Note: SME’s policy Libya.

Ahmed M. Jallala

In Libya SME’s program was established in 2007. However, until now it did not succeed in launching one single project. Its best achievement is transferring the files (feasibility studies) of few projects to commercial banks after being reviewed by loan guarantee fund. People working in Libya Enterprise (SME’s program) claim that the bottleneck is financing the start-up projects. People working in loan guarantee fund and commercial banks claim that the technical support provided by LE is not comprehensive and potential entrepreneurs are not selected according to well specified criteria and are not well trained.

This failure may reflect failure of economic policy, SME’s policy or financial institutions. It may be a combination of any of these factors.

Economic policies, when they exist, assume that piece meal policies work. That is separate policies  work independently in general. Accordingly, SME’s policy works independently of all other policies. In this case it is assumed that policies in other countries can be adopted. As a result important connections among different policies are ignored and specific policies may not work as expected. If property rights are not well defined and legally protected, no collateral can be used by commercial banks. Being risk averse commercial banks will not lend money to potential entrepreneurs. Similarly, in the presence of some form of monopoly, there is no way for SME’s to survive in the lack of fair competition laws.

In Libya until now no fair competition laws has been drafted and property rights are not well defined nor legally protected. Thus, commercial banks will not lend potential entrepreneurs since they are considered very high risk. This does not mean that commercial banks are efficient. Risk management units in commercial banks are understaffed when exist and the staff is not well trained, thus risk aversion is the rule.

Government policy, so far, does not specify certain time to achieve certain goals. Ideally, goals have to be achieved by some percentage in certain time period, such as reducing unemployment among youth by (x%) within the next (Y) years or increasing the share of some goods or services by (z%) in the next (L)years.

Ministry of economy and trade, presently, considers the SME’s program as an investment program rather than a development program. Accordingly, new investment funds has been established in five cities (Tripoli, Benghazi, Sebha, Misurata and Derna). Geographic boundaries are not defined. They claim that the five funds can compete. A unit was set up at the ministry of economy and trade to coordinate the work of the five funds.

If the goals of SME’s program are development ones then investment funds will not help achieve these goals in a reasonable time. As a matter of fact there several development banks (Agricultural Bank, Rural Bank, Development Bank, and Real Estate and Saving Bank) that has existed for a long time and did not succeed  in providing the services needed. Five new investment funds will not be different from the existing development banks.

SME’s program is a typical public sector organization. They wait for potential entrepreneurs to come in !!!!!. They have no well planned marketing. Incubators and business centers do not go out to high schools universities and other technical institutes to offer their technical support services and have an awareness campaign. Many people who may become potential entrepreneurs never heard of the program. I personally asked several students in the universities and some young men I met accidently if they know anything about the incubators, business centers or SME’s program. Their answer they never heard of it and if they did they don’t know what they offer.

SME’s program has no well specified criteria to select potential entrepreneurs to be trained. Many young people walk in asking for business ideas and those who do have one usually have traditional type of businesses and all what they want is finance. No business plan is required. All what the program ask for is a feasibility study. Training of potential entrepreneurs is very short and very limited. Only three training courses in 8 days. The first is dealing with entrepreneurship, the second on understanding feasibility study and the last one has to do with project management.

The program has no well defined method to follow up the graduates of the incubators and those assisted by business centers. The numbers of incubates is very small and most of the business centers are newly established. In my view all business centers and incubators are understaffed and the present staff need more training to be able to do the work required.

In conclusion, SME’s program in Libya needs serious help from international and regional agencies on all levels of work.