Business Dynamics Review of Egypt

Report

4 May 2026

3. Firm birth, employment growth and entrepreneurship in Egypt

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Abstract

This chapter provides evidence on some aspects of business dynamics in Egypt. First, it analyses the role of young firms in the economy and their characteristics. Second, it examines small and medium-sized enterprises, their contribution to employment and the reasons behind their relatively limited role compared to OECD countries. Third, the chapter examines entrepreneurship, and in particular, female ownership. For each of these areas, the chapter offers targeted policy recommendations to develop them within Egypt’s current economic and policy landscape.

Introduction

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This chapter analyses firm birth, employment and entrepreneurship in Egypt. It complements the analysis by discussing policies implemented in Egypt in recent years and proposes recommendations to address obstacles to firm creation and growth and to boost employment and entrepreneurship.

The analysis is mainly based on the inclusion of Egypt in the OECD DynEmp database, which allows a cross-country comparison of business dynamics across countries, sectors and time. Egypt has been included in a cross-sectional version of the project (DynEmp_XS) using the Economic Census 2022/2023, the most recent available wave. The inclusion of Egypt in DynEmp has allowed cutting-edge evidence, enabling comparisons with the performance of OECD and non-OECD economies.

The chapter begins with a discussion about evidence on new firm creation and policies implemented in Egypt to sustain their creation and growth. It then examines small and medium-sized enterprises’ (SMEs) contribution to total employment and the reason behind their relatively limited role. The chapter then looks at the characteristics of entrepreneurship in Egypt, particularly of female entrepreneurship.

Fostering business dynamics: Facilitate business creation, start-up growth and business formalisation

Copy link to Fostering business dynamics: Facilitate business creation, start-up growth and business formalisation

This section presents the characteristics of Egyptian young firms and their contribution to employment. Within new businesses, it also focuses on the dynamics of non-agricultural household enterprises. It concludes with a discussion of existing policies that facilitate firm entry and growth in Egypt, before proposing recommendations to support young firms, improve business registration and streamline licencing procedures.

The analysis in this chapter mainly comes from the Egyptian Economic Census 2022/2023 and its inclusion in a cross-sectional version of the OECD DynEmp project (DynEmp_XS) (Box 3.1).1 The analysis compares Egypt with two benchmarks: OECD countries and emerging economies.2 To improve cross‑country comparability, the analysis focuses on manufacturing [ISIC Rev.4 Section C] and non-financial private sectors [G-N excluding K]. These sectors are better covered in different countries available in the DynEmp database and represent a significant share of Egyptian total employment (together accounting for more than 40% of total employment; Annex Figure B.2). Annex D provides more information on the methodology of the analysis.

Box 3.1. The OECD DynEmp Project and adapting it to the Egyptian data

Copy link to Box 3.1. The OECD DynEmp Project and adapting it to the Egyptian data

The DynEmp distributed micro-data project to study business dynamics and support evidence-based policy making

The OECD developed the DynEmp database to facilitate cross-country comparable micro-data analysis on business dynamics. The project uses a common protocol for data collection and analysis through a distributed micro-data approach, meaning that the project is based on a Stata® routine that is centrally written by the OECD to harmonise differences in the data across countries. The routine is locally run by researchers and statistical agencies that apply the necessary steps to ensure that outputs meet specific confidentiality requirements and return the secure, micro-aggregated results to the OECD for analysis. The distributed micro-data approach presents several advantages, such as reducing the burden on individual national statistical agencies through the development of a common code. It also overcomes the confidentiality constraints of directly using national micro-level databases. Finally, the programme is reproducible at a low cost (Berlingieri et al., 2017[1]).

The DynEmp project generates micro-aggregate datasets capturing the dynamics and dispersion of employment across highly disaggregated groups of firms by age, size and industry. It allows one to examine gross job flows (job creation and destruction) and employment growth by firm characteristics, including firm age, size and employment growth percentile. The DynEmp project also allows one to examine “transition matrices” of a selected group of firms, containing information on units’ size evolution from time t to time t+j (which allows, for example, to calculate the survival rate and post-entry growth in terms of employment). The DynEmp database relies on national business registers as a primary source of firm and establishment data, containing the population of firms in the selected country.

The project started in 2013 and is currently in its third version, DynEmp3_v3. The last roll out was in September 2024 and contains data for 19 OECD and non-OECD countries (Australia, Austria, Belgium, Costa Rica, Croatia, Estonia, Finland, France, Germany, Hungary, Italy, Japan, Lithuania, Luxembourg, Portugal, Slovenia, Spain, Türkiye and the United Kingdom), covering the period 2001-22.*

The DynEmp project has been proven to support evidence-based policy making through several cross‑country works. Some include the examination of structural and policy determinants of the declining business dynamics observed across OECD countries (Calvino, Criscuolo and Verlhac, 2020[2]); studying the business dynamics during the COVID-19 pandemic (OECD, 2021[3]) and the role of start-ups during the COVID-19 crisis (OECD, 2020[4]); and examining the role of the digital transformation for business dynamics (Calvino and Criscuolo, 2019[5]). The project has also supported evidence-based policy making through several in-depth country-level analyses on business dynamics, including countries like Belgium (OECD, 2019[6]); Croatia (OECD, 2023[7]), Finland (Calligaris et al., 2023[8]), Korea (Chapter 3 of OECD (2021[9])), South Africa (Tsebe et al., 2018[10]) and Tunisia (OECD, 2022[11]).

Adaptation to Egypt: Cross-sectional version of DynEmp

Egypt has been included in a cross-sectional version of the DynEmp project (DynEmp_XS), which allows examining firms’ size distribution across sectors and the characteristics of entrants and incumbents, including the conditional distribution of firm size on firm age – see Annex C for a methodological discussion of the inclusion of Egypt in DynEmp. The cross-sectional version has also been previously run for Association of Southeast Asian Nations (ASEAN) countries, namely, Cambodia, Indonesia and Viet Nam. These data have been used to perform an analysis on business dynamics and firms’ distribution, supporting the Canada-OECD Project for ASEAN SMEs (OECD, 2021[12]).

The inclusion of Egypt in a cross-sectional version of DynEmp code allows producing the novel evidence on young firms, employment and entrepreneurship provided in this report. However, the output presents several limitations with respect to the full inclusion in the (longitudinal) DynEmp project due to the lack of panel dimension in the data. This prevents fully examining the extent to which new firms enter the market, contribute to job creation and destruction, their exit, and the extent to which job reallocation occurs among incumbent firms (i.e. entry and exit rates, net job creation and destruction). Nevertheless, despite this limitation, most features of the Egyptian economy examined in this chapter are likely to be structural and should not exhibit significant changes over time.

Note: * The first phase of the project, DynEmp Express, started in 2013; see Criscuolo, Gal and Menon (2014[13]). The second phase was in 2015, DynEmp v.2; see Calvino, Criscuolo and Menon (2015[14]; 2016[15]). A third phase was launched in 2017, DynEmp v.2_2; see Calvino and Criscuolo (2019[16]) for details on the novelties introduced.

Source: OECD (n.d.[17]), “DynEmp”, https://www.oecd.org/sti/dynemp.htm.

Egypt has a high share of young firms, but they are small and a large share is informal, limiting their potential to innovate and adopt advanced technologies

Egypt has many young firms (aged 0-2), but a large share is informal

In both developed and emerging economies, new firms significantly disproportionately bring innovation to the market, creating jobs and increasing productivity. Furthermore, young firms are systematically more vulnerable than incumbents to the policy environment and national framework conditions (Calvino, Criscuolo and Menon, 2016[15]).

Young firms (0-2 years old) represent a large share of Egyptian establishments.3 In manufacturing [ISIC Rev.4 Sector C], they represented 15% of businesses, while in non-financial market services [G-N excluding K], they reached 18% in 2022/23 (Figure 3.1).4 These shares are similar to those of the OECD benchmark (respectively 14% and 19% on average in manufacturing and non-financial market services) but are lower than other emerging economies included in the analysis.5

The share of young firms varies greatly across industries (Figure 3.2), ranging from 27% of total firms in Other professional, scientific and technical activities [MC] and 26% in IT and other information services [JC] industries to 2% and 3%, respectively, in Transport equipment [CL] and Basic pharmaceutical products and pharmaceutical preparations [CF] industries (see Annex Table C.2 for the A38 sectoral classification correspondence with ISIC Rev.4). In most industries the share of young firms is higher than the OECD average. However, some industries have a lower share, especially Telecommunications [JB], Publishing, audiovisual and broadcasting activities [JA], Basic pharmaceutical products and pharmaceutical preparations [CF], Computer and electronics [CI] and Transport equipment [CL].

Most young firms come from the informal sector (70% in manufacturing and 58% in non-financial market services), meaning that they are not registered with the relevant authorities or they do not hold the necessary licenses to operate.6 Indeed, if one considers only formal units in Egypt, the percentage of young firms is much lower than the OECD benchmark (Figure 3.1). Additionally, Figure 3.2 shows that the share of young firms originating in the informal sector also varies across industries. Rubber and plastics products, and other non-metallic mineral products [CG], Textiles, wearing apparel, leather and related products [CB] show the highest share of informal young firms (respectively 81% and 77% of total young businesses in the industry). On the contrary, in industries such as Basic pharmaceutical products and pharmaceutical preparations [CF], Computer and electronics [CI], IT and other information services [JC], Legal and accounting activities; activities of head offices; management consultancy activities; architecture and engineering activities; technical testing and analysis [MA], Publishing, audiovisual and broadcasting activities [JA] and Telecommunications [JB], all young firms are formal.

Figure 3.1. Young firms make up a significant proportion of firms, but a large share is informal
Copy link to Figure 3.1. Young firms make up a significant proportion of firms, but a large share is informal

Percentage of young firms (firms aged 0-2) by sector 2022/23

Figure 3.2. The share of young firms varies across industries, and some are below the OECD average
Copy link to Figure 3.2. The share of young firms varies across industries, and some are below the OECD average

Percentage of young firms (aged 0-2) by industry 2022/23

Informality decreases when firms become older, but rate of formalisation varies across sectors

While informality is high among young firms, it decreases for older firms. Consistently, informal businesses contribute to around half of total employment in young firms (aged 0-2 year), but only 10-20% of employment in firms older than 10 years (Annex Figure B.3).

The share of formal businesses by firms’ age varies across sectors (Figure 3.3). In non-financial market services, 60% of businesses are informal in their first year. This drops below 57% for firms aged 3-5 years, 45% for those aged 6-8 years and it reaches 20% for firms that are at least 15 years old. In contrast, in the manufacturing sector, 80% of businesses start as informal. This share remains at 60% for firms aged four years, drops below 50% afterwards and reaches 24% for firms older than 15 years old.

This is consistent with previous evidence for Egypt, showing that older firms are more likely to be formal. The strong relationship between formality and firm age may be explained by the fact that firms formalise later in the life cycle or that informal firms are less likely to survive (Krafft et al., 2020[19]).7

While for most industries, the rate of formalisation increased for older businesses, in some industries informality persists even in older firms ( Annex Figure B.4). Indeed, certain industries continue to have large shares of informal businesses (slightly lower than 40%) even for firms more than ten years old. Industries with persistent shares of informal businesses include Textiles, wearing apparel, leather and related products [CB], Wood and paper products, and printing [CC], Basic metals and fabricated metal products, except machinery and equipment [CH], Furniture; other manufacturing; repair and installation of machinery and equipment [CM] and Accommodation and food service activities [I]. In other industries, instead, informal entry seems to be a stepping stone for formalisation. In industries such as Food products, beverages and tobacco products [CA] and Machinery and equipment [CK], the shares of informal businesses drop to around 10% for firms aged ten years or more, compared to over 32% and 52% respectively among young firms.

Figure 3.3. Informality reduces as Egyptian firms age
Copy link to Figure 3.3. Informality reduces as Egyptian firms age

Percentage of informal companies by firm’s age and sector, 2022/23

Young firms are not evenly distributed geographically

Young firms are concentrated in Cairo, Giza and Alexandria (Figure 3.4 dots). Together, they represent 37% of young firms in manufacturing and non-financial market services in Egypt, accounting for over 100 000 establishments. In these respective governorates, young businesses account for around 20% of total businesses. Conversely, in Aswan and North Sinai, young firms account for a higher percentage of total businesses (respectively 24% and 31%), despite being much lower in absolute numbers.

Registration status (formal or informal) of young firms also varies across governorates. North Sinai has most of its young firms born in the informal sector (around 80% of them), followed by Matrouh and Kalyoubia. On the contrary, in South of Sinai and Red See governorates, most young firms originate from the formal sector. Developing policies at the local level can be effective to target the regions where promoting young firms’ creation and incentivising formalisation is most needed (see Box 3.6 for the case of India).

