Micro-Finance

In

SYRIAPrepared by – Reem Ramadan

The Globalization Challenge And The Changing Environment

International Competition Increasing Competitiveness due to

Productive Technology Labor Profile Demands

SYRIACountry And People

SYRIA

PALASTINE

A- Population Growth

Syria's population was estimated at 17.1 million in the year 2002. It more than doubled between 1970

and 1994, rising from 6.3 million to 13.8 million at an annual average rate of 3.3%. This rate of growth

dropped between 1995 and 2000 to 2.7%.

B- Labor

Year197019811994199920002001

1-Population6305904613782161101632016720

2-Manpower(10yrs+)903958829612112291202812340

3-Labor Force (15 yrs+)320046617607889397029958

4-Economically Active Population (labor supply)1570213540385026-5275

5-Average gross participation rate (4/1)24.9%23.6%29.3%31.2%-31.5%

6-Average net participation rate (4/3)49.1%45.8%53.1%56.5%-52.9%

1- Labor Supply

Source: For (I, 2, and 3) above Statistical Abstract: 1999-2002, Syrian Arab Republic, for (4), Population Censuses 1970-1981. and 1994, Syrian Arab

Republic. Multipurpose Survevl999. Syrian Arab Republic.

Table (1)

Of the total number of working labor of 4,844,023 in 2001, male participation rate was

82.6% (4,001,565) and a female rate was 17.4% (842,458).

2- Labor And Gender

MaleFemale

UrbanRural

51.648.4

35.164.9

Total100100

3- Employment in the Formal and Informal Private Sectors

SectorMaleFemaleTotal

Public Private

Organized Private non-OrganizedJoint-Cooperative

24.3 35.3

40.3 0.2

34.2 32.4 33.0

0.3

26.0 34.8 39.00.2

Table 3: Distribution of Employment by Public & Private Sector 2001 (%)

Source: Labor Force Survey, 2001

C- Education

23University (6 years)22University (5 years)21

University (4 years)

20

19

18Intermediate Institutes (2years)17

General secondary school (3 years)Vocational Secondary School ( 3 years) 1615

14Preparatory School (3 years) 13

1211

Primary School (6 years)

1098765

Pre-Primary (3 years) 4Age 3

1- Education And TrainingStructure of the education system in SyriaFigure 1:

2- Education And Skill Level Of Employment

CertificateMaleFemale

Elementary school & lowerPreparatorySecondary schoolIntermediate InstitutesUniversityTotal

2693551325199234

4002

%67.313.88.25.05.8100

5136366

13665

842

%60.87.57.8

16.17.7100

Source: The Central Bureau of Statistics, Labor Market Survey 2001

Table 5: Distribution of Employees by Educational Level and by Gender in Both Private and Public Sectors 2001

3- Vocational Education and Training

a- The Structure Of The Vocational Education And Training

The Syrian vocational education and training system comprises Secondary (vocational secondary school) and post-secondary (intermediate institutes). 1. First

level: secondary vocational education and training (grades 10 to 12).

b- Labor Training

Economic ActivityInside the Establishment

Outside the Establishment

Abroad

Agriculture74.020.75.3

Extraction industry42.034.823.2

Manufacturing industry58.621.619.8

Water& Electricity---

Building & Construction---

Trade76.64.818.6

Communication & Transport

44.554.60.9

Services96.04.0-

Total56.526.017.5

Table 7: Labor Training by Sector and Location

Source: Labor Market Census in the Syrian Arab Republic, 2000.

c- Public Sector Training

Government sector training, in principle, is conducted in institutions related to each Ministry.

d- Private Sector Training

The Ministry of Education had already licensed 140 private training centers in foreign language courses,

computer literacy, and certain mechanical and electrical courses. The Crafts Union had also

licensed 106 training centers that are specialized in various craft training.

4- Higher Education

Currently, Syria has four public universities in the major regions of the country.

Curriculum Development

The MOHE took up a strategy to develop the higher education in its different levels in the period 2000-2010.

