MSME (Micro, Small and Medium Enterprises ) research

MSME research

As the Lebanese economy continues to contract, so unemployment will rise. With an economy largely reliant on imported goods, and with inflation rates making it near impossible for many business owners to buy the imported goods that the consumer has become dependent on, so the outlook for businesses looks increasingly grim.

In Beirut and Tripoli the extreme poor’s main source of income is from Micro, Small and Medium Enterprises (MSMEs) – small shops, repair companies, service providers and so on, who are owned by the poor, or who employ people through casual or contract labour, and are the backbone of the country’s economy. Given that the availability of wage employment has been decreasing since the onset of crisis, self-employment stands as the most feasible and sustainable way of income-generation for the majority of the people in the country. Furthermore, in the heavily privatised Lebanese economy, needed services are largely provided through the private sector: child care, provision of nutritious food, repair and maintenance services, wholesalers, transportation and other such services. If their business model fails, so access to their services will decline, along with an increase in unemployment.

There is little doubt that the trajectory of the Lebanese economy, given the political deadlock, the failure of the banks to control the exchange rate and inflation, and the absence of stimulus packages designed to maintain economic activity, will get worse before it gets better. Poverty rates are soaring: more than half of the population are now considered below the poverty line. Unemployment has already risen from 11.3% in 2018 to 36.9% in 2020.

In the Lebanese context where a social security safety net is largely absent[1], two broad approaches need to be taken with regards to urban livelihoods and the extreme poor: (1) how to maintain employment, and (2) how to help provide employment for those already unemployed? INGOs can and should play a part in slowing the economic decline if a nation-wide humanitarian tragedy is to be avoided.

Typical INGO approaches, such as giving cash grants to struggling MSMEs, will only delay the inevitable. It is highly unlikely that the international community will continue to provide cash hand-outs to struggling businesses for the years it will take for the Lebanese to recover their economy – this approach will not work. Something else is needed… but what?

This research TOR, commissioned by Concern, looks at the first of the above questions, and ACF will tackle the second. Concern and ACF will then seek to combine the results of the research into a coherent whole, pilot a strategy which addresses both employment retention and re-employment, in the hope that the interventions that are designed can be scaled up as the economy worsens.

Research question

“What can an INGO (like Concern) do to assist Lebanese urban MSMEs avoid closure – and thus maintain employment opportunities for the extreme poor – in a context of severe economic decline and high inflation rates?”

To answer this, numerous progressive perspectives should be taken into account within Lebanon, as well as seeking lessons from similar situations of economic collapse in other countries which may be adapted to fit the specificities of the Lebanese context. Sub-questions to guide the research process are listed below.

Sub-questions

The MSME context:

• Which sectors of the economy provide both employment for the extreme poor as well as providing necessary services to the Lebanese public? To be answered both from the perspective of MSMEs owned by the poor, and MSMEs employing the poor; aiming to understand which sectors are not yet saturated (new business creation?) and which sectors would benefit from assistance (economic viability)
• In which areas of Beirut and Tripoli are the extreme poor most reliant on MSMEs for employment (in other words, which are the most deprived neighbourhoods, and where does their employment come from?). To be asked from the perspective of (a) employment of the extreme poor and (b) MSMEs owned by the poor
• What are the main challenges that MSMEs face in these areas?
• Who are they employing (age, sect, nationality, sex etc…)? Where do these employees live? What about other groups, are they able to get work here if they want?

Rural-urban links:

• Are any local value chains worth supporting/maintaining, bearing in mind where Concern, ACF, the Alliance2015 members and other key allies working in livelihoods in Lebanon are working on selected value chains?

Policy and government dimension:

• Are there any small business stimulus packages available?
• If so, how can they be accessed?
• What is the policy and legal environment within which any effort to support MSMEs must be framed?
• Are there any stakeholders who need to be influenced in order to gain the buy-in or support from government?

Humanitarian and development sector dimension:

• What are other INGOs, CSOs, UN and donors thinking on this subject?
• What guidance is available, and what strategies or approaches are being developed, within the international community (such as through the food security and livelihoods working group)?
• Which donors are interested in funding MSME support and/or innovative approaches to the maintenance of employment and MSMEs in urban areas of Lebanon?

Progressive economists’ and academics’ perspectives:

• What are the underlying structural causes of the economic crisis, and within this analysis, are there any entry points / pressure points that can be influenced by INGOs to create a more stable economic environment for poor people?
• What ideas and approaches are being suggested by progressive economists with regards to the recovery of the Lebanese economy with a particular focus on the extreme poor and small businesses, that do not entail giving handouts?
• Which sectors are more viable / important?

International dimension / learning from other crises:

• How did MSMEs survive similar economic crises in other countries? Countries to study (select 2 from the list) could include Argentina, Venezuela, Cyprus, Greece, Zimbabwe and the ‘Asian Tigers’
• What lessons can be applied to Lebanon (bearing in mind the unique Lebanese context)

The local dimension, or the perspective from MSME owners and their employees:

• From the perspective of business owners, what do the businesses need in the short and medium term to stay viable in the present and future predicted economic context?
• What skills are needed by business owners in order to underpin these changes?
• From the perspective of the employed, what employee skills are in demand, and what other elements are needed for the maintenance of employment through MSMEs?
• What is the impact of gender, age, nationality and administrative status?

All research must be disaggregated according to sex, age, nationality (bearing in mind restrictions placed on Palestinians, Syrians and migrant nationalities) and administrative status (with or without residency and work permits). Disaggregation with regards to MSMEs must also be done.  making a distinction between businesses aligned to export or internal markets, and those that focus on production versus the service sector.

Research methodology

The research will be conducted by a lead researcher (consultant) with an assistant researcher, for a period of two months.

The first month will focus on key informant interviews with progressive economists and academics, business leaders in Beirut and Tripoli, the food security and livelihoods sector in Lebanon, NGOs, think tanks etc; and also conduct secondary information review to learn lessons from other countries and widen the access to alternative suggestions for economic maintenance in Lebanon.

The second month will focus on quantitative (survey) and qualitative (follow-up focus group discussions or key informant interviews) with owners and employees of MSMEs in deprived areas of Beirut and Tripoli.

A detailed research methodology in an inception report is expected at the end of the first week.

Oversight

A research steering committee will be formed consisting of 4 people – two from Concern (livelihoods PM and Beirut PM) and two from ACF (Food Security and Livelihoods Coordinator and Beirut PM), who will meet on a fortnightly basis to:

• Receive research updates and discuss the implications, guiding the research to maintain a degree of relevance for INGOs
• Assess and modify research protocols (extremely important prior to the launch of the qualitative and quantitative research with MSMEs and their employees) ensuring that the ethics of research are maintained
• Assist in accessing certain people if needed
• Review and feedback of written materials including quantitative and qualitative questionnaires and final report

Expected outputs

• Inception report for review by steering committee. Due at end of week 1 of the process. To include methodology, detailed work plan and questionnaires for review by the steering committee who will assess both in terms of research rigour and ethical considerations.
• Interim report: all secondary information, including the international dimension. 1 round of review with the steering committee. Due at end of week 3 of the process
• Final report: combining secondary information analysis (interim report), analysis of primary information collection, combined analysis, and recommendations that answer the question of what INGOs can do to help avoid MSME collapse. Due at end of week 8 of the process