Figure 3.4. The percentage of young firms and their registration status vary across governorates
Copy link to Figure 3.4. The percentage of young firms and their registration status vary across governorates

Percentage of young firms (left axis) and number of young firms (right axis) by governorate, manufacturing and non‑financial market services in Egypt, 2022/23

Young firms’ contribution to employment is high, but not across all industries

Young firms contribute significantly to total employment in Egypt. In manufacturing, 8% of workers are employed by firms aged 0-2, and in non-financial market services the share reaches 13% (Figure 3.5). These numbers are higher than for the OECD benchmark (5% and 10% respectively), but lower than in emerging economies included in this analysis.8

These findings are in line with evidence showing that entrant firms capture a higher share of the market in developing economies than in the United States or in more developed countries (Tybout, 2000[20]). The analysis of young firms is crucial for policy makers as young firms have a prominent role in job creation. Examining a sample of 17 OECD countries and Brazil, Calvino, Criscuolo and Menon (2016[21]) show that young firms account for an average of only 17% of employment, but create 42% of jobs.

When examining only formal firms in Egypt, the distribution of employment is more skewed towards older firms (aged six years and older), aligning more closely with the OECD average, further supporting the idea that firms may start their activity as informal and formalise later.

Figure 3.5. Young firms contribute significantly to total employment in Egypt
Copy link to Figure 3.5. Young firms contribute significantly to total employment in Egypt

Distribution of employment by age group, 2022/23

However, in certain industries, young firms contribute less to employment compared to OECD countries (Figure 3.6). This is true particularly in Basic pharmaceutical products and pharmaceutical preparations [CF], Computer, electronic and optical products [CI] and Transport equipment [CL]. Combining this evidence with evidence from Figure 3.2, in pharmaceutical, computers and transport equipment, young firms contribute less to the total number of firms and employment.

Moreover, in several industries, young firms’ contribution to total employment is mainly driven by informal young firms that are not registered with the relevant authorities. Formalisation polices can be particularly helpful for those key industries, including Textiles, wearing apparel, leather and related products [CB], Furniture; other manufacturing; repair and installation of machinery and equipment [CM] and Wholesale and retail trade, repair of motor vehicles and motorcycles [G], for which 55% of young firms’ employment originates from informal young firms.

Figure 3.6. Young firms in computers, telecommunications, transport equipment and pharmaceuticals are not contributing much to employment compared to OECD
Copy link to Figure 3.6. Young firms in computers, telecommunications, transport equipment and pharmaceuticals are not contributing much to employment compared to OECD

Employment contribution of young firms (aged 0-2) by industry, 2022/2023

The size of young firms is lower than in OECD countries, and the gap with the OECD widens as firms age

Although the firm and employment contribution of young firms is high, their size is smaller than the OECD average. Indeed, the average employment of young firms is notably lower in Egypt, and the gap with the OECD increases as firms age (Figure 3.7). This suggests that firms may face difficulties in scaling up as they age. Egyptian young firms (aged 0-2) employ about 50% as many workers as OECD firms in non-financial market services and 40% as many in manufacturing. Meanwhile, old firms (aged six years and above) are only around 30% the size of their OECD counterparts. The average employment is slightly higher when considering only formal firms in Egypt, but it is still significantly lower than the OECD levels. This evidence is in line with findings from the MultiProd project (OECD, 2026[22]), which suggests that, in manufacturing, firms face challenges in obtaining productivity improvements when becoming older comparing to the OECD benchmark.

Such results are also in line with the growing evidence in the literature (see, for example, Hsieh and Klenow (2014[23]); Eslava, Haltiwanger and Pinzón (2019[24])) showing that firms in developing countries grow more slowly as they become older. Moreover, stagnant firms tend to survive longer compared to firms in developed economies.

Figure 3.7. Average employment is lower than in the OECD with the gap widening as firms age
Copy link to Figure 3.7. Average employment is lower than in the OECD with the gap widening as firms age

Average employment by age group, Egypt vs. OECD, 2022/23

Among new businesses, household enterprises are born in wholesale and retail, in rural areas and are predominantly informal

Household enterprises (or family businesses) represent over 80% of businesses in the Middle East and North Africa (MENA) (OECD, 2019[25]; Samara, 2021[26]) and more than 50% in Egypt (PwC, 2021[27]). 9 This section examines new businesses that are created through family involvement and their characteristics. In particular, it focuses on non-agricultural household enterprises – examining the ELMPS data for Egypt – which represent a non-negligible share of households in Egypt (around 22% in 2023, which corresponds to 5.8 million households; see Box 3.2). While most of them do not hire workers outside the household, around 15% hired at least one worker in 2023 (see Box 3.2).

Box 3.2. Non-agricultural household enterprises in Egypt

Copy link to Box 3.2. Non-agricultural household enterprises in Egypt

In Egypt, the number of households owning at least one (non-agricultural) enterprise is non-negligible, with around 22% of households owning at least one enterprise in 2023. This corresponds to around 5.8 million households in Egypt. The share increased again in 2023, after being on a downward trend over the period 2006-18. In 2018, indeed only around 14% of households had a family enterprise.

Almost no household enterprises hire people outside the family. However, around 16% of them hired at least one worker from outside the household in 2023, including both relatives and non-relatives (Figure 3.8). This percentage has significantly decreased since 2006, when it was around 30%.

Figure 3.8. Around 20% of households have an enterprise but only 16% of those hire at least one worker outside the household
Copy link to Figure 3.8. Around 20% of households have an enterprise but only 16% of those hire at least one worker outside the household

Percentage of household enterprises and those hiring at least one worker outside the household, Egypt, 2006-2023

Around 24% of new (non-agricultural) household enterprises are created among every two waves of the survey (1998-2006, 2006-12, 2012-18, 2018-23), on average over the period.10 Most of these new (non‑agricultural) household enterprises are born in the Wholesale and retail trade, repair of motor vehicles and motorcycles [G]. In 2023, 35% of new household enterprises were engaged in wholesale and retails activities, which was a drop from the previous period (it was around 50% in 2006) (Figure 3.9). The creation of household enterprises engaged in Transportation and storage activities [H] increased significantly from 2006 to 2012 (from 9% of new household enterprises in 2006 to 17% in 2012) and it remains stable afterwards. On the other hand, sectors like Manufacturing [C] and Construction [F] saw lower proportions of new enterprises over time.

Figure 3.9. Half of new household enterprises are concentrated in the wholesale and retail sector
Copy link to Figure 3.9. Half of new household enterprises are concentrated in the wholesale and retail sector

Distribution of new (non-agricultural) household enterprises by key sector (as a per cent of total new enterprises), Egypt, 2006-2023

Geographically, the majority of new household enterprises are located in rural areas, both in the rural Lower Egypt and rural Upper Egypt regions.11 Almost 30% of new enterprises locate in rural Lower Egypt while 38% were located in rural Upper Egypt in 2023 (Figure 3.10). Rural Upper Egypt has also seen a rapid increase from 2006, when it accounted for 22% of new household enterprises only. Meanwhile, the share of new enterprises created in Greater Cairo, Alexandria and Suez Canal, and other urban areas decreased over the period 2006-23.

Most of the new household enterprises are informal, thus not registered with the relevant authority, and this share has increased over time. Indeed, only around 17% of new household enterprises were formally registered (commercial registration) in 2023, a decrease from 32% in 2006 (Figure 3.11). The share of new household enterprises that are formal is even lower when considering the possession of a business license and proper accounting books, in addition to having a commercial registration. Indeed, in 2023, only 10% of new household enterprises met all three of the formality-related criteria considered in Figure 3.11, which include (i) having a commercial registration, (ii) having a business license, and (iii) keeping accounting books.

Figure 3.10. Most new household enterprises are located in rural Egypt
Copy link to Figure 3.10. Most new household enterprises are located in rural Egypt

Distribution of new household enterprises by region (in percentage of total new enterprises), 2006-2023

Figure 3.11. The share of new household enterprises that are formal has declined over time in Egypt
Copy link to Figure 3.11. The share of new household enterprises that are formal has declined over time in Egypt

Distribution of new household enterprises by formality requirements (in percentage of total new enterprises), 2006‑2023

Egypt has undertaken several initiatives to promote start-ups and facilitate business registration, but efforts could be further strengthened

This section discusses the main interventions and initiatives implemented in Egypt to promote the creation of new firms and facilitate business registration. It also proposes recommendations for further improving it.

Continue efforts to foster firm creation and scale-up by targeting lagging industries and the most innovative young firms

In September 2024, a Prime Ministerial Decree (No. 2878 of 2024) established the Ministerial Group for Entrepreneurship, chaired by MPED, to strengthen Egypt’s start-up ecosystem across multiple dimensions. The Group focuses on improving the regulatory environment, facilitating market access, coordinating government efforts, expanding access to finance, retaining talent, reducing brain drain, and enabling global expansion (MPED, 2024[29]). The Ministerial Group comprises four working groups dedicated to these priorities. Since its formation, it has convened regularly to define key policies and actions essential for advancing the start-up landscape. Its secretariat has already conducted an in-depth review of over 35 laws and regulations affecting start-ups, alongside international best practices (MPED, 2024[29]). The Group is also considering the introduction of a unified definition of start-ups in Egypt to streamline policymaking and resource allocation. These efforts will culminate in a dedicated “start-up chapter,” to be released by the end of 2025, accompanied by a package of incentives accessible through a digital start-up label system. In addition, a catalytic fund initiative – leveraging existing public funds – is being developed to attract foreign investment and promote the emergence of unicorns, further reinforcing Egypt’s innovation-driven growth strategy.

The Ministry of Communication and Information Technology (MCIT) has also promoted ICT innovation and entrepreneurship in that field in line with the National Structural Reform Program’s objectives (OECD, 2023[7]).12 According to Disrupt Africa 2021 report, Egypt was the fourth-largest ecosystem in Africa in terms of the number of tech start-ups – after South Africa, Nigeria and Kenya – accounting for 19.8% of the active tech start-ups in the continent as of September 2021 (Disrupt Africa, 2021[30]). Most of those start-ups (93.6%) are headquartered in the Greater Cairo metropolis (Disrupt Africa, 2021[30]). Egypt also reported an increase in the number of funded tech startups in the latest report (Disrupt Africa, 2024[31]; OECD, 2025[32]).

In addition, to sustain innovation and start-ups, Egypt also opened eight creative innovation hubs, in Aswan, Qena, Sohag, Minya, Menoufia, Ismailia, Mansoura City and Cairo (MCIT, 2023[33]).13 The project aims to support and assist students, entrepreneurs, SMEs and start-ups to become key actors in bringing digital transformation within the reach of all industry sectors.14 They include specialised tech labs, training centres, and venues for seminars and workshops. The hubs also host technology incubators for starting and growing start-ups and connecting youth with investors and major venture capital firms (OECD, 2026[22]). Also, Egypt’s Innovator Support Fund, established under Law No.1 of 2019 and affiliated with the Ministry of Higher Education and Scientific Research, supports early-stage start-ups and promotes technological advancements among innovators and entrepreneurs.

Within this context, Egypt can further reinforce policies to support the creation and scaling up of young firms and start-ups.

First, Egypt can focus on fostering young firms in industries that lag OECD countries in young firms’ contribution to industry total businesses and employment, including Basic pharmaceutical products and pharmaceutical preparations [CF], Computer, electronic and optical products [CI], Transport equipment [CL], Publishing, audiovisual and broadcasting activities [JA] and Telecommunications [JB]. In some of these industries, employment is dominated by large firms (250+), which account for a larger share of employment than in OECD countries. Consequently, young firms are likely to face barriers to enter the market and grow. Ensuring a level playing field in such industries will be key to ensure the entry and scale-up of young firms.

Moreover, Egypt could devote attention to high growth potential young firms. These firms are so-called innovative start-ups (e.g. have productive asset composition, skilled workers, a proven track record of successful innovation). Even if young firms are key for job creation, only a small proportion survive and grow (Calvino, Criscuolo and Menon, 2015[34]). These are the companies that are often very innovative. Indeed, the literature has shown that fostering the creation of young firms without any scrutiny of their quality can be inefficient (Shane, 2009[35]; Colombelli, Krafft and Vivarelli, 2016[36]).

Several countries – including the United States, and European and Asian countries – have designed incentives to support innovative start-ups (Audretsch et al., 2020[37]). Relevant support includes simplifying laws and regulations, reducing the cost of incorporation, providing tax incentives, improving access to risk finance, or providing incentives to equity investments. Italy, for example, introduced a comprehensive package of incentives called the Italian “Start-up Act”, which has been effective in sustaining innovative start-ups (Menon et al., 2018[38]) (Box 3.3). Audretsch et al. (2020[37]), elaborate a framework to help in the design and implementation of relevant policy initiatives.

In Egypt, MSMEDA has already introduced some measures targeting innovative enterprises, however the definition of innovative enterprises to access such incentives is based only on age (firms with age lower than seven years). Current incentives can be better targeted by defining clearer criteria for identifying innovative enterprises, not only based on age, but also on innovative activities, in line with international practices. Definitions of innovative start-ups vary across countries and may rely on observable indicators (such as the share of investment in R&D, the registration of patents, workers’ level of education) or on verified self-declarations (such as ownership of intellectual property rights). A single criterion is often insufficient; instead, a combination of indicators, as in Italy’s case (see Box 3.3) provides a more robust approach.

