sample (20% of the surveyed enterprises). This is due to the fact that around 600 MSEs answered tothese two parameters.The analysis of performance indicates that performance is directly related to the size of the firm, withthe exception of one-employee enterprises. As the number of employees increases, firms tend torecord better performance levels, with a peak for MSEs with 10-49 workers. Performance was alsoassessed based on clustering, and unlike global trends, MSEs that do not belong to a cluster werefound to achieve better performance levels. This may be a result of the nature of clusters in Lebanon,which consist of nothing but firms in the same, or similar, line of business. On the other hand, theinternal organization of MSEs enhances their performance as a result of, among others, specializationand labor resource management.As expected, male entrepreneurs do better than female ones. This is explained through thecategorization of females in low performing jobs and levels that enjoy low added values and profits.Performance is found to peak when the age of the entrepreneur is in the 30 to 39 years category.Educational attainment is also positively related to performance, where the latter increases with theentrepreneur’s number of years of formal education, with highest performance recorded in firms withentrepreneurs who have attained at least a university bachelor’s degree. The same is true in the case ofentrepreneurs with training apprenticeship experience.The survey showed that formalized enterprises perform significantly better than informal ones.Similarly, MSEs that employ up-to-date technologies perform considerably better than those that usetraditional ones. Also, firms that have access to basic infrastructure show higher performance levels.The study also showed that the level of performance is better when the firm’s clientele base isconstituted of foreign customers, while least performing businesses are those whose main clients arepublic enterprises and domestic NGOs.Finally, the survey indicated that the level of performance, when compared to the number of workinghours, reach a peak at 48 working hours per week, after which it starts to fall. This trend remains validuntil working hours per week reach 72, after which the level of performance rises again. In this case, adouble-shift system is installed, representing nearly the same level of performance as that of a singleshiftone.I. Background, Objective and Methodology of the StudyI.1 BackgroundSimilar to most countries in the region, economic growth and technological progress have been slowin Lebanon, with a predominance of small scale enterprises in the economy. The private sector hastraditionally been a major partner in the development of the country, also with a dominance of smalland micro enterprises 5 that constitute the bulk of private sector activity. The MSE sector has, thus, thepotential of providing substantive support to the development of the country in the medium and longterms. This is especially true as a large proportion of new jobs generated are in the informal sector – asector characterized by low productivity, poor working conditions, and high vulnerability to shocks.This overall context necessitated detailed research of the sector in order to be able to better understandthe sector’s contribution to value added and employment in the country as a whole, and to be betterable to target MSE-specific policy and program interventions.Research on the topic in Lebanon is scarce, making this research endeavor the largest known MSEresearch project undertaken in the country in the past decade or so. The earlier desk reviews and thedata base gathered in the field survey will enable policy makers and researchers to understand thecharacteristics of MSEs, to appreciate the constraints faced by the sector, and to realize the potentialladen in some of the niche activities and enterprises.The research project is constituted by three desk reviews, including an overview of the sector, ananalysis of the institutional aspect governing the sector, and financing. In addition, the research5Micro enterprises are defined as those which are run on a full time basis, often constituting the major source of income forhouseholds, and employing no people except the owner and/or family members. Small enterprises have a short businesscycle and cover domestic consumer needs, mostly using local products and employing simple management tools.7
project includes a field survey, the details and findings of which are detailed in the third part of thisreport.I.2 Objective of the studyThe main objective of the study is to expand the knowledge of the economic and social characteristicsunder which the informal and MSE sector operates in Lebanon in order to address its contribution togrowth and employment generation, especially for the poor. In this context, the study examines thesectors’ current status, existing constraints and potential for growth. This enhanced understanding isexpected to permit the formulation of policies and programs that would allow this sector to fulfill itspotential growth with expected spin-off effects on the national economy. Such a framework is crucial,especially given the substantial share of the said sector in the economy of Lebanon and in light of thechanging environment towards globalization and trade liberalization, and the subsequent threat to theprotection of traditional incomes and livelihoods of a major disadvantaged segment of society.The study specifically intends to provide insights into the factors determining the competitiveness ofMSE, suggest effective ways for the involvement of the various levels of government to supporthigher income and competitiveness of the sector, identify constrains and potential linkages with theformal private sector, and determine gender differences in the sector.The analytical variables included in the conceptual framework of the study include inputs (humanresources, facilities, technology, financial status, marketing, and information), environment (enablingand inhibiting factors- infrastructure and regulatory framework, and linkages), processes, and outputs(contribution to economy, employment, and income).I.3 MethodologyTwo methodological tools were adopted and applied in this study, including (a) sampling approachand (b) sample correction. The sampling approach, developed in section 3.1 below, was implementedin order to obtain a representative sample of enterprises, taking into account several variables such asthe size of the enterprise (number of employees), geographical distribution (Mohafazats), and gender(of the entrepreneur). The sample correction, developed in section 3.2, was used in order to generateresults at the national level.I.3.1 Sampling MethodologyA. Evaluation of the existing dataThe target population of the study is the MSEs (i.e. Micro and Small Enterprises -enterprises with lessthan fifty employees). In accordance with the terms of reference of the study, the scope of workexcluded the following activities:• Agricultural activities• Non-market activities• Illegal activities• Production for own use• Mobile vendors• Domestic services• Professional services (doctors, lawyers and accountants)• Enterprises employing more than 50 workers.Table 1 outlines the geographic distribution of the target population.8