The Integrated SME Support Programme

Overview

The Integrated SME Support Programme (ISSP) was ambitious in character; it took place in one of the most troubling periods that the country has faced since the end of the Civil war. During this period, major assassinations of political figures took place, one very destructive war by Israel, economic paralysis and political paralysis resulting in economic and political instability. As a result, the programme had to contend with many competing priorities.

Nevertheless, the programme succeeded in delivering most of its intended outputs, foremost of which, developing a consultative based SME strategy for the first time for the country, creating three sustainable business development centres that will form the basic infrastructure of future business support activities in the country. The creation of the first credit guarantee product in Lebanon that requires no collateral and at the same time, funds to start ups in a sustainable and efficient manner, 223 loans were issued amounting 96,038,345,730 LBP till the period covering August 2008.

The programme’s major shortcomings occurred in the legal field where the programme was not well equipped in retrospect to engage in expensive, and sometimes controversial, legal reforms, and to lobby in order to get these changes through the government. Thus, the programme did not produce the draft resolutions and changes to the laws as envisioned and it also did not establish a regulatory impact analysis unit, as this was beyond the scope and meagre resources of the programme. Yet the ministry of economy and Trade incorporated some of the recommendations of the legislative reforms in other ongoing projects with parliament.

Operationally, the programme suffered from the political and economic situation of the country by witnessing high turnover from local staff and from international experts as well. This has been dealt with at the ministry by retaining expertise of people who have worked in the programme while it was ongoing.

OBJECTIVES

The Integrated SME Support Programme is the first programme in Lebanon to take an integrated approach to improving the environment and support framework for SMEs. It is also the first programme to implement permanent support structures through which future programmes, initiatives and supports can be channelled.

The overall objective of the Integrated SME Support Programme was to assist the Government of Lebanon to develop and implement an integrated approach linking policy formulation, training and servicing of start-up and existing SMEs. The programme also aimed to reinforce access channels to long term financing of SMEs and start-up businesses.

The clusters were:

• SME Support Unit
• SME Policy,
• Support Strategy and Services for SMEs
• Streamlining the Environment for SME Financing

Actions/ Activities

Actions and activities performed during the programme included:

• Consultations with stakeholders to (a) identify legislative and regulatory impediments; (b) create new initiatives; and (c) to encourage support for programme activities.
• Working with legislators and other regulatory stakeholders to propose and implement reforms
• Developing an overarching SME strategy for the next 10 years
• Launching Calls for Proposals and assisting in the establishment of a network of Business Development Centres
• Training and building the capacities of the SME Support Unit, BDCs and service providers
• Supporting the development of the Centres and their services
• Working with private and public financing agencies to expand financing for SMEs

Results

The Results of the project included:

• A consensus SME policy framework and strategy to guide the public and private sectors for the next six years and a series of initiatives and programme concepts;
• A prioritised matrix of proposed law amendments and regulation improvements to support an enabling environment for SME development; • A framework, survey and information gathering methodologies and tools;
• 223 loans were issued amounting 96,038,345,730 LBP till the period covering August 2008, where 70% of beneficiary companies were already existing business and 30% were start ups.

SME SECTOR

Lebanon is dominated by micro enterprises. Small and medium enterprises are actually a minority in the economy. However, they contribute substantially to the value added of the economy and to employment generation and wealth creation. Over the years a discernable trend exists of stagnation in the growth of SMEs and an increase in the numbers of micro enterprises.

The Lebanese economy is not well diversified. Most SMEs engage in limited number of activities. Trade and services form the major of economic activities for Lebanese SMEs. Even within these two spheres, little variety exists. Traditional trade enterprises, meaning mini markets and convenience stores, dominate most of the economic landscape in terms of numbers, followed by restaurants that employee few people. Industrial activity is restricted to traditional practice and is limited by size and scope. Most industrial enterprises engage in one of eight sectors, namely:

1. food and beverage (20.3%)
2. metal products (16.1%)
3. non-metallic products (11.5%)
4. furniture and assimilated products (10.7%)
5. clothing and fur (10.3%)
6. wood products - excluding furniture (10.2%)
7. leather and tanning (5.9%)
8. textiles (3.7%)

There are significant changes in the composition of enterprises according to size. Larger enterprises, especially those with above 50 employees, seem to be disappearing in favor of the micro enterprises. This phenomenon is troubling since studies done by the SME unit and by other organizations in Lebanon indicate a positive correlation between size and value added and between size and employment. A recent survey conducted by the consultation and research institute in Lebanon reveals that monthly value added for enterprises with 2-4 employees is 1218$ while the value added for enterprises with 5-49 employees averaged 10,050 $/month.

Contacts

For more information about the Integrated SME Support Programme (ISSP), please visit the Ministry website: www.economy.gov.lb

Or contact;
• Ms. Nada Sweidan, Email: nsweidan@economy.gov.lb
•Ms. Nathalie Wehbe, Email: nwehbe@economy.gov.lb

Direct telephone number: 961 1 982 367