Egyptian policies should be directed towards positioning Egypt as an attractive hub for start-ups with a friendly investment climate, particularly in light of the increasing competition from other countries in the region to attract start-ups. Egypt should differentiate itself by offering a simplified registration process, clear regulatory frameworks and efficient licensing procedures that facilitate the establishment and operation of start-ups (see below). Moreover, there should be a focus on providing comprehensive support services tailored to the needs of start-ups, including access to mentorship, incubation programmes and funding opportunities. The Ministerial Group for Entrepreneurship is specifically focused on achieving these goals. Complementary policies to combat corruption, promote a level playing field and fight tax evasion can be particularly helpful to create a friendly environment for start-ups.

Box 3.3. The Italian “Start-up Act” to sustain innovative start-ups

Copy link to Box 3.3. The Italian “Start-up Act” to sustain innovative start-ups

In 2012, the Italian government introduced the “Start-up Act” to create a more favourable environment for small innovative start-ups. This policy was justified by investing a limited amount of public resources on the sub-sample of firms with growth potential that in the literature was found to disproportionately contribute to job creation and innovation.

The “Start-up Act” included a set of policies to sustain start-ups as “fast-track” and zero-cost incorporation. The policy package included the simplification of insolvency procedures, tax incentives for equity investments and a public guarantee scheme for bank credit.

According to the act, innovative start-ups must meet at least one of the following criteria: an R&D expenditure ratio of at least 15%; one-third of its employees are PhD students, graduates or researchers or two-thirds hold a Master’s degree; and hold, deposit or license a patent or own registered software.

Menon et al. (2018[38]) evaluated the impact of the policies on beneficiary firms and found positive effects on revenues, value added and assets. The indicators increased by about 10-15% relative to similar start-ups that did not benefit from the policies (or benefited at a later stage). The empirical analysis also showed that enrolled firms are more likely to receive credit from banks.

Menon et al. (2018[38]) argued that effective start-up policies also need complementary policies (e.g. improving the efficiency of civil justice, fighting corruption and tax evasion). Otherwise, policies would have a disproportional benefit on innovative start-ups.

Source: Menon et al. (2018[38]), “The evaluation of the Italian “Start-up Act", https://www.oecd.org/en/publications/the-evaluation-of-the-italian-start-up-act_02ab0eb7-en.html.

Firm registration procedures at GAFI have improved, however Egypt could streamline procedures for obtaining approvals, permits and licenses, which remain challenging

Registering a business in Egypt is quicker...

Egypt has taken significant steps to improve business registration, in line with the goal of increasing the role of the private sector. Those efforts have been mostly concentrated in GAFI. In Egypt, three additional entities are responsible for registering firms: 1) the Financial Regulatory Authority (FRA); 2) the Suez Canal Economic Zone (SCZone); and 3) the courts. Each entity is responsible for registering different types of firms (Box 3.4).

The establishment of ISCs – with the New Investment Law of 2017 – was a key step in providing a one‑stop shop for investors to obtain all the necessary national and local approvals to make starting a business easier and quicker within GAFI.15 The ISC gathers representatives from more than 60 agencies authorised to provide the necessary licenses and approvals required for establishing a business. It provides incorporation establishment services, after establishment services (e.g. closing a company, changing the legal status, etc.), technical services (e.g. authorisation of import and export invoices of the companies) and governmental services (e.g. to grant and renew work permits for foreigners).16

Box 3.4. Registering companies in Egypt: Entities involved

Copy link to Box 3.4. Registering companies in Egypt: Entities involved

Four main authorities are responsible for registering a business in Egypt: 1) the General Authority for Investment and Free Zones (GAFI); 2) the Financial Regulatory Authority (FRA); 3) the Suez Canal Economic Zone (SCZone); and 4) the courts. Each entity is responsible for registering different types of firms:

GAFI establishes companies under the Companies Law No. 159 of 1981 (shareholder companies: joint stocks, partnerships limited by shares, limited liability companies, one-person companies) and the Investment Law No. 72 of 2017 (individual firms, partnerships, shareholder companies).
The FRA establishes joint stock companies and partnerships limited by shares in non-banking financial sectors (e.g. capital market, exchange, mortgage, insurance, securitisation, etc.).
The SCZone establishes all kinds of legal companies inside the Suez Canal Zone.*
The courts: partnership companies can be registered with the competent Court of First Instance in whose jurisdiction the company’s headquarters or one of its branches will be located.

* In May 2002, Law No. 83 of 2002 regarding Special Economic Zones was introduced. This law allows for the establishment of specific zones for industrial, agricultural and service activities primarily focused on export markets. It permits companies operating within these zones to import capital equipment, raw materials and intermediary goods exempt from customs duties.

GAFI has also automated the procedures for providing services to investors, allowing them to pay fees and electronically sign documents through a single electronic portal. This aims to facilitate investment services and reduce the time and cost of obtaining them, as well as the governance and transparency of the procedures. Indeed, on 8 September 2023, the Prime Minister witnessed a “live experience” of launching the first corporation electronically using GAFI’s digital platform. GAFI, with this step, launched the service of establishing companies completely electronically, as part of its efforts to facilitate investors and apply the highest levels of transparency. The investor can establish the company and pay all the fees electronically using e-signature, provided that GAFI completes the rest of the incorporation procedures with the external bodies then sends company documents to the investor via email. On behalf of the client, GAFI’s follow-up team integrates multiple procedures into a single process, including issuing the commercial registration, the tax ID and the social security registration.17

The aforementioned improvements significantly contribute to reducing the time needed to establish a company within GAFI, which now takes less than two working days. Consequently, the number of new firms registered at GAFI significantly increased in the 2016-23 period, during which most of the new firms were operating in the service sector (Figure 3.12) and were limited liability companies (Figure 3.13). Meanwhile, the average time to register a firm at the FRA and the SCZone is about five working days. It is around 20 working days for the courts.

Box 3.5. New firms registered at GAFI are mainly limited liability companies and operate in the service sector

Copy link to Box 3.5. New firms registered at GAFI are mainly limited liability companies and operate in the service sector

The General Authority for Investment and Free Zones’ (GAFI) database contained 318 000 firms by the end of May 2024. Comparing this number with the Economic Census 2017/2018, these firms represent around 8% of total firms in Egypt. Despite this limited number, GAFI firms are likely to have high growth potential, being larger and accounting for most of the value added and employment in the country.* Analysing the dynamics of these businesses and their characteristics is thus key for policy makers. However, the use of these data for analysis can be fostered.

Figure 3.12 shows that the number of new firms registered at GAFI has significantly increased in the recent period, especially since 2016. The New Investment Law of 2017 may have notably contributed to this increase. The largest rise in entry is observed in the service sector, followed by the construction, industrial, and communication and information technology sectors.

Figure 3.12. The number of new firms registered at GAFI has increased, driven by the service sector
Copy link to Figure 3.12. The number of new firms registered at GAFI has increased, driven by the service sector

Number of new registered firms at GAFI by sector, Egypt, 1966-2023

From 2016 to 2023, the largest number of new businesses registered at GAFI were limited liability companies, with more than 90 000 new units, followed by individual companies (more than 33 000 units) (Figure 3.13).18 In 2018, amendments to the Companies Law No. 159 of 1981 introduced a new legal form called the one-person company. This legal structure allows for the establishment of companies with only one individual as the owner. From 2018 to May 2024, more than 15 000 one-person companies were established in Egypt under two key legal frameworks: the Investment Law No. 72 of 2017 and the Companies Law No. 159 of 1981.

Figure 3.13. The largest number of new firms registered at GAFI are limited liability companies
Copy link to Figure 3.13. The largest number of new firms registered at GAFI are limited liability companies

Number of new registered firms at GAFI by legal form, Egypt, 1966-2023

...However, Egypt needs to streamline approvals for licenses and permits

Although the length of time for registering a business has improved in Egypt, the process of providing licenses, approvals and permits remains the main challenge. The current processes are highly bureaucratic, with numerous requirements and lengthy timelines. In fact, more than 40 entities are responsible for providing business licenses, and generally, an investment project needs around 5-13 licenses or permits to get into the market. In recent years, the government has introduced several initiatives to address the existing challenge. With the 2017 Industrial Permits Act, the Industrial Development Authority (IDA) became the sole responsible entity for providing industrial licenses in Egypt, except for special economic zones.19 Before 2017, businesses needed to secure approvals from 11 agencies, and the process of obtaining a license took up to 600 days. The Law for Simplification of Industrial Licensing Procedures No. 15 of 2017 significantly reduced the time needed to issue industrial licences to 7 days for low-risk projects and 30 days for high‑risk projects (which represents 20% of total industries). Through this law, the number of procedures decreased from 19 to 7 basic steps. However, manufacturers still need to seek pre-establishment approvals from local authorities, for instance for health and safety, or environmental impact, involving the Civil Protection Authority and the Environmental Affairs Agency, among others (OECD, 2024[40]).

Moreover, in late 2022, the government introduced the “Golden License” for Investment Projects, which is a comprehensive approval on the set up, operation and management of a project, including building licenses and the allocation of the real property required thereof (GAFI, 2022[41]; 2023[42]). Previously, separate approvals from multiple government entities were required to establish projects and obtain the required licenses. The “Golden License” shortens procedures in a one-step approval that reduces both time and effort.20 Currently, the “Golden License” is enforced and has been awarded to 49 projects across various sectors, including manufacturing, logistics and renewable energy.

More recently, Egypt created the Unified Investment Licensing Platform, which is now operational. The platform integrates 43 authorities and offers 470 fully digitised services, including online submission, payment, e-signature, tracking and digital issuance.21 By 2026, the government plans to complete integration with all relevant national authorities, ensuring full digital coverage of investment licensing and approvals. The platform will introduce standardised procedures, unified timelines, automated verification and real-time performance monitoring. Investors will be able to obtain all required licenses digitally through a single unified government interface, replacing manual submissions. This platform has the potential to significantly reduce time, cost and procedural complexity. The platform will be integrated with the Economic Entity Platform in 2026.

More generally, the government is planning to implement a nationwide licensing re-engineering programme to align with best practices and simplify procedures. This effort will start with mapping all current licensing processes across targeted economic activities, including the number of steps, documents, authorities involved, processing times and fees. This assessment is key to understand the complexity of the current system and develop a roadmap to simplify the current process (see, for example, similar work in OECD countries to streamline licenses in Romania (OECD, 2022[43]) and the Online Business Licensing Service project in Singapore (OECD, 2025[32])). To streamline current procedures, some steps could be merged or be allowed to proceed in parallel. As recommended in the OECD Economic Survey of Egypt 2024, the principle of “silence is consent” for business registration licenses – which implies that licences are issued automatically if the competent licensing authority has not reacted by the end of the statutory response period – could be implemented in Egypt (around half of OECD countries used this principle in 2018) (OECD, 2024[40]).

Moreover, the government can assess the key licencing requirements that discourage informal businesses from formalising. Policies could then be designed to reduce or eliminate these barriers, as demonstrated by the IDA’s recent temporary suspension of environmental and civil protection documentations to attract informal businesses (see below and OECD (2024[40])).

Additionally, Egypt could establish regular monitoring of newly created firms and the average time needed to issue licences, approvals and permits. GAFI, in particular, could evaluate the effectiveness and quality of ISCs, track the number of newly created firms by each ISC and consider regularly publishing this information for transparency (e.g. disaggregated by governorate and economic sector). GAFI has started publishing information on businesses registered at GAFI on its website and it plans to update it regularly. Continuous monitoring of these metrics would provide insights into the ISCs’ performance and identify opportunities for improvement. The evaluation of effectiveness of the ISCs could be based on user feedback. GAFI’s website already has a page to reply to customer satisfaction surveys for ISCs and license services. GAFI can assess the response rate of this survey, implement adjustments to increase the response rate if needed (e.g. make it mandatory after each registration) and implement necessary improvements based on survey results.

Egypt could strengthen its current efforts to reduce informality and evaluate the effectiveness of existing incentives

A business’ decision to formalise may be related to the high costs of remaining formal (e.g. high taxes, complicated regulations once registered) rather than the initial costs to enter the formal sector (e.g. registration costs). In fact, reducing the cost of registration has been found to have a very limited effect to incentivise formalisation (La Porta and Shleifer, 2014[44]). On the contrary, increasing the benefit of formalisation (e.g. providing better access to credit and the financial market) and reducing the cost of being formal (e.g. tax exemption) have been found to have a greater effect (Rocha, Ulyssea and Rachter, 2016[45]).

For example, Brazil and India introduced policies which have been effective in incentivising businesses to formalise (Box 3.6). India introduced an industrial policy in 2003 in two specific rural states (Uttarakhand and Himachal Pradesh), providing tax exemptions and capital subsidies to formal firms (both new and existing ones). Evidence showed that the policy was effective in increasing the number of registered firms (Abeberese and Chaurey, 2017[46]). Moreover, Rocha, Ulyssea and Rachter (2016[45]) showed that in Brazil, the Individual Micro-Entrepreneur Program was effective in reducing the cost of formalisation (lowering social security contributions) and improving the number of formal firms.

