A large number of micro and small enterprise owners prefer to keep their business informal for many reasons: unclear government regulations, the absence of incentives to formalise, the lack of awareness on the necessity of formalisation and lax government monitoring. To identify these obstacles, the Alexandria Business Association (ABA) conducted a survey called Microenterprise Reform Index (MRI). “The MRI is a useful tool that can help the government identify areas in need of development and create incentives to encourage small business owners to join the mainstream economy,” said Mohamed Ghatwari, ABA chairman. The report which is part of ABA corporate social responsibility gives a voice to small and micro business owners struggling in these turbulent economic times due to marginalisation and poor resources, according to Ghatwari. The MRI survey was conducted on 601 small and microenterprises across five governorates — Alexandria, Gharbiya, Menoufiya, Beheira and Kafr Al-Sheikh. The firms are working in manufacturing services and trade industries. The MRI, according to Ghatwari, should be a measure to register any improvement on the business environment of micro and small enterprises in the future. In 2013, the MRI included a large number of informal micro and small enterprises. Almost half of the sample (47 per cent) operate without a licence, reflecting the high number of Egyptian companies in the informal sector. The MRI attributed this high figure to three reasons: the relatively cumbersome procedures needed to receive a licence, lack of awareness that businesses need to be licensed and registered to operate legally, and the desire to evade governmental taxes and necessary inspections. The firms asserted that government regulations might be too complex and act as an impediment to joining the formal sector. Even those who had an operating licence, which was the majority, according to the MRI, applied because they were afraid of being punished or prosecuted by the government. Due to poor consumer protection laws and enforcement, the MRI revealed that 71 per cent of firms do not provide receipts to customers, claiming that “businesses like us do not give receipts” while some of them said tax evasion was the main reason to avoid receipts. Since the absence of incentives to be part of the formal economy was the biggest obstacle that hindered the integration of microenterprises, MRI recommended a package of procedures. Providing financial resources, reinforcing transparency in dealing with government bodies, streamlining regulations and establishing a mechanism for public and private dialogue to develop policies for micro finance are listed as the survey's recommendations. The MRI highlighted the importance of providing comprehensive financial services needed by small and micro enterprises such as insurance and banking services. Using up to date repayment methods such as ATM, smart phones and smart cards which would directly upgrade the financial system under the supervision of the Central Bank is also recommended by the MRI. In a press conference held to launch the MRI, Ghada Wali, secretary-general of the Social Fund for Development (SFD), asserted the importance of upgrading micro and small enterprises. “The more financial services they receive, the more social justice can be achieved.” Wali explained that the SFD gives priority to micro and small enterprises “since they play an important role in society”. According to Wali, 67 per cent of SFD's total funds estimated at $630 million in 2012 were provided to micro and small enterprises projects totaling 165,000 enterprises. Wali said Hisham Kandil, the prime minister, issued a decree to form a ministerial committee to identify the incentives that the government can provide to encourage micro enterprises to join the formal sector. Moreover, Wali said the SFD is currently discussing with the parties concerned the strategies needed to develop microenterprises. These policies, according to Wali, include providing finance, non-finance services, creating positive climate and achieving financial illiteracy.
