Marwan Kheireddine : Small and Medium-Sized Enterprises (SMEs) are the backbone of many economies around the world, and Lebanon is no exception. These small and medium-sized enterprises in Lebanon are defined by various criteria, such as the number of employees, annual turnover, and assets. They provide jobs for a significant portion of the country’s workforce, including both skilled and unskilled labor. This is especially important in a country with high unemployment rates, where job creation is a top priority. “Typically, SMEs in Lebanon employ fewer than 250 people and generate an annual turnover of less than $10 million”, explains Marwan Kheireddine. He adds that these enterprises are diverse and encompass various sectors, including manufacturing, services, trade, and technology, and retail. Their presence promotes economic diversification, reducing the country’s over-reliance on specific industries and increasing economic resilience.
The Economic Significance of SMEs
Marwan Kheireddine : SMEs play a vital role in providing employment opportunities to the Lebanese workforce. In a country with high unemployment rates, these enterprises often act as a crucial source of jobs. They not only offer work for skilled labor but also support entrepreneurial ventures, helping to reduce unemployment rates. Moreover, SMEs contribute to economic diversification by operating in a wide range of sectors. This diversification is particularly important for a country like Lebanon, which has faced economic challenges due to over-reliance on specific industries. SMEs help reduce the country’s vulnerability to economic shocks by spreading economic activities across various sectors. “Many SMEs in Lebanon are at the forefront of innovation and entrepreneurship. They are often more flexible and adaptable, allowing them to respond quickly to market changes and technological advancements”, adds Marwan Kheireddine. He believes that this agility fosters a culture of innovation, which is vital for economic growth in a rapidly changing world. In addition, SMEs can contribute significantly to a country’s export capacity. Lebanese SMEs are increasingly exploring international markets, which not only enhances their own growth but also supports the national economy by bringing in foreign exchange. Finally, SMEs are not confined to the capital city, Beirut; they are dispersed throughout Lebanon, contributing to regional development. They help reduce urban concentration, promote balanced growth, and improve the overall quality of life in smaller towns and rural areas.
Challenges Facing SMEs in Lebanon
While SMEs play a crucial role in Lebanon’s economy, they face numerous challenges that hinder their growth and development. “Many SMEs struggle to access funding, particularly due to the country’s unstable banking sector and high interest rates. Access to credit remains a significant issue, limiting the expansion and innovation potential of these enterprises”, explains Marwan Kheireddine. He adds that excessive bureaucracy and cumbersome regulations make it difficult for SMEs to operate efficiently and that by simplifying and streamlining the administrative procedures is essential to support their growth. Lebanon has been grappling with a severe economic crisis, marked by hyperinflation, currency devaluation, and a liquidity crunch. This crisis has had a direct impact on SMEs’ ability to access foreign currency for importing goods, causing supply chain disruptions and difficulties in conducting international trade. A significant portion of economic activity in Lebanon takes place in the informal economy, which can make it difficult for formal SMEs to compete. Informal businesses may not comply with tax regulations, giving them a competitive advantage. In Addition, frequent power outages and inadequate infrastructure can hamper the operations of SMEs, especially in manufacturing and technology sectors. Investment in infrastructure is vital for their success. Some sectors in Lebanon may be oversaturated with businesses, leading to intense competition, especially in the retail and services industries. To sum up, the political instability and economic crisis in Lebanon have created an uncertain business environment, impacting SMEs’ ability to plan and invest for the future.
In a nutshell, small and medium-sized enterprises are the lifeblood of Lebanon’s economy. Their role in creating jobs, driving innovation, supporting regional development, and diversifying the economy is vital. However, to fully harness their potential, Lebanon must address the challenges they face, including access to finance, regulatory hurdles, infrastructure improvement, and the overall political and economic environment. “With the right support and reforms, SMEs can continue to be a driving force behind Lebanon’s economic growth and prosperity” concludes Marwan Kheireddine.