In this regard, Egypt, too, has implemented and designed several policies to incentivise formalisation, however their effectiveness has not yet been evaluated. Law No. 152 of 2020 for the Development of Micro, Small and Medium Enterprises (MSMEs) provides incentives that exempt enterprises from the payment of, inter alia, stamp duties, notarisation fees and any registration fees required for the registration of the land for informal firms that apply to regularise their situation. These incentives apply for the first five years following the MSME’s registration with the GAFI and Free Zones’ Commercial Registry. Additionally, a recent law (19/2023) grants the IDA the possibility of delivering temporary three-year operating permits to unlicenced industrial firms, provided that they adhere to environmental requirements, civil procedures and related inspections (OECD, 2024[40]). These two measures aim to reduce the cost to a firm of becoming and remaining formal. Finally, the CBE’s Financial Inclusion Strategy (2022‑2025) facilitates access to financial services for MSMEs and start-ups, increasing the benefits of formalisation and encouraging their integration into the formal sector.22

Box 3.6. Case studies on policies to incentivise formalisation: Brazil and India

Copy link to Box 3.6. Case studies on policies to incentivise formalisation: Brazil and India

The case of India’s New Industrial Policy for the states of Uttarakhand and Himachal Pradesh

To attract industrial investments and generate employment, in 2003 the central government of India introduced an incentive package in the states of Uttarakhand and Himachal Pradesh, two small, hilly states in northern India with limited industrialisation. The policy reduced taxes and provided capital subsidies through a:

100% excise duty exemption for 10 years from the start of commercial production
100% income tax exemption for 5 years, followed by 25-30% for another 5 years
capital investment subsidy equal to 15% of a firm’s investment in plant and machinery, up to INR 3 million (Indian rupees) (approximately USD 50 000).

Eligible firms include new industrial units in designated areas; existing units in designated areas that underwent substantial expansion, modernisation or diversification; and all units operating in priority sectors, irrespective of their location. Firms must be registered to benefit from existing incentives.

Using the Economic Census of India and a difference-in-differences strategy, Abeberese and Chaurey (2017[46]) found that this policy led to an increase in firm registration, especially among male‑owned firms, disadvantaged group owners, urban firms and firms with access to external financing.

The case of the Individual Micro-Entrepreneur Program in Brazil

In 2009, the Brazilian government introduced a new framework to support micro-entrepreneurs with up to one employee. The initiative aimed to foster entrepreneurship, increase tax compliance and boost social security contributions.

The programme reduced both the costs of entering the formal sector (lowering the registration costs) and the costs of remaining formal (reducing taxes). It was implemented in two phases:

Phase 1 (2009) significantly reduced registration costs but did not lower taxes for most entrepreneurs, benefiting only the highest income percentiles.
Phase 2 (2011) halved monthly tax expenditures by reducing social security contributions from 11% to 5% of the minimum wage.

Eligibility criteria were defined based on size (micro with one employee), turnover and economic activity (seven-digit industry level).

Rocha, Ulyssea and Rachter (2016[45]) found that reducing entry costs alone had no significant impact on firm informality. However, they identified positive effects in industries with tax reductions when firms faced no registration costs. Consequently, existing informal businesses drove the increase in formalisation rather than the creation of new formal firms or improved survival of existing formal ones.

Source: Abeberese and Chaurey (2017[46]), “Formal sector incentives and informality”, https://cdep.sipa.columbia.edu/sites/cdep.sipa.columbia.edu/files/content/WP40Abeberese.pdf; and Rocha, Ulyssea and Rachter (2016[45]), “Do lower taxes reduce informality? Evidence from Brazil”, https://www.sciencedirect.com/science/article/pii/S0304387818303560 .

Egypt should continue its current efforts to reduce informality. It should also ensure that these introduced measures are being evaluated in terms of their effectiveness in boosting the number of registered firms. To do so, Egypt can take inspiration from Cambodia, which recently launched a monitoring and evaluation framework to support its National Strategy on Informal Economy Development (see Box 3.7). Egypt can thus define a comprehensive evaluation framework with key performance indicators and assign responsibilities across relevant ministries and sub-national authorities.

This could go hand-in-hand with awareness-raising campaigns on the benefit of formalisation (such as access to finance, incentives, etc.). Improved awareness could help businesses (and workers) understand the benefits of registering, as well as complying with labour and tax obligations (see, for example, the Argentinian 2013 Strategy within the Integrated Plan to Reduce Non-Registered Employment (ILO, 2014[47]).23 Formalisation campaigns should be accompanied by other formalisation policies (such as alleviating tax burden), as providing information alone may not be sufficient to increase the number of formal firms (J-PAL, 2022[48]).

In the short to medium term, Egypt could also consider focusing resources on most pressing regions and sectors. Since informality is not evenly distributed across sectors and governorates, developing policies at the local and sectoral level can be effective in targeting the areas that need incentives to formalise (see Box 3.6 for the case of India).24 To do so, Egypt can take into account the insights from this report (e.g., Figure 3.6 and Annex Figure B.4) and conduct more in-depth studies at the local level to identify gaps and areas for intervention. The MSMEDA and other entities like the IDA and the Ministry of Finance can collaborate in providing co-ordinated policies.

Box 3.7. Cambodia’s monitoring and evaluation framework to accelerate formalisation

Copy link to Box 3.7. Cambodia’s monitoring and evaluation framework to accelerate formalisation

In July 2025, the government of Cambodia launched its new monitoring and evaluation framework for the National Strategy on Informal Economy Development 2023-28. The framework was developed through a technical cooperation between the Ministry of Industry Science Technology and Innovation (MISTI), with support from the International Labour Organization (ILO), the United Nations Development programme (UNDP) and the Australian-funded CAPRED programme. It is a result of a year-long inclusive consultation process, drawing on views from over two hundred and fifty participants at a national workshop, technical consultations with nine key ministries and five regional consultations involving officials from across the country.

The framework provides a robust national system to coordinate, monitor and assess the implementation of Cambodia’s strategy for informal economy development. It aims to strengthen transparency, accountability and evidence-based policy decision-making to support the informal economy, a widespread challenge in Cambodia. This system will track implementation progress of the strategy across all 28 ministries and 25 provinces, ranging from access to health insurance, skills development courses and affordable finance.

The framework outlines key performance indicators and assigns responsibilities across relevant ministries and sub-national authorities, ensuring that efforts to support the informal economy are aligned with each institution’s role and capacity. It also includes a digital dashboard that enables real-time data monitoring, aimed at fostering better coordination between institutions and timely interventions for the informal sector.

Source: ILO (2025[49]), “Cambodia launches monitoring and evaluation framework to accelerate formalization”, https://www.ilo.org/resource/news/cambodia-launches-monitoring-and-evaluation-framework-accelerate; and UNDP (2025[50]), “Joint Media Release: Cambodia Launches Monitoring and Evaluation Framework to Enhance Informal Economy Development”, https://www.undp.org/cambodia/press-releases/joint-media-release-cambodia-launches-monitoring-and-evaluation-framework-enhance-informal-economy-development.

Boosting employment: Enhance small and medium-sized enterprises’ role

Copy link to Boosting employment: Enhance small and medium-sized enterprises’ role

This section presents evidence on SMEs’ contribution to total employment, comparing Egypt with OECD countries and emerging economies.25 This evidence is then used to discuss potential explanations for the relatively low role of SMEs in Egypt and to propose relevant policies that could be implemented to strengthen their role.

Small and medium-sized enterprises contribute comparatively little to employment

The size distribution of employment exhibits a missing middle in manufacturing and a concentration of micro-firms in non-financial market services

The firm employment-size distribution has important implications for aggregate productivity. Evidence from developing economies has shown that the higher the share of employment in small establishments, the lower the country’s productivity (García-Santana and Ramos, 2015[51]). The size distribution of firms also reflects the incentives and difficulties firms face to innovate and grow (Eslava et al., 2023[52]).

Figure 3.14 and Figure 3.15 show that the distribution of firms in Egypt is skewed towards micro-firms (2-9 workers) compared to emerging economies and OECD countries. Micro-firms account for around 93% of the population in the manufacturing sector and 97% in non-financial market services. Meanwhile, in OECD – and similarly in emerging economies – the share is 64% in manufacturing and 82% in non-financial market services.26 Figure 3.14 and Figure 3.15 also highlight that SMEs (defined in this report as firms with 10-249 workers) account for a significantly lower proportion of firms in Egypt than in the OECD countries and emerging economies considered.

This result is partly, but not only, explained by the large presence of informal firms in the Egyptian economy. According to the 2022/23 Economic Census, informal firms represent 53% of total units in manufacturing and 50% in non-financial market services. Micro-firms dominate the informal sector, contributing significantly to employment in firms with less than five workers (Annex Figure B.5). On the other hand, when looking only at formally registered firms, the distribution shifts slightly toward larger firms (“Egypt only formal” in Figure 3.14 and Figure 3.15). Nevertheless, the share of micro-firms remains substantially higher than the OECD average.

Consistently, micro-firms account for a large share of employment in Egypt, reaching 43% in manufacturing and 72% in non-financial market services. The corresponding figures in OECD countries are respectively 10% and 26% on average (Figure 3.14 and Figure 3.15).27 In manufacturing, large firms (250+) hold a notable 31% share of employment, aligning with patterns in other emerging economies. This results in employment being concentrated in micro and large firms, with SMEs noticeably underrepresented. Conversely, in non-financial market services, very large firms contribute only 10% of total employment, which is less than half of the equivalent share observed in emerging economies and approximately one-third of the OECD average.

Figure 3.14 and Figure 3.15 thus show that SMEs in Egypt are below the OECD and other emerging economies in terms of the number of firms and their contribution to total employment, especially in manufacturing. This phenomenon is identified in the literature as the “missing middle” (Tybout, 2000[20]; 2014[53]) (see Box 3.8).28 In non-financial private services, instead, very large firms account for a lower share of employment than in the OECD and other emerging economies, suggesting more of a “concentration of micro-firms” rather than a missing middle phenomenon (Tybout, 2014[53]).

These findings align with recent research on developing countries (Eslava et al., 2023[52]) and highlight the continued difficulties of realising employment growth (Amer, Selwaness and Zaki, 2020[54]). Amer, Selwaness and Zaki (2020[54]) attribute this to the structure of the Egyptian economy, which, while dominated by services, relies heavily on mining, quarrying, construction, and capital-intensive manufacturing industries such as chemicals. Moreover, recent evidence from El-Haddad and Zaki (2023[55]) explained that government support during the COVID-19 pandemic primarily benefited politically connected, larger and older firms. This may have exacerbated the missing middle phenomenon and the concentration of small firms in Egypt. The National Economic Development Narrative, published in 2025, aims to boost employment in Egyptian sectors with high employment multipliers and strong job creation potential (MPED, 2025[56]). This focus can strengthen the role of SMEs and support broader employment creation in Egypt.

Figure 3.14. The missing middle phenomenon is prevalent in the manufacturing sector in Egypt
Copy link to Figure 3.14. The missing middle phenomenon is prevalent in the manufacturing sector in Egypt

Firm and employment distribution by size class (employment), manufacturing, 2022/23

Figure 3.15. There is a high concentration of micro-firms in non-financial market services in Egypt
Copy link to Figure 3.15. There is a high concentration of micro-firms in non-financial market services in Egypt

Firm and employment distribution by size class (employment), non-financial market services, 2022/23

The size distribution of employment is heterogenous across industries

The employment distributions by size classes presented in Figure 3.14 and Figure 3.15 mask high heterogeneity within sectors. Figure 3.16 shows that not all manufacturing industries exhibit a missing-middle phenomenon and not all industries within non-financial market services show a concentration of micro-firms.

Some industries show a concentration of micro-firms. For example, in Basic metals and fabricated metal products, except machinery and equipment [CH], Furniture; other manufacturing; repair and installation of machinery and equipment [CM] and Wood and paper products, and printing and paper [CC], most of the employment is attributed to micro-firms (between 53% in metal products and 83% in furniture), a notable deviation from the OECD benchmark (14% in metal products and 23% in furniture), where micro-firms have a minor role.29 Moreover, in Wholesale and retail trade, repair of motor vehicles and motorcycles [G], 84% of employment is concentrated within micro-firms, while the share is only 28% in OECD countries.30

On the contrary, in other industries, the market is dominated by large firms. For example, in Basic pharmaceutical products and pharmaceutical preparations [CF], firms with less than 250 workers contribute to only 12% of the total workforce in this industry. The bulk of total employment is generated by large firms (250+). This highlights a significant difference with the OECD average, where SMEs represents 45% of employment in the industry. Large firms are also the primary contributors to employment in Electrical equipment [CJ], IT and other information services [JC] and Publishing, audiovisual and broadcasting activities [JA] more than in OECD countries. In several countries, capital-intensive sectors like pharmaceuticals, often face high entry costs due to requirements for advanced technology, regulatory compliance and certification. As a result, firms in these sectors tend to be much larger than in other industries (World Bank, 2022[57]), since bigger firms can more easily absorb these costs. Yet, the much higher share of contribution of large firms to employment in Egypt compared to OECD in the mentioned industries highlights the potential presence of undue barriers to entry in these industries.

Finally, in other industries, the role of SMEs is high and more aligned with the OECD average. For example, in Chemicals and chemical products [CE] and Rubber and plastics products, and other non-metallic mineral products [CG], SMEs represent 40% of employment.31

Figure 3.16. Firm size distribution largely varies across industries in Egypt
Copy link to Figure 3.16. Firm size distribution largely varies across industries in Egypt

Distribution of employment by size class and industry, 2022/23

SMEs’ growth may be hindered by several factors, but the government is seeking to address existing challenges.