This expansion process is aligned with two major issues:

1) society and labor market needs

2) region's needs.

D- Unemployment

1981199519992001

Total unemployed labor force (thousand)99276432613

Percentage of unemployed/labor force (%)4.8%6.7%9.5%11.2%

Percentage of unemployed Males/labor force (%)

(4.8%)(4.4%)(7.4%)(8.0%)

Percentage of unemployed Females/labor force (%)

(5.1%)(15.0%)(18.7%)(23.9%)

Percentage of unemployed for the first time/total of unemployed (%)

63%79%83.3%89.1%

Sources: Population and labor force Planning Department, Ministry of Planning, and Labor Market Survey 2001.

Table 8: Unemployment in the Syrian Labor Market 1981-2001.

Category%Age15-24 years79.4%25 years and above20.1%Education ProfileIlliterate and up to the elementary schools level73.9%Intermediate and High School level19.4%Institutions and University Graduates6.7%Area DistributionRural59.3%Urban40.7%Experience ProfileUnemployed with no previous experience89.1%Unemployed with previous experience10.9%

Unemployment Distribution by Age, Education Profile,Areas and Experience Profile in 2001

Table 9:

Source: Labor Market Survey 2001.

Economic Activity%

Food Stuff and Beverages, Manufacturing Industries14.9%

Retail Trade and Commerce10.3%

Hotels and Restaurants9.2%

Plastic Manufacturing Products6.2%

Textile Industries5.7%

Non-Metallic Manufacturing Products5.7%

Chemical Manufacturing Products3.5%

Metal Reformation Industries3.5%

Tools and Equipment Industries3.5%

Other Activities36.8%

Disguised Unemployment Percentage Distribution by Economic Activity

Table 10:

Source: Labor Market Census in the Syrian Arab Republic, 2000.

Regional distribution of Unemployment

Unemployment is generally spread throughout Syria; however 36.5% of the unemployment is associated with the Eastern Region. 27.4% of Al-hasakeh's labor force was unemployed.

E- The Banking System In Syria

Inefficient retail banking services and inability to cater to the financing needs of a rapidly growing private sector.

Lack of diverse saving and investment instruments, and little experience in risk finance (requiring heavy finance collateral).

Bank loans requiring very complicated and impractical procedure (which obliges investors to resort to informal channels to finance their projects).

Rigid interest rate structure and inability to access international financial markets.

Absence of a strong regulatory system in place at the Central Bank.

The banking sector suffers from the following deficiencies:

Bank of BahrainHousing Bank for Trade and Finance of JordanBLOM Bank of LebanonThe Arab Bank of JordanBEMO Bank of Lebanon

In 2000, the government introduced several reforms in the banking sector

The Syrian cabinet on the 22nd of December 2002 approved the request of 5 banks to work with local Syrian

businessmen to set up private banks on-shore. These foreign banks are:

F- Legislation And Regulations Related To Investment

Government sector training, in principle, is conducted in institutions related to each Ministry.

The Ministry of Education had already licensed 140 private training centers in foreign language

courses, computer literacy, and certain mechanical and electrical courses. The Crafts

Union had also licensed 106 training centers that are specialized in various craft training.

Contribution Of SMEs In The Syrian

Economy

A- An SME economy

SMEs are an essential part of the Syrian economy and of the global economy in general. It may come as a surprise that more than 60% of the US economy comes from companies with less

than 9 workers, which is considered the standard definition of an SME in most countries.

Syria is an apparent example of this situation. SMEs employ the majority of the private sector work force that represents and there

are almost 450,000 registered businesses most of whom recruit lest than 9 workers.

B- Contribution Of SMEs In The Labor Force

It is estimated that 4.4 million people over the age of 15 are economically active in sectors dominated by SMEs.

