
This contrast highlights the difference between overall sector growth and firm-level experience. While the sector is generating more value, the capacity to capture and sustain that value varies significantly across businesses.
Entrepreneurial activity has remained a consistent feature of the Barbadian economy. In recent years, approximately 1,000 new companies have been registered annually, even in the context of economic disruption.
Nearly a quarter of MSMEs currently in operation were established within the last five years, pointing to a steady inflow of new entrants into the sector.
This suggests that starting a business remains accessible.
What appears less certain is the pathway beyond entry. The structure of the sector continues to be heavily weighted toward micro enterprises, with fewer firms transitioning into small and medium categories. This pattern, largely consistent with the 2016 baseline, points to a distinction between business formation and business expansion.
Access to finance remains a recurring factor within this dynamic. Survey findings indicate that financing constraints continue to feature prominently among the challenges faced by MSMEs, shaping the pace at which firms are able to invest, scale, and move into higher-value activities.
The composition of business ownership has also evolved over the past decade. Female ownership of MSMEs has increased from 34.4% in 2016 to 40.8% in 2025.
This reflects a broader expansion in participation and a more diverse entrepreneurial base. It is also occurring within a context where a significant proportion of business owners are tertiary educated, indicating a strong level of human capital within the sector.
At the same time, patterns within that participation remain evident. Women-owned businesses are more prevalent at the micro level and are concentrated within service-oriented industries, while male-owned firms are more represented in industrial sectors and larger-scale operations.
The data points to a sector that is becoming more inclusive in terms of entry, while still reflecting structural differences in how businesses are distributed across industries and scales.
Over the past decade, the MSME sector has become increasingly service-oriented. Services now account for approximately 87.7% of all firms, up from 77.4% in 2016.
This shift reflects broader changes within the economy, including the expansion of retail, professional services, and other service-based activities. These sectors tend to have lower barriers to entry, supporting sustained levels of business formation.
At the same time, the concentration of activity within services influences how businesses grow. Service-based firms often face different constraints in scaling operations, accessing export markets, and achieving productivity gains compared to firms in goods-producing industries.
Engagement in export activity remains limited. Approximately 8.6% of MSMEs report participating in export markets, and for many of these firms, exports account for a relatively small share of total revenue.
The domestic market therefore continues to be the primary focus for most businesses.
The past decade has exposed MSMEs to a range of external shocks, most notably the COVID-19 pandemic. During this period, nearly two-thirds of firms experienced full or temporary closure, highlighting the vulnerability of smaller enterprises to sudden disruptions.
Many businesses adapted in response, adjusting operations and finding new ways to remain active. However, formal approaches to managing risk remain limited. Only a small proportion of firms—8.1%—report having structured plans in place to address climate-related or other external risks.
Digital tools are increasingly part of the operating environment, particularly in areas such as marketing and customer engagement. A large proportion of firms report using social media platforms. However, deeper forms of digital integration—those that influence productivity, operations, and market expansion—remain less widespread, with more advanced adoption still emerging.
This suggests that while the foundations for broader market engagement are present, the transition toward more integrated, technology-driven business models is still developing.
The 2026 study indicates there is evidence of growth in overall economic activity, sustained levels of entrepreneurship, and broader participation in business ownership. The sector continues to play a central role in employment and remains a defining feature of the economy.
At the same time, many of the structural weaknesses of the sector remain familiar. A large proportion of businesses operate at the micro level, revenue distribution is uneven, and engagement in export markets is limited. Firms report financial constraints, labour shortages and a bureaucratic business environment. Survival appears to be the focus of businesses more so than growth.
Facilitating an enabling environment for businesses to pivot, must therefore be the focus of policymakers, business support organisations and other stakeholders going forward.