Informality, taxes and tax administration issues, limited access to finance, low competition and trade barriers may affect SMEs’ growth. Understanding these constraints provides important context for examining the “missing middle” phenomenon, which has been examined in developing countries since the early 2000s with varying results and policy implications (Box 3.8).

Based on the points identified in the literature, the following sub-sections explore the different factors that could hamper SMEs’ growth in Egypt, with a focus on identifying the key determinants specific to the Egyptian context. The analysis is structured as follows:

Firms’ characteristics: includes aspects such as ownership structure and informality.
Macro-policies: covers areas like taxation and access to finance.
Structural factors: examines elements like competition, trade policy, corruption and human capital.

For each of the identified factor, the sub-sections below also examine the government responses to address these constraints.

Box 3.8. Missing middle: Potential explanations from the literature

Copy link to Box 3.8. Missing middle: Potential explanations from the literature

Debate on the “missing middle” phenomenon

Tybout (2000[20]) was the first to show a significantly lower employment share of small and medium-sized enterprises (SMEs) (10-49 workers) in developing economies compared to the United States and other more advanced economies. He examined the manufacturing sector using aggregate information.

Hsieh and Olken (2014[58]) proposed an alternative perspective, suggesting that the concept of the “missing middle” should focus on the distribution of firms rather than employment figures. Analysing census data from India, Indonesia and Mexico, they argue that there is no clear evidence of a missing middle in the manufacturing sector, as both large and medium-sized firms are absent in the firm distribution. They also consider that Tybout’s findings were influenced by the use of broad firm size classes. Their analysis did not reveal any significant disruptions in firm size distributions at revenue or employment thresholds, suggesting that regulation enforcement and taxes play a limited role in distorting markets. Additionally, they note higher levels of average labour and capital productivity in larger firms, interpreting this as evidence that the business environment impedes the growth of larger firms more than it does smaller ones.

Tybout (2014[53]) later presented a counterargument to the critiques of Hsieh and Olken (2014[58]), demonstrating that a more robust indication of the missing middle can be obtained by observing whether the share of medium-sized firms, as opposed to that of small or large ones, is smaller than the one observed in an undistorted economy.

Policy implications

These two opposing views in the literature – Tybout’s (2000[20]) and Hsieh and Olken’s (2014[58]) – imply very different underlying economic dynamics and, thus, policy responses.

Following Tybout’s approach, small firms are at a disadvantage relative to large firms due to market distortions, such as institutional inefficiencies, credit constraints for micro-firms and disproportionate government support for larger ones. These challenges suggest the need for policy interventions that focus on small establishments, including improved access to credit and streamlined regulations. The missing middle phenomenon is also linked to excessive regulations and taxation. Micro-firms often remain informal to avoid taxes, while very large firms may be able to obtain special tax rates and regulation exemptions. In contrast, medium-sized enterprises bear the brunt of regulatory costs, which hinders their growth (Gauthier and Gersovitz, 1997[59]). Moreover, large firms tend to be more politically connected, enabling them to benefit from greater protection and preferential treatment (Eibl and Malik, 2016[60]).
In contrast, Hsieh and Olken’s approach implies that medium-sized and large firms are at a disadvantage vis-à-vis smaller ones. For instance, large firms often encounter fixed costs or constraints, such as taxes and regulations, that smaller firms may evade or be exempt from. Hence, policies should focus on addressing constraints faced by larger firms, given their critical role in job creation and driving productivity growth.

Ownership structure and formality status contribute to SMEs’ comparatively limited role in Egypt, but are not the sole factors

Firms’ ownership and management structure can pose challenges to their expansion. This is particularly evident in family-owned businesses, which may encounter difficulties in achieving significant growth and maximising their potential. Often characterised by subsistence entrepreneurship rather than high-growth strategies, these businesses tend to remain relatively modest in scale. However, transitioning from a family-centric organisational model to a more intricate management system can play a pivotal role in bolstering such firms’ scalability and overall growth trajectory.

Evidence for developing countries has shown that the self-employed population plays a significant role in explaining the higher share of micro-firms compared to more advanced economies (Eslava et al., 2023[52]). Using data from official employment and household survey data, particularly in Latin American countries, the authors show that business size is, on average, significantly lower in developing countries than in advanced economies, but most of this is explained by the large presence of self-employed without employees in developing countries.

The analysis in this report is conducted on firms with at least one employee, showing that, despite the large presence of firms without employees in Egypt (around 30% of establishments in manufacturing and non-financial market services), the size distribution is still significantly skewed towards micro-firms. This supports the idea that the large presence of businesses without employees may not be an explanation for the substantial proportion of micro-firms observed in Egypt.

Another factor that can contribute to explaining the missing middle is the firm’s registration status. Informality often serves as a crucial survival mechanism for small firms, especially in environments where regulations are poorly designed. There is a paradoxical incentive for informal firms to restrict their size below the optimal efficiency scale to evade detection (La Porta and Shleifer, 2014[44]), implying that high growth potential firms will not scale up and will use inefficient production technology.

Recent preliminary studies conducted by Abreha et al. (2022[61]) have analysed data from four sub-Saharan countries (Burkina Faso, Cameroon, Ghana and Rwanda), showing evidence of a missing middle in the size distribution. Specifically, medium-sized manufacturing firms are found to have disproportionately low employment shares, regardless of how this size class is defined. The primary driver behind this missing middle phenomenon is identified as the prevalence of informal firms. Indeed, the distribution of the sub-Saharan African countries mirrors that of developed countries when focusing only on formal firms. Interestingly, the size distribution of new entrants does not exhibit any evidence of a missing middle.

The evidence provided in Figure 3.14 and Figure 3.15 shows that despite the fact that informality is likely to play an important role in explaining the high share of micro-firms in Egypt, it is unlikely to be the only force explaining the comparatively low contribution of SMEs. Even when restricting the analysis to formal firms, medium‑sized enterprises contribute significantly less to the total number of firms and to the total employment in Egypt than in the OECD and emerging economies in the benchmark. This suggests that apart from ownership structure and formality status, other factors may play a role.

Taxes and tax administration have posed challenges for micro and small firms in Egypt

Taxes and tax policy can influence an individual’s decision to engage in entrepreneurial activities through mechanisms such as the tax schedules (personal income, corporate and capital gain tax rates) and tax expenditures (incentives targeting start-ups, young firms and SMEs). Tax incentives can be particularly beneficial for high-growth firms in their early years, relieving them from taxes and social costs. Young firms, compared to incumbent ones, are more sensitive to policy environments and national frameworks (Calvino, Criscuolo and Menon, 2016[21]).

For credit-constrained firms, which are often small and young firms with high growth potential, these constraints prevent them from operating at an efficient scale in their early stages. This limitation significantly hinders their ability to realise their full potential and contribute to broader economic growth (Berlingieri et al., 2020[62]).

According to the WBES 2020, which is the latest available year for Egypt, tax administration and tax rates were perceived as significant obstacles for micro and small firms. Data from the WBES highlights that around one in four MSMEs identify tax rates as a major operational constraint. Among medium-sized firms, 13% report similar difficulties.32 Moreover, 8% of micro and 5% of small firms report tax administration as a major constraint for their operations (Figure 3.17). These proportions have significantly increased over time (from 2013 and 2016) – see Annex Table D.1. In contrast, large firms appeared less constrained by tax administration and tax rates, underscoring differences in how tax obligations impact firms of varying sizes (Figure 3.17). It should be noted that the data are now six years old at the time of writing. In light of the recent efforts by the government (see paragraphs below), tax rates and tax administration may now, or in the future, be perceived as less damaging challenges for small firms.

Figure 3.17. Around one in four micro and small businesses perceived tax rates as a major constraint
Copy link to Figure 3.17. Around one in four micro and small businesses perceived tax rates as a major constraint

Business constraints by firm size, World Bank Enterprise Survey, Egypt, 2020

As discussed in Chapter 2, the VAT Law mandates that all firms with annual revenue exceeding EGP 500 000 (the “Registration Threshold”) within the 12 months preceding the enforcement of the law must register with the Egyptian Tax Authority within 30 days of reaching this threshold.

The analysis below exploits this threshold to examine whether there is a “kink” just before and after this threshold. Building upon the framework proposed by Hsieh and Olken (2014[58]), the presence of a kink in the revenue distribution at the VAT threshold might help explain the existence of a missing middle due to high tax and regulation above that threshold. For example, evidence for France shows that just after the employment threshold above which French regulations increase the labour costs and regulations for firms, there is a sharp drop in the number of firms (Garicano, Lelarge and Van Reenen, 2016[64]). This indicates that some firms that would have grown without regulation costs choose to remain low to avoid paying such costs.

However, Figure 3.18 shows that there is no evidence of a kink at the revenue threshold of EGP 500 000, above which firms are obliged to be registered at the Egyptian Tax Authority, neither for the full distribution of firms (Figure 3.18 Panel A) nor for firms with more than ten workers (Figure 3.18 Panel B). Similarly, there is no significant kink at the threshold for different size classes or only for formal firms (back-of-the-envelope calculation using the Economic Census 2022/23). The fact that there is no kink is consistent with a situation in which policies are imperfectly enforced (Hsieh and Olken, 2014[58]).

Figure 3.18. There is no kink at the value-added tax threshold at which firms have to register with the Egyptian Tax Authority
Copy link to Figure 3.18. There is no kink at the value-added tax threshold at which firms have to register with the Egyptian Tax Authority

Distribution of units at the VAT threshold, Egypt, 2022/23

To address persisting challenges, Egypt has been introducing some measures to reduce the tax burden on small enterprises. In February 2025, the Egyptian Parliament enacted Law No. 6 of 2025, as part of a comprehensive package of tax laws (EY, 2025[65]). This law, effective from March 2025, introduces tax incentives for small enterprises with annual turnover not exceeding EGP 20 million, including exemptions (from state development fees, stamp tax etc.), reduced tax rates (from 0.4% to 1.5%) and simplified tax procedures.

This replaces previous simplified tax regime from MSMEDA, which targeted firms with a turnover less than EGP 10 million.33 The previous MSMEDA regime was under SMEs Law of 2020.34 Furthermore, the Ministry of Finance announced a new tax facilitation package to support small businesses, start-ups and freelancers (State Information Service, 2024[66]). The new framework aims to simplify the tax filing process and ease compliance. The system would benefit SMEs, entrepreneurs and professionals with an annual income of up to EGP 15 million (Egyptian Ministry of Finance, 2025[67]). This simplified package is yet to be approved. In parallel, MSMEDA is currently developing the Strategy for Formalisation of Businesses, which includes measures to streamline tax procedures and encourage SMEs to formalise across sectors.

In addition, the SMEs Law provides a wide range of tax and non-tax benefits to foster SME growth. Among the tax incentives, the law provides exemption from: registration fees for patents, design drawings for prescribed circuits and utility models; taxes on profits resulting from the disposal of assets, machinery or equipment; and taxes on dividends generated by a single company from projects. In terms of non-tax incentives, the MSMEDA Board of Directors can allocate free land (or land at a symbolic cost) for eligible projects. SMEs can receive partial refunds for the cost of connecting facilities to project sites. In addition, the government may provide financial support for worker costs.

In a broader scope, the Egyptian government also provides incentives for firms operating in certain zones within the country. In this vein, GAFI oversees the economic incentives that drive investment within the country, including incentives for free zones, investment zones and technological zones (Box 3.9). Under this regime, eligible firms benefit from tax exemptions and tax incentives, as well as from duties and fees.

Box 3.9. Investment regimes at GAFI benefiting from tax exemptions

Copy link to Box 3.9. Investment regimes at GAFI benefiting from tax exemptions

According to the General Authority for Investments and Free Zones (GAFI), free zone companies in Egypt enjoy full exemption from income tax, sales tax, and import and export duties. GAFI further distinguishes between private and public free zones. A private free zone is a unique establishment that represents only one independent project or several projects exercising similar activities. It must be located outside the public free zone vicinity due to the nature of its activities. Public free zones are locations that are equipped with the utilities and infrastructure needed for operations and receiving new projects. There are currently nine public free zones across Egypt, each of which targets specific sectors (Table 3.1).

Additionally, investment zone firms benefit from an overall custom tax of 2%, as well as exemption from some fees. Key services provided within these zones include securing approvals for zone establishment; project plans and operations; and obtaining necessary licenses for construction, infrastructure and compliance with safety and environmental regulations.

Meanwhile, technological zones provide firms specialising in communication and IT activities with tax incentives ranging from 30% to 40% depending on the zone’s location.