ActivityNumber (000)% of total labor force

% of GDP

Agriculture 14303230Industry 58513.117Construction 55412.44Trade & Tourism 64814.520Transport & Telecom. 2375.313Other services 101422.716

Table (12) Distribution of employees by economic activity & role in GDP

Source: CBS, Statistical Abstract, 2001, Damascus

C- Role of SMEs in Gross Domestic Product (GDP)

SMEs represent less than 9% of the Gross Domestic Product in Syria that was estimated at $13.5 billion in 2000to be $1.2 billion . The output of one SME employee is approximately $8,800 a year.

Activity% of GDP

SME Share of the Sector (%)

SME Share of GDP (%)

Agriculture 305015Industry & mining 17305.1Construction 4502

Trade & Tourism 208016

Transport & Telecom 13202.6

Other services 168012.8

Table (13) SME Share of GDP

Source: Statistical Abstract, 2001, CBS,Damascus, and Author projections.

D- Role Of SMEs In Foreign Trade

Available Statistics indicate that the share of SMEs is extremely very high in relative and absolute terms on the imports side.

SMEs in Syria is to expand its share of exports from the current 18%, or the mere $728 million, to more than $ 5 billion a year

before the turn of this decade.

ActivityPublic Sector

Private Sector

TotalSMEs (90% of private

sector)

Export38908094700728

Imports992308440762775

Table (14) Role of Public, Private, and SME sectors in foreign trade

Source: Statistical Abstract, 2001, CBS, Damascus, and Author estimates

Problems And Constraints Facing

SMEs

1- Absence Of a Pro SMEs Fiscal Policy

This figure represents 30% of profits and 8.4% of turn over; not an encouraging factor in a global economy based on

competitiveness.

a)b)c)d)e)f)g)h)I)J)k)

Administrative License Renewal Tax:Real estate Tax:EmployeesCommercial Register Fees:Industrial Register Fees:Business Vehicle Fees:Bar code fees:Machinery tax:Income tax:Social SecurityTotal

$ 100$ 200$ 240$140$140$100$ 240

$ 3700$ 600

$2160$ 7620

Table 15

Source: Author, SME costs survey, 2002, Damascus.

2- High Variable Taxes And Fees Related To Exports

Exports are calculated as increased profits and therefore lead to higher income taxes even

though there are no direct taxes on exports per se. This situation creates a disincentive to

exports.

3- No Breaks For Technological Innovations

Technological innovations are considered new machineries and are not treated as productivity generators and hence new

technologies create new burdens on SMEs.

4- Absence Of A Suitable Banking And Financial System

Table (16) indicates the dominance of the public sector over total credit provided by the banking system to

private and public sector over the period 1990-2000.

Sector 1990 1995 1999 2000

Public $1.18 billion $ 2.76 billion $ 3.6 billion $ 3.7 billion

Private $ 0.26 billion $ 1.0 billion $ 1.2 billion $ 1.3 billion

Table (16) Credit distribution by sector

Source: CBS, Statistical Abstract, 2001, Damascus

In general terms the major obstacles for SMEs in the banking system are:

A. High costsB. Slow processes

C. Limited Credit purposesD. Absence of a financial system

E. The new laws governing the private banking sector have no special reference to SMEs.

F. Absence of micro finance schemes to serve SMEs in local communities in urban and rural

areas.

5- Absence Of Training And Skills Development For Building Highly Skilled SME Workers

YearMalesFemalesTotalFemale %

198168533017987031

198929182887580550

1990609442981039251

1998667664381311449

199944195383980255

Table (17) Development of TVET graduates 1981-1999

Human Resource Development in Syria, Population Growth, Technology Capabilities, and the future of sustainable development in Syria, R.Helane et al, 2001, Damascus.

6- Lack Of International Marketing Experience

A. Very limited institutional capacity in the area of export promotion and market research.

B. The cost of acquiring market intelligence is inhibiting for SMEs.C. Absences of formal or vocational training in the field of export promotion or market intelligence in Syrian technical schools and

universities.D. foreign markets data and intelligence gathering.

E. Limited use of the Internet by SMEs in commercial activities due to many reasons including high costs of hardware, software and

communications, the language barriers, and inhibiting accessibility policies.

