Small & Medium-Sized Enterprises (SMEs), also known as small businesses in common parlance, are much more than small ventures—they represent the lifeblood of Egypt’s economy. When discussing the critical role of MSMEs in Egypt, imagine an entrepreneur in the city of Alexandria attempting to build a small manufacturing unit or an ‘innovative’ business in the capital city of Cairo—a small business faces every nook & cranny challenge daily but the potential for their success & impact on the economy is staggering. Keeping in mind the dynamics & importance of success in small businesses, the government of Egypt introduced ‘Law No. 152 in 2020.’ This introduced a legal & official framework in support of SME’s success & made the process easier for the ‘informal sectors’ to go ‘official.’
Article Insights
Micro, Small, & Medium-Sized Enterprises (MSMEs) represent the ‘backbone’ of the economy in Egypt. Noting the importance of MSMEs in inclusive economic growth, innovation, & employment generation in the Egyptian economy, the government in Egypt introduced various legal & regulatory measures to improve the business environment for the facilitation of MSMEs in the country. Such measures include the ‘Law 152 of 2020.
This article explores how the legislative framework supports MSME development, the incentives it introduces, and the challenges that still shape its practical implementation.
Overview of the MSME Legal Landscape in Egypt
Prior to 2020, the government policies in Egypt towards MSMEs involved overlapping mandates for various institutions. However, the approval of Law No. 152/2020 on the Development of MSMEs introduced a paradigm shift in the way the government treats the subject.
However, the implementation of the act was delegated by law to the Micro, Small & Medium Enterprise Development Agency (MSMEDA).
Such legislation embodies Egypt’s vision to better the investment climate through efforts in line with Egypt Vision 2030’s plans concerning the government’s strategy for financial inclusion.
Key Features of Law No. 152/2020
Law 152/2020 introduced several structural and financial measures to facilitate the growth of MSMEs:
- Clear Definitions and Classification
The law holds specific criteria related to the scale of their turnover, capital, and the scale of their employment.
This clarity is particularly important for banks, tax administration, and investors evaluating opportunities for finance or collaboration.
- Simplified Licensing and Registration
MSMEs benefit from streamlined procedures through MSMEDA’s one-stop-shop model, reducing bureaucratic delays and compliance burdens.
- Access to Finance
It supports specialized credit lines, guarantees, and venture capital initiatives to respond to the challenge of funding, and encourages joint efforts by the MSMEDA, commercial banks, and development partners.
- Integration of the Informal Sector
Among the most important policy targets of the law is the encouragement of the formalization of the informal sector through tax relief, exemption periods, and government contracting.
Regulatory and Financial Incentives
This framework offers various incentives to encourage greater acceptability, formalization, and growth through:
- Tax Incentives: Low taxes, simplified tax returns, and tax waivers for newly registered MSMEs for a prescribed period.
- Land and Infrastructure Support: Preferential access to industrial areas along with lower lease payments for MSMEs who are involved in manufacturing and export-oriented segments.
- Financial Inclusion: It is in harmony with the ‘MSME Initiative’ introduced by the ‘Central Bank of Egypt,’ where banks are obligated to provide business loans for small enterprises at preferential rates.
Such incentives seek to promote entrepreneurship, boost productivity, as well as ensure inclusiveness in the private sector.
Challenges and Implementation Gaps
Despite the ambitious framework outlined in the law, some of the challenges that persist
- Access to Credit remains impeded by risk-averse credit behavior and the unavailability of collateral.
- Resistance within the informal sector arises primarily because many small business owners remain cautious about registering their activities with the government.
- Overlaps in Regulations sometimes occur between Local Authorities and MSMEDA. This generates delays in the approval of projects.
- The work of Awareness & Capacity Building remains inadequate, especially in the non-urban areas.
To fill the implementation gaps discussed in the previous paragraph, the various institutions will require continued collaboration.
Conclusion
Egypt’s Law No. 152/2020 is clearly one of the most important milestones in the effort to provide an encouraging environment for MSMEs. By removing obstacles related to procedures for obtaining funding through various means of finance.
Nevertheless, its true potential will depend on proper enforcement, harmonized policies, and greater awareness on the part of entrepreneurs. Moreover, given the increasing focus on economic reforms in Egypt, the improvement of the MSME sector will continue to play an important part in the recovery of the economy.
This article offers a general overview of the subject matter and is not a substitute for legal advice. For guidance tailored to your specific circumstances, professional consultation is recommended.
Request a formal consultation
If you choose us to support your specific issue, please do not hesitate to contact us using Inquiries Form (link) or by sending an email to coop@youssrysaleh.com.