	Location	Target sectors
Alexandria Public Free Zone	Located in Alexandria, the second-largest city in Egypt, which is close to Nozha International Airport and Borg El-Arab Airport. It also has convenient access to a network of main roads.	Textile, furniture, carpet and ready-made garment industries; chemical, petrochemical, metal and metal products industries; food and food products industries; engineering and electrical and electronic industries; pharmaceutical industries and medical and pharmaceutical preparations; transport and shipping service and petroleum services.
Nasr City Public Free Zone	Located in Cairo, the capital of Egypt, which has easy access to all road networks.	Textile, furniture, carpet and ready-made garment industries; food and food products industries; engineering and electrical and electronic industries; leather industries, shoes and leather products; manufacturing paper, cardboard, stationery and supplies of printing and publishing; manufacturing glassware and crystal and glass products and their products; chemical and metal industries and their products; transport, shipping and export services and petroleum services.
Port Said Public Free Zone	Located in the north-east of Egypt, at the northern end of the Suez Canal. The free zone connects Asia, Africa and Europe by sea.	Textile, furniture, carpet and ready-made garment industries; engineering and electrical and electronic industries; metal and metal products industries; transport and shipping services, export and re-export; port management services and container terminal.
Suez Public Free Zone	Located near the southern end of the Suez Canal. There are three sites: Port Tawfiq, El Adabeya and Attaqa.	Engineering, electrical and electronic industries; textile, furniture, carpet and ready-made garment industries; petrochemical, metal and metal products industries; pharmaceutical industries and medical and pharmaceutical preparations; transport and shipping services and petroleum services.
Ismailia Public Free Zone	Located between the two gates of the Suez Canal on the way to international trade and navigation.	Textile, furniture, carpet and ready-made garment industries; engineering, electrical and electronic industries; food and food products industries; transport, shipping, export and re-export services.
Damietta Public Free Zone	Located in North Delta on the east bank of the Nile.	Textile, furniture, carpet and ready-made garment industries; timber, furniture and wooden works industries; chemical, mining and metal industries; food industry and food products; pharmaceutical industries and medical and pharmaceutical preparations.
Shebin el Kom Public Free Zone	Located near Cairo/Alexandria agricultural road and Cairo/Alexandria desert road.	Textile, furniture, carpet and ready-made garment industries; chemical, engineering, and electric and electronic industries.
Media Public Free Zone	Located adjacent to Giza Governorate.	Media production services and information, television and radio broadcasting.
Keft Public Free Zone	Located nearby the industrial zone on the road of Keft/El-Qaser, near the Upper Egypt road on the East bank of the Nile that connects the zone with all governorates and various sea and airports across the country.	Pharmaceutical industries and medical supplies; renewable energy and power generation technology; engineering, and electric and electronic industries; timber, furniture and furnishings industries; food industry and food products; oil services; mining and manufacturing industries.

Source: American Chamber of Commerce in Egypt (n.d.[68]), “Egypt’s New Investment Law: Opening Egypt for business”, https://www.amcham.org.eg/eginvlaw.asp; GAFI (2017[69]), “Egypt for a Brighter Future”, https://anima.coop/wp-content/uploads/publications/gafi_ppt_-_anima_12042017.pdf; GAFI (n.d.[70]), “Free Zones”, https://www.gafi.gov.eg/English/StartaBusiness/InvestmentZones/Pages/FreeZones.aspx; and GAFI (n.d.[71]), “Investment Zone”, https://www.gafi.gov.eg/English/StartaBusiness/InvestmentZones/Pages/Investment-Zone.aspx.

Medium-size firms faced relatively more challenges in accessing finance

Another common explanation for the missing middle phenomenon is that SMEs are financially constrained. Successful innovation strategies often require substantial investments in R&D, high operational costs, and access to capital for scaling up innovative products or services. SMEs worldwide frequently lack the resources and capabilities to make such investments, limiting their ability to compete and grow in dynamic markets. Moreover, informal firms are ineligible for bank loans, further restricting their capacity to finance innovative projects and hindering their innovation activities. Targeted SME finance initiatives and technical assistance can mitigate these constraints.

Challenges in access to finance for SMEs is a common issue in developing countries, including Egypt (El-Said, Al-Said and Zaki, 2015[72]). Although the proportion of businesses in Egypt identifying access to finance as a major constraint decreased in 2020 compared to 2013 and 2016, challenges remain. In 2020, 8% establishments faced financial constraints, rising to 15% among medium-sized firms (with 50-249 workers) (see Figure 3.17 and OECD (2026[22])). These challenges have also been exacerbated by government borrowing, which has crowded out private sector credit (Morsy, 2017[73]; Morsy and Levy, 2020[74]; OECD, 2024[40]). While government borrowing has historically crowded out private credit, the challenge is compounded by a banking culture that remains heavily reliant on traditional collateral rather than cash-flow-based lending. Medium-sized firms frequently struggle with governance and financial transparency, which disqualifies them from high-tier credit facilities. To bridge this, Egypt’s Law No. 152 of 2020 has introduced strategic financing facilitators such as 'Temporary Allocation' system. This system allows medium-sized firms to secure site occupancy, providing the necessary legal documentation required by financial institutions to approve credit lines. By addressing the 'location-based' collateral hurdle the law creates a more inclusive path to bankability for growth-oriented enterprises.

To improve access to finance and support SME growth, the CBE has launched several initiatives over the last five years (Box 3.10). Notably, it increased banks’ required allocation for financing small and medium-sized projects to 20-25% of their total credit facilities portfolio. In parallel, the OECD is conducting a project to advance Egypt’s national financial literacy strategy.

Some theories suggest that small firms struggle to grow because they face high marginal costs of capital.35 If this holds true, the marginal product of the capital that they possess should be higher (Hsieh and Olken, 2014[58]). Under the assumption of a Cobb-Douglas production function with constant markups and zero fixed costs, the average product of capital is proportional to the marginal product of capital.

Replicating Hsieh and Olken’s (2014[58]) approach using data from the Economic Census 2022/2023 reveals that SMEs in Egypt may indeed face financial constraints (Figure 3.19). The average product of capital (log value added over capital) is higher for smaller than for larger firms in manufacturing, while it remains relatively flat across firm sizes in non-financial market services. This pattern supports the hypothesis that smaller firms are financially constrained. This finding aligns with results from the WBES for Egypt, which shows that manufacturing firms face greater financial constraints compared to firms in the service sector.

Figure 3.19. The average product of capital is lower in larger firms, suggesting financial frictions
Copy link to Figure 3.19. The average product of capital is lower in larger firms, suggesting financial frictions

Average product of capital and labour, and firm size (log employment), Egypt, 2022/23

Box 3.10. Egyptian initiatives to enhance small and medium-sized enterprises’ access to finance

Copy link to Box 3.10. Egyptian initiatives to enhance small and medium-sized enterprises’ access to finance

Egypt has implemented a series of initiatives aimed at improving access to finance for small and medium-sized enterprises (SMEs), combining financial support with broader development strategies.

Contributions from the United Nations Development Programme and the Micro, Small and Medium Enterprises Development Agency

Since 1991, the United Nations Development Programme (UNDP) has disbursed over EGP 27.5 billion through the Micro, Small and Medium Enterprises Development Agency (UNDP, 2023[75]). This funding includes both financial and non-financial services, focusing primarily on soft loans for small businesses and microfinance projects. By June 2022, microfinance providers (both banks and non-banks) had extended EGP 64.6 billion to 4.5 million beneficiaries, a significant increase from 2 million clients in June 2016 (OECD, 2024[40]).

Microfinance initiative

In 2017, the Central Bank of Egypt (CBE) launched a USD 1.6 billion initiative to encourage bank lending to microenterprises at a 5% interest rate, as part of its broader Financial Inclusion Strategy 2022-25.

Credit allocation for SMEs

The CBE increased banks’ mandated credit allocation to SMEs from 20% to 25% of their total credit facilities portfolios, with a minimum of 10% reserved specifically for small businesses. The CBE identified SMEs by their turnover.

Sector-specific financing initiatives

The CBE introduced an Initiative to finance small companies and establishments (excluding commercial activities) at a 5% interest rate, focusing on industrial companies, intermediate component production, import substitution and labour-intensive activities.

The CBE also implemented an initiative for medium- and long-term financing up to 10 years at a 7% interest rate to purchase machinery, equipment and production lines for companies operating in the industrial, agricultural and renewable energy sectors. Each client can receive up to EGP 20 million.

The CBE established an initiative to support medium- and large-scale projects at an 8% interest rate in private industrial, agricultural and contracting sectors, targeting firms with annual revenues exceeding EGP 50 million.

NilePrenerues Initiative

The CBE launched the NilePrenerues Initiative in 2019 to foster innovation and competitiveness. Initially piloted at Nile University, the initiative expanded to other universities. NilePreneurs supports start-ups and SMEs in manufacturing, agriculture and digital transformation by applying different innovation instruments and offering technical and administrative assistance (CBE, n.d.[76]).

Its goal is to build a comprehensive and effective infrastructure for SMEs and the broader entrepreneurship ecosystem. Currently, the initiative includes six business incubators across various sectors such as furniture, packaging and construction materials. It also operates 32 business development service centres in 17 governorates.

Since March 2024, the CBE’s Business Development Service (BDS) Hubs – located in bank branches, youth centres and universities – have facilitated access to finance for 9 000 projects, totalling EGP 6.7 billion (CBE, 2024[77]). These hubs also provide integrated non-financial and advisory services, including idea selection, enterprise establishment, registration and licensing guidance, preparation of feasibility studies and financial evaluations. Between July 2019 and August 2023, 30% of beneficiaries were women (OECD, 2026[78]).

Limited competition may influence SMEs’ decision to enter the market

In several countries, the presence of dominant incumbents and unfavourable market conditions often discourages small firms from entering the market. This reluctance stems from the recognition that small enterprises face significant cost disadvantages compared to larger, well-established incumbents that might be more politically connected (Eibl and Malik, 2016[60]). Thus, small firms may strategically avoid industries where these disadvantages are particularly pronounced (Tybout, 2000[20]).

Competition policies play a vital role in fostering private sector development by creating a fairer business environment. These policies benefit consumers by driving prices down and improving the quality of goods. Moreover, competition policies can help allocate resources to the most productive firms and induce the exit of the least efficient ones (Sulistiawan and Rudiawarni, 2019[79]).

However, in many developing countries, anti-competitive practices persist due to inadequate enforcement of competition laws (Youssef and Zaki, 2024[80]). Such practices pose a significant obstacle to SME growth and development, undermining efforts to create a level playing field.

The Egyptian Competition Authority (ECA), established under the Egyptian Competition Law of 2005, has a mandate to review draft legislation for potential barriers to competition. Since 2015, the ECA has increased the number of decisions against anticompetitive practices (OECD, 2024[40]). In recent reforms, the Authority reviewed and amended contracts and procurement regulations across government agencies to ensure compliance with competitive neutrality principles and prevent monopolistic practices. To date, it has reviewed regulations and amended four, coordinating with relevant authorities on corrective actions for eight contracts and procurement regulations.

The ECA also established the Department of Competition Policies and Competitive Neutrality and the Department of Combating Collusion in Contractual Operations to review government agency regulations and promote competitive offering methods, reducing direct agreements with SOEs. Moving forward, the Authority will conduct periodic assessments using key indicators such as concentration ratios, the competitive neutrality index, as well as market entry and exit.

While the ECA has increased enforcement against anticompetitive practices, greater independence would increase its effectiveness, as noted in the OECD Economic Survey of Egypt (OECD, 2024[40]). Strengthening these areas – by granting the ECA greater independence and enhancing merger regulations – would promote market fairness and support SME growth.

Moreover, the Egyptian government adopted reforms to reduce the role of SOEs in the economy. While the presence of SOEs may influence market competition, given that they have historically received tax, customs and fee exemptions in Egypt (OECD, 2024[40]), recent reforms are going in the right direction. These include measures to increase the share of private investments in the economy and the recent issuance of Law No. 159 of 2023, which abolishes preferential tax treatment previously granted to SOEs in investment and economic activities. Furthermore, the Egyptian government published the State-Ownership Policy (SOP) in 2022 and updated in 2023, which was created to reduce the State’s involvement in the economy. Yet, the presence of the state in the economy remains high in several upstream sectors, including electricity, water, financial intermediation and insurance, which can affect the competitiveness of downstream sectors, including manufacturing (OECD, 2026[22]).

SMEs may face difficulties in entering international markets

In several countries, SMEs often hesitate to enter export markets due to the perception that these markets are dominated by larger firms with more resources and well-established networks. This perception can discourage smaller firms from exploring international markets, restricting their growth potential. Regulatory complexities further exacerbate this issue. SMEs in numerous countries, particularly those with limited resources, struggle to navigate complex regulatory environments and compliance requirements. These regulatory burdens not only create barriers to entry into export markets, but also stifle broader growth prospects, contributing to the missing middle phenomenon.

Custom and regulations were not perceived as the main constraint on businesses operations in Egypt. However, evidence from the 2020 WBES highlights that SMEs were relatively more affected than larger firms. In 2020, around 6% of SMEs reported this as major obstacle, compared to only 1% among large firms. The share for SMEs has risen since 2013, when it stood at around 1% (see Figure 3.17 and Annex Table D.1). It should be noted that the data reflect the situation in Egypt six years ago (at the time of writing), and the situation may have changed. Moreover, both tariff and non-tariff barriers remain high in Egypt compared to peer countries, limiting the export development of SMEs (see OECD (2024[40]; 2026[22])). In addition, the number of exporting firms has declined over time, as fewer firms enter the export market (OECD, 2026[22]).