F. Absence of business incubators to support the export and R&D activities of small businesses

7- No Participation In National Or Sectoral Decision-making

private sector participation in decision making and the majority of Syrian private businesses i.e. SMEs were

never actively engaged.This absence from the economic decision making

process was never more striking than in the process leading to the passing of the Investment Promotion

law no 10 in May 1991. The law that aimed at encouraging direct foreign investments in the country

required investors to have a foreign capital component in their investment no less than $200,000,

F- Government Employment Offices

Labor Law No. 91 for the year 1959 created the employment offices in Syria and organized

their activities. Law No. 3 was introduced in the year 2001, modifying the existing law and

aimed to improve the efficiency of these employment offices.

The ACU , Agency for combating Unemployment FIRDOS: Fund for integrated rural development of Syria

WHO World Health Organization MOH Ministry of Health

UNDP United Nation Development Program AGA Khan Development Network

SEBC – Syrian – European Business Center Mawred: Activities in Socio-economic Development

JICA Karim Rida Said Foundation

G- Organization Active in the Field of Microfinance

The ACU , Agency for combating Unemployment

2001.President Bashar al – Assad, passed law No. 71 estabishing the (ACU).The ACU is a public development and investment organization which enjoys financial and administrative independence. It was launched on December, 8 .

FIRDOS: Fund for integrated rural development of Syria

Firdos was founded by Mrs, Asma al Assad, which took the bold step of creating Syria's first NGO.FIRDOS' activities can be divided into three programme areas: Income. Generation, Basic Development Needs (BDN), and Education and Training. Each programme area comprises of a range of practical project type.

WHO World Health Organization

The QOL programme uses the BMN approach which is a process of organizing and mobilizing community members to realize their health and development needs, and work collectively to achieve them.It is a community-based, community- managed and community-financed programme.

MOH Ministry of Health

Healthy VillagesA concept that aims at achieving a better quality of life. It is a participatory, dynamic process of integrated socio-economic development, based on self-reliance and self-management by organized communities supported through coordinated intersectoral action.

UNDP United Nation Development Program

RCDP: is a development project works to instill a microfinance national economic instituational organization suits the prevailed moral constituations as a way to alleveate poverty and fight unemployment to access sustainable human development as it works on developing local community capacities to lead development process through a national microfinance cooperative.

AGA Khan Development Network

The MCF began operations in the provinces of Tartous, Lattakia, Hama, and Aleppo since 2000, with the expection to expand to other areas in the future. The goal is to break the barriers to credit and provide access to those who otherwise would not be able to obtain a loan. The microfinance programme goes to the doorstep of the borrower, and tailors its approach to the needs of each community.

Government Credit Institutes

• Industrial Bank (Syria)

• Agricultural Cooperative Bank (Syria)

• Ministry of Finance (Syria)

• Popular Loaning Bank (Syria)

• Post – Office Saving Fund (Syria)

• Ministry Of Economy (New)

SEBC Syrian – European Business Center

SEBC is a unique business service provider in Syria, focusing on the supply of business know-how, expertise and the development of local cosultancy skills. The Centre provides technical assistance to Syrian enterprises by assisting in the upgrading and development of their performance, capacity, knowledge, products and services.

Mawred

Mawred is a Syrian non-profit organization dedicated to enhancing and activating the contribution of women in the development process.Established under the patronage of Mrs. Asma al-Assad in 2003 with the support of the Syrian-European Business Centre (SEBC)

JICA

Address: Abou- Rumaneh, Al-Muhdi St. Bld. No. 28P.O. Box 10012Tel:+963-11-3339359Fax:+963-11-3334834E-mail: Jicasr@jicar.orgwww.jicasr.org

Karim Rida Said Foundation

The Foundation has run a Syria Disability Programme since 1996 in close cooperation with the Ministry of Social Affairs and Labour and local non-governmental societies (NGOs). The Programme aims to improve the lives of disabled children and young people by improve the lives of disabled children and young people .

THANK YOU