This article sheds light on the development of SMEs in Algeria since the independence in 1962. Once independendent, Algeria chose to follow socialism as a model that governs the socioeconomic life. Within this model SMEs were marginalized because the focus was on oil and gas sector and heavy industries. In 1988 the country decided to shift to the open market model and, therefore, recognized private sector as a main driver to diversify economic outputs and lessen dependence to hydrocarbons which had showen high vulnerability to different international fluctuations. Since then, successive governments have shown increasing efforts to support SMEs financially and upgrade their competitiveness while creating a conducive environment for their flourishing. Though they have grown locally in terms of number, GDP share and employment, SMEs still face various challenges and issues in both enterprise and environment levels that underminne their business conduct. Furthermore, SMEs’ share of export is very low which means that they are far from competing internationally. Therefore, much efforts are needed in the future to equipe SMEs with necessary managerial, human and financial resources in order to create competitive advantages which are necessary tools for a better competitiveness.