To address existing challenges, Egypt has already taken some steps to reduce trade barriers. The Egyptian Customs Authority launched the Nafeza system as the national single window for foreign trade facilitation (ILO, 2022[81]). Nafeza serves as a one-stop-shop by providing a single entry point for all documents required for imports, exports and the transit of goods. The system modernises custom administration, automates procedures and reduce clearance time (ILO, 2022[81]).

Furthermore, Egypt implemented export support programmes, such as the Export Rebate Program (ERP), a long-standing policy that provides cash transfers to exporting firms (OECD, 2026[22]). Because the transfers depend on sales volume, the old version of the ERP has proven to implicitly favour larger exporting firms (Alhelewa, 2020[82]). In 2025 Egypt launched a new version of the program, increasing the budget allocation to EGP 45 billion for FY 2025/2026. It introduces an allocation framework that considers factors such as value added (50%), export growth (30%), productive capacity (10%), and employment (10%), alongside additional support elements tailored to sector needs (e.g., participation in international fairs, targeted markets, shipping and logistics, branding, and compliance with international environmental standards). The revised design also aims to improve predictability and liquidity for exporters through faster disbursement timelines, including a commitment to pay current-year dues within 90 days. The new program is intended to support exporters of different sizes, including SMEs, while encouraging a shift toward higher value-added and more economically complex products.

Moreover, as part of the National Structural Reform Program, Egypt’s Ministry of Trade aims to streamline licensing procedures and prior approvals for imports. The Ministry shares a comprehensive overview of all sectors requiring licenses, prior registration or import approvals to enhance transparency and ensure predictability for investors (MPED, 2024[29]).

Corruption may also represent an impediment to SMEs’ growth

Finally, corruption may serve as a significant impediment to the growth of small firms, particularly in countries where informal practices are pervasive. Indeed, entrepreneurs who typically benefit from expanding their workforce may opt to refrain from doing so to maintain their informal status and evade the associated costs such as bribes and heightened tax liabilities. Only substantial productivity gains may outweigh the expenses and risks associated with growth in such contexts.

In several countries, a corrupt environment may favour large firms that have connections with officials, leaving medium-sized firms disproportionately constrained. Medium-sized firms face the most constraints, as they are often too large to remain invisible but too small to enjoy economies of scale. Gallipoli and Goyette (2013[83]), using data from Uganda, argue that corruption and heterogeneity in productivity may help to explain the missing middle in developing countries.

The 2024 OECD Economic Survey of Egypt shows that perceptions of corruption are worse than in many comparable countries and have worsened over the past decade (OECD, 2024[40]). Corruption undermines business dynamism and disproportionately affects SMEs, limiting growth and innovation. Reducing corruption is high on Egypt’s political agenda. The enactment of the 2018 Public Procurement Law was a significant step toward reducing corruption in public procurement, a domain that harmed business dynamism in the private sector (OECD, 2024[40]). This law posed the first steps to ensure that public procurement processes are competitive, non-discriminatory and transparent. In December 2022, the Egyptian Administrative Control Authority launched the third phase of the National Strategy for Combatting Corruption (2023-30).36

Few firms reported human capital as a major constraint, but more so in manufacturing than services

A labour force with relatively low levels of education can affect SMEs’ growth. Yet, education levels in Egypt have largely improved over time (OECD, 2024[40]), for both man and women (OECD, 2026[78]). Consequently, only a small share of firms reported inadequately educated labour force as a major operational constraint in 2020, with slightly more firms affected in manufacturing than in services (OECD, 2026[22]). In manufacturing, around 3.8% of establishments, compared to 1.2% in services, identified this constraint (WBES 2020).37 This reflects the fact that most manufactured goods exported from Egypt (and more broadly in the MENA region) rely on skilled blue‑collar workers rather than in white-collar workers. As new production methods require adequately skilled blue-collar labour, gaps in education and skills could limit the growth potential of the manufacturing sector (Aboushady and Zaki, 2021[84]).

Egypt is prioritising the improvement of technical and vocational education as a key pillar of its strategy for comprehensive economic and social development. By 2025, the number of Applied Technology Schools had reached 90 across various governorates, with a strong presence in Cairo, Giza and Sharqia – areas with high population density and robust industrial infrastructure. These schools integrate theoretical learning with hands-on training in real work environments through strategic partnerships with leading companies such as B.TECH, El Sewedy and Volkswagen. Over 80% of graduates secure direct employment opportunities with these partner companies and receive accredited experience certificates.

The government has also prioritised the creation of Sectoral Skills Councils (SSC), specialised entities designed to align technical education and vocational training with the specific labour needs of each sector. These councils institutionalise collaboration between private sector employers and education providers to reduce skill mismatches and improve employability. The councils also promote knowledge exchange among workers, trainers and students, while fostering mentoring and training capabilities within the private sector. To ensure the sustainability of these efforts, a decree established a sectoral skills umbrella under the leadership of the MPED to oversee and support the councils and further develop Egypt’s labour market.

Egypt could foster the role of small and medium-sized enterprises by…

…reviewing the definition of MSMEs to account for employment with the aim of better targeting MSME policies

Egyptian initiatives to facilitate SMEs’ growth (such as facilitating access to finance) are going in the right direction and are key to sustaining their growth, but Egypt could review its definition of firm size classes to better target SMEs. Evidence from Amer and Selwaness (2022[85]) suggests that there is a strong mismatch between the firm size definition based on the number of workers (used by CAPMAS and the WBES) and the one used by the CBE for its policy target, which is based on revenues.38 As a result, CBE financing initiatives were not all appropriately directed towards the most constrained firms. Indeed, when size classes are defined according to the number of workers, some were directed towards larger firms instead of SMEs. Consistently, Table 3.2 shows this using the Economic Census 2022/23. It shows that the definition of SMEs used by the CBE also captures some large firms when classifying size classes using employment.

The SMEs Law of 2020 established a unified definition for MSMEs in Egypt.39 This definition harmonised different definitions used before by public institutions and, importantly, represents the criteria for allocating incentives to MSMEs by the MSMEDA and other public entities. However, the current definition uses only revenue (or capital when information on revenue is missing), and does not account for employment. This decision is also influenced by the fact that firms may be reluctant to report any information on employment because they hire informal workers.40

Sector	Size group (Revenue)	Size group (Employment)
		Micro (2-9 workers)	Small (10-49 workers)	Medium (50-249 workers)	Large (250+ workers)
Manufacturing	Micro (< EGP 1 million)	99%	1%	0%
	Small (EGP 1-50 million)	81%	17%	2%	0%
	Medium (EGP 50-200 million)	12%	33%	45%	10%
	Large (EGP 200+ million)	1%	16%	38%	45%
Non-financial market services	Micro (< EGP 1 million)	100%	0%	0%	0%
	Small (EGP 1-50 million)	77%	22%	2%	0%
	Medium (EGP 50-200 million)	8%	51%	33%	8%
	Large (EGP 200+ million)	4%	18%	31%	48%

Notes: The table reports the percentage within size classes defined as revenue (row) by each size class defined in terms of employment (columns). Statistics are calculated applying sampling weights.

Source: OECD elaboration based on CAPMAS (n.d.[18]), Economic Census 2022/2023 (database), https://censusinfo.capmas.gov.eg/Metadata-en-v4.2/index.php/catalog/Economic_Census.

Egypt could consider defining MSMEs to account for both revenue and employment. This would also align it with other international practices and other peer countries’ practice, such as Türkiye; see Box 3.11). The definition of MSMEs should reflect Egypt’s economic characteristics, be based on the latest evidence (e.g. Economic Census 2022/23) and be reviewed regularly to ensure that structural changes are accounted for. The definition of MSMEs could also reflect different firms’ distribution across sectors, for example distinguish between manufacturing sectors and service sectors (see Box 3.11 for an example in Colombia).

To solve the issue of informality, in the shorter term, Egypt can consider including only employees with a formal contract in the new definition of MSMEs.41 This would likely approximate the number of total workers in larger firms (100+ workers) where, in 2023, almost 80% of workers were employed with a formal contract (evidence from ELMPS).42 The MSMEDA and other entities could retrieve such information from social security data.

Box 3.11. Practices in defining small and medium-sized enterprises

Copy link to Box 3.11. Practices in defining small and medium-sized enterprises

There is no unified definition of small and medium-sized enterprises (SMEs) used worldwide. Definitions vary across countries and sectors, as well as levels of development. However, common variables used to define SMEs include the number of employees, revenue and fixed assets. These criteria are applied using different thresholds depending on the country and sector.

While some common definitions have been established for developed countries (for example in the European Union, see below), developing countries do not have a clear and common definition used to define SMEs across countries or international organisations (AFI, 2017[86]). Additionally, some countries use multiple definitions of SMEs. For example, Jordan uses different definitions across varying institutions, while Colombia tailors definitions to specific sectors, such as manufacturing, services or commerce (OECD, 2021[87]).

Definition of SMEs in Europe

European Union (EU) Recommendation 2003/361 established a unified definition of SMEs, providing clarity and consistency across member states. The definition is based on staff headcount and either turnover or balance sheet total. Table 3.3 shows the classification.

Company category	Staff headcount	Turnover	Balance sheet total
Medium-sized	< 250	≤ EUR 50 million	≤ EUR 43 million
Small	< 50	≤ EUR 10 million	≤ EUR 10 million
Micro	< 10	≤ EUR 2 million	≤ EUR 2 million

These ceilings apply to the figures for individual firms only. A firm that is part of a business group may need to include staff headcount, turnover or balance sheet data from that group too.

Definition of SMEs in Türkiye

In Türkiye, SMEs are defined based on employees and net sales or financial balance sheet:

Microenterprises: Businesses with fewer than ten employees and an annual net sales or financial balance sheet that does not exceed TRY 10 million (Turkish lira).
Small enterprises: Businesses with less than 50 employees and an annual net sales or financial balance sheet that does not exceed TRY 100 million.
Medium-sized enterprises: Businesses with less than 250 employees and an annual net sales or financial balance sheet that does not exceed TRY 500 million.

The Regulation on SMEs, which entered into force on 25 May 2023, introduced changes to the upper limits of the annual net sales or financial balance sheet thresholds. Apart from this, the regulation stipulates that the determination of an enterprise’s financial status and number of employees shall be based on the most recent available annual data. Furthermore, only individuals employed under formal employment contracts shall be considered as employees within the relevant enterprise. Apprentices and student interns shall not be included.

* In 1996, the European Commission introduced a recommendation establishing the first common definition for SMEs. This definition was widely applied throughout the European Union. Recognising the need to reflect evolving economic conditions, the Commission updated this recommendation on 6 May 2003 to ensure its relevance and applicability in the face of economic developments since its initial adoption (European Commission, 2022[88]).

Source: AFI (2017[86]), “Defining Micro, Small and Medium Enterprises (MSMEs) in the AFI Network”, https://www.afi-global.org/sites/default/files/publications/2017-05/2017-SMEF-Survey-Defining%20MSMEs.pdf; European Commission (n.d.[89]), “SMEs definition”, https://single-market-economy.ec.europa.eu/smes/sme-fundamentals/sme-definition_en; European Union (2003[90]), “Commission Recommendation of 6 May 2003 Concerning the Definition of Micro, Small and Medium-sized Enterprises”, http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32003H0361&locale=en; and OECD (2021[87]), “The SME Test: Taking SMEs and Entrepreneurs into Account When Regulating: Annex to the OECD Best Practice Principles on Regulatory Impact Assessment”, https://one.oecd.org/document/GOV/RPC%282021%2921/FINAL/en/pdf.

…continuing to promote competition and a level playing field

Egypt should continue efforts to promote a level playing field and manage the role of SOEs in the economy. Creating a fair business environment is fundamental to help unleash the growth potential of SMEs (Pillar 3 of the OECD Egypt Country Programme focuses on issues related to governance and SOEs).

Egypt could assess current undue barriers to entry in industries where employment is dominated by large firms (250+ workers) more than in OECD countries. If persisting challenges are identified, the government could implement necessary policies to facilitate business creation and ensure a competitive environment. Relevant industries include Basic pharmaceutical products and pharmaceutical preparations [CF], Electrical equipment [CJ], IT and other information services [JC], Publishing, audiovisual and broadcasting activities [JA] and Telecommunications [JB].

… further reducing tariff and non-tariff barriers to trade and facilitating SMEs entering international markets

Policies should focus on reducing tariff and non-tariff measures that significantly impede Egyptian exporter firms. Tariffs should be lowered on intermediate imports for export production, which can have positive effects on productivity (Martínez Zarzoso, Said and Zaki, 2021[91]). Efforts should also focus on increasing the transparency of non-tariff measures and educating SMEs on compliance requirements. Streamlining registration, document processes and import license requirements would further alleviate administrative burdens. Recent development within the National Structural Reform Program from the Egyptian Ministry of Trade seeks to streamline licensing procedures and prior approvals for imports, enhancing transparency and predictability for investors (MPED, 2024[29]). These efforts are crucial to help SMEs overcome the fixed costs associated with entering export markets and fostering a competitive environment where they can experiment, expand and thrive. Such initiatives would ultimately bolster innovation and enhance the overall competitiveness of the Egyptian economy. To this aim, Egypt should ensure that the Nafeza system is working effectively in automating customs administration, simplifying procedures, and reducing clearance time by constantly monitoring consumers’ satisfaction. The effectiveness of this window is key to streamline administrative barriers to trade which today remain higher than other countries (e.g., the time to export and import is significantly higher in Egypt than peer economies (OECD, 2026[22])).

