MICRO AND SMALL ENTERPRISES IN LEBANON

3.6 Major ConstraintsThe most prominent constraints of surveyed MSEs seem to include securing initial capital forbusiness start-up, and high tax rates. One third of surveyed MSEs indicate that ensuring acceptableprofit is a major concern, and so are cumbersome licensing/registration procedures, custom duties andtax administration. Access to financial services is viewed as a constraint by 24% of MSEs, while laborissues and availability of raw material do not seem to pose any significant difficulties to surveyedMSEs. Some MSEs face problems in securing enough demand for their outputs, but competition wasnot raised as a crucial constraint compared to other issues.The survey indicated that 42% of MSEs are constrained by lack of access to credit facilities. In thisregard, the results of the field survey show that 8.3% of MSEs currently have a credit/loan (mainlylarger MSEs). The main source of loans is banks (69%), but also friends/relatives (18%) and 6% frombusiness associates. Around 56% of MSEs who are under loans declared that they are satisfied withrespect to the loan conditions.3.7 Customer and Market StructuresSurveyed MSEs depend on households as their major consumers- 94% of surveyed MSEs have theirconsumer base as households. Their consumer base does not include government, cooperatives,private sector enterprises, or foreign firms. This dependency on households as the major consumerbase is a main characteristic of MSEs.Furthermore, most MSEs depend on the surrounding local market for marketing their output, wherethe local market constitutes the main marketing base for 96% of MSEs. They also depend on themarket in their surrounding region significantly (51% of MSEs), but they do not access national orinternational markets.3.8 OwnershipMost of the surveyed MSEs are sole proprietorships (93.5%). Taking into consideration thedominance of this type of ownership, MSEs in the industry, hotels, and restaurants’ sectors are moreprone to employing other parts of partnerships, especially limited liability and joint stock. In addition,the size of MSEs also has an impact on the type of ownership, where bigger enterprises move awayfrom the sole proprietorship type of ownership. Gender does not seem to have an impact on the typeof ownership.Notwithstanding the almost total dominance of sole proprietorship over the ownership structure ofMSEs, those working in industry and in hotels and restaurants have a higher percentage of enterpriseswith partnerships and limited liability forms of ownership. In addition, hotels and restaurants have thehighest percentage of MSEs falling under the joint stock form of ownership.The size of MSEs also has an impact on the type of ownership. The size of the enterprise is negativelycorrelated with the sole proprietorship form of ownership. The larger the enterprise is, the less likelyit is to remain a sole proprietorship. In addition, a joint stock form of ownership is most prevalent inthe 10-49 category, reinforcing the correlation between size and more complex forms of ownership.3.9 Formality and NSSF MembershipLebanon, like most developing countries, has a large informal sector with widespread informalenterprises and informal employment. The survey examines this aspect through exploring enterprisecommercial registration, registration in the national social security fund, and registration with taxauthorities.It is noted that almost half of the MSEs surveyed are not commercially registered (this figure excludethose which are not legally required to register). However, MSEs tend to legalize their status andregister commercially as they become older and grow. In addition, female-run MSEs indicate a higherlevel of non-requirement for registration. Enterprises have different registration levels according tothe sector of activity as well, where higher registration levels are observed in the industrial sector. Thedegree of commercial registration is also linked to the size of MSEs, where there is a higher tendencyfor registration as the size of the enterprise becomes bigger.4