Finally, Egypt could combine volume-based (such as Export Rebates Program) and SME-specific support policies for export. Other countries have been implementing export policies specifically targeted to small businesses (e.g. the SME Export Promotion Grants in Türkiye (OECD, 2016[92]) and the PROGER in Brazil (OECD, 2020[93])). For additional insights on these and related trade policies, refer to OECD (2026[22]).

…strengthening the vocational education and training systems to ensure an adequate supply of skills

High-quality vocational education and training (VET) systems are critical for addressing Egypt’s skill gaps. Effective VET programmes can equip workers with the technical competencies required by employers, boosting productivity and enabling firms to compete in global markets. Investments in improving the quality and accessibility of VET, alongside reforms to align curricula with industry needs, can contribute to enhancing the necessary work skills.

In Egypt, the Technical Vocational Education and Training (TVET) and Productivity and Vocational Training Development (PVTD) programmes have been prominent in equipping the human capital with skills necessary to be part of the workforce. More recently, the MCIT has been collaborating with various stakeholders to provide training for skills relevant in the digital era.43 Nevertheless, existing initiatives need to be strengthened to ensure an adequate supply of skills, while simultaneously raising awareness and improving the image of vocational training programmes.

Egypt may consider strengthening the VET system to provide the necessary skills, particularly for middle‑skill workers in the manufacturing sector (OECD, 2026[22]). This can include improving the quality and practical relevance of existing vocational programmes and promoting collaboration between educational institutions and manufacturing firms.

As a first step, Egypt can review and evaluate the TVET and PVTD to ensure that the trainings offered under the existing programmes are driven by the skills demanded by the industries. This can be done by identifying the educational gaps in the programme through a collaboration with relevant stakeholders such as the MCIT, the Ministry of Education, the Ministry of Industry, the Ministry of Labor and the MSMEDA. The review can adopt the OECD Skills Strategy Framework, where Egypt can monitor performance indicators by occupation as elaborated in the OECD Skills for Jobs database (OECD, 2019[94]).44 After identifying the gaps using data, Egypt can invest in strengthening the TVET system by continuously collaborating with manufacturing firms and leveraging partnerships with OECD countries.

Concurrently, Egypt is encouraged to constantly improve and assess the reputation of TVET within the country. A favourable reputation of VET systems may lead to increased uptake, contributing to an adequate supply of skills. This can be achieved by increasing awareness of the quality programmes offered under the TVET, collaborating with other OECD countries in offering in-demand trainings, and maintaining the relevance of the TVET through constant monitoring and evaluation.

Sparking entrepreneurship: Address barriers for women entrepreneurs

Copy link to Sparking entrepreneurship: Address barriers for women entrepreneurs

Young firms are typically started by enterprising entrepreneurs. This section explores the characteristics of business owners in Egypt, including the role of female owners and the characteristics of owners of non‑agricultural household enterprises. It is important to note that not all business owners are entrepreneurs, but all entrepreneurs are (at some point) business owners. The section concludes with policy recommendations aimed at promoting female entrepreneurship in Egypt.

Female entrepreneurship is low in Egypt

Female entrepreneurship is particularly low, especially in manufacturing

The (cross-sectional) DynEmp project allows investigating the role of gender in business dynamics, especially the role of female ownership and gender participation in the labour market. The OECD has run the same code on other countries including Cambodia, Indonesia and Viet Nam (see Box 3.1), enabling a direct comparison with Egypt using a consistent data collection methodology. Unfortunately, no other MENA countries provide similar information to the DynEmp project, limiting direct comparison with culturally similar countries.

In 2022/23, female-owned firms (>50% of the owners of a given firm are female) constituted a limited share of Egyptian businesses (Figure 3.20). They accounted for only 4% of establishments in the manufacturing sector (excluding one-person firms), significantly lower than the shares in Indonesia (26%) and Cambodia (39%).45^,46 In non-financial market services, the share of female-owned firms is slightly higher than in manufacturing at 10%, but still significantly lower than in other ASEAN economies considered (65%).47 Although comparisons with Indonesia and Cambodia reflect different cultural contexts, the results above highlight that women-owned business in Egypt remain underrepresented relative to comparable countries. This finding is supported by more recent entrepreneurship indicators from the Global Entrepreneurship Monitor, as discussed in the OECD Women Economic Empowerment Review (OECD, 2026[78]). The review shows that, in 2022, only 3% of women were actively starting or managing a new business, compared to over 9% for men. This share is lower than in Tunisia (15%) and other more advanced economies. The share is similar to Morocco, however. This underscores the importance of national efforts to expand women’s economic participation and strengthen entrepreneurship support programmes. The Egyptian government has several ongoing national initiatives in this area (see subsection “Egypt should continue to support women-owned businesses, strengthen existing programmes and evaluate their effectiveness” below).

Annex Figure B.7 shows that these aggregate results mask large heterogeneities across industries. Within manufacturing, female-owned businesses make up 10% of establishments in Food products, beverages and tobacco [CI] while they account for just 1% in Furniture [CM]. In non-financial market services, female-owned businesses represent 12% in Administrative and support service activities [N] and only 0.2% in Telecommunications [JB].

Figure 3.20. Egypt has significantly fewer female-owned businesses than other selected developing countries
Copy link to Figure 3.20. Egypt has significantly fewer female-owned businesses than other selected developing countries

Distribution of establishments by gender of the owners, 2022/23

Male-owned establishments employ a limited share of female workers

The average share of female workers is lower in male-owned businesses than in female-owned ones, with female participation significantly lower compared to Cambodia (Figure 3.21). In manufacturing industries, female workers comprise only 3% of employment in male-owned businesses, while in non-financial market services the percentage reaches 11% (compared to 35% and 38% in Cambodia, respectively).48

This evidence is situated in a context where female labour market participation in Egypt remains relatively low compared to OECD countries (Annex Figure B.8) and neighbouring countries (Jin and Hofer, 2024[95]) – see also (OECD, 2026[78]). In both manufacturing and non-financial market services, the share of female workers in OECD countries is around three times higher than it is in Egypt – where it is 10% in manufacturing and reaches 15% in non-financial market services according to the 2022/23 Economic Census.49 Recent initiatives that aim to increase women’s participation are discussed in the next section.

Figure 3.21. .The share of female workers is greater in female-owned businesses in Egypt
Copy link to Figure 3.21. .The share of female workers is greater in female-owned businesses in Egypt

Average percentage of female workers by gender of the owner, 2022/23

The number of household enterprises run by women is increasing, as well as their education level, though it remains lower than that of male owners

While owners of (non-agricultural) household enterprises are still predominantly men, the share of female owners has gradually increased over the years, passing from 15% in 2006 to 19% in 2023 (Figure 3.22). The owner of the enterprise is defined as the household member who works the most in the enterprise, regardless being the head of the household.50 This is consistent with the definition used in the literature (see, for example, Rashed and Sieverding (2014[96]) and Krafft et al. (2020[97])). A more recent paper (El-Haddad and Zaki, 2023[98]) shows that when restricting the definition of owners to those that are also the head of household, the share of female-owned enterprises reduces substantially, but it still shows an increasing trend over time.51

Egyptian women running family businesses have rapidly increased their education level over time: in 2023, only 34% were illiterate, compared to 65% in 2006. This is expected given population-level increases in educational attainment over the same period in Egypt (Rashed and Sieverding, 2014[96]), especially among women (OECD, 2026[78]; Alazzawi and Hlasny, 2025[99]). However, the share of illiterate female owners is higher than for men, where less than 20% of male owners were illiterate in 2023 (Figure 3.23).

Figure 3.22. The share of female-owned household enterprises has increased over time in Egypt…
Copy link to Figure 3.22. The share of female-owned household enterprises has increased over time in Egypt…

Percentage of (non-agricultural) household enterprises by owner’s gender, 2006, 2012, 2018 and 2023

Figure 3.23. …and their education level, although female-owners are still less educated than male owners
Copy link to Figure 3.23. …and their education level, although female-owners are still less educated than male owners

Share of (non-agricultural) household enterprises by owner’s education and gender, 2006, 2012, 2018 and 2023

Egypt should continue to support women-owned businesses, strengthen existing programmes and evaluate their effectiveness

Initiatives directed towards fostering women’s entrepreneurship exist in Egypt, including providing training and facilitating access to finance. In 2017, the Egypt National Council for Women (NCW) developed a National Strategy for the Empowerment of Egyptian Women 2030 (NCW, 2017[100]). The strategy has been endorsed by all national actors and concerned state bodies. It includes an objective to increase women’s participation as entrepreneurs and MSME owners within the pillar of improving women’s economic empowerment (OECD, 2026[78]). The strategy also targets an increase in the microfinance targeting women and in the number of women with bank accounts (OECD, 2026[78]). The NCW produces reports that include the achievements on the implementation of the strategy. Within this context, the NCW has implemented entrepreneurship training for women, including providing principles of planning, marketing, financial awareness, and basic concepts of innovation and entrepreneurship. Those programmes are implemented in specific governorates.

There are also several initiatives to facilitate financial support to female-owned businesses mainly led by the CBE and MSMEDA. For example, the CBE’s Financial Inclusion Strategy (2022-25) places women’s access to finance as a priority (CBE, 2024[101]). The CBE also provided a definition of women-owned businesses in 2018 to facilitate the collection of statistics on women’s entrepreneurship.52 In addition, in July 2024, the Governor of the CBE signed the Women Entrepreneurs Finance Code Initiative in partnership with the European Bank for Reconstruction and Development (CBE, 2024[102]). The initiative seeks to enhance access to finance for women-led MSMEs while also offering crucial technical support. This support will extend to strengthening the capabilities of the Egyptian banking sector, financial service providers and relevant institutions in collaboration with the Egyptian Banking Institute, banks and other state entities. The primary goal of this technical assistance is to promote women’s financial inclusion and develop tailored financial and non-financial products and services. Ultimately, the initiative aims to achieve gender equality, eliminate gender constraints and reduce financing gaps for women entrepreneurs (CBE, 2024[102]). Moreover, in March 2024, CBE launched the "Women for Women in FinTech" initiative, with the aim of providing innovative FinTech solutions to support women entrepreneurs across various sectors in expanding their businesses (CBE, 2024[103]). The initiative is planned to resume for six months, and it provides women entrepreneurs with intensive training sessions and workshops to equip women with the skills to use FinTech applications. The CBE also launched initiatives to economically and financially empower women in rural areas an integrate them into the formal banking system. A key example is the “Tahweesha” project (CBE, 2023[104]). Additionally, the CBE focused on enhancing financial literacy among youth, SMEs and women through workshops and capacity-building programmes (CBE, 2024[105]). Finally, MSMEDA implemented a four-year “Women-Owned Business Support Program” with funding from the French Development Agency (2019‑22). In addition to fundings, women received vocational training, market access support and assistance with exhibition participation. The programme has financed over 24 000 women-led micro and small businesses across the country, creating more than 60 000 job opportunities.53 MSMEDA is committed to enhance women’s empowerment and further do so in the coming years.

In the ICT sector, the Technology Innovation and Entrepreneurship Center has designed a Women Entrepreneurship Program to support early-stage women entrepreneurs operating in the ICT sector, including those creating technology products or using technology to commercialise their products.54

More generally, MPED has made significant strides in fostering a robust innovation and entrepreneurship ecosystem in Egypt. Central to this effort is the establishment of the Orange Corners Egypt programme – delivered in collaboration with the Kingdom of Netherland government and Bank of Alexandria – which serves as a grassroots incubator with a focus on youth and women-led businesses across sectors such as agriculture, creative industries, health, and education, reaching over 120 start-ups in 2023 alone (MPED, 2024[29]). In June 2023, Egypt established the Egypt Entrepreneurship and Innovation Center (EEIC) to cultivate a culture of sustainable entrepreneurship, support start-ups and improve the quality of entrepreneurial education. The centre is also developing a national index to benchmark Egypt’s performance and enhance its international rankings in innovation and entrepreneurship. Complementing these efforts, the Ministry supports several strategic initiatives, including Egypt Ventures, a public venture capital arm that has invests in start-ups through direct funding and accelerator-backed programmes, reinforcing the start-up landscape with scalable capital (MPED, 2024[29]).

Egypt should ensure it fully achieves the goals of its National Strategy for the Empowerment of Egyptian Women 2030, specifically related to women entrepreneurship and economic empowerment. Particularly, the NCW should continue offering entrepreneurship training, coaching and mentoring across all governorates. It should ensure these programmes are evaluated in their effectiveness in supporting women-owned businesses and further strengthened based on women’s needs. Egypt could publish regular progress reports on the number of beneficiaries of women entrepreneurship programmes, complemented by survey results to monitor actual progress and identify future areas for improvements based on participants’ reported challenges. The Egypt’s National Observatory for Women, established in 2017, which already monitors women’s indicators, could play an instrumental role in this process. In this vein, Egypt can take inspiration from Canada which publish yearly progress reports of its Women Entrepreneurship Strategy and recently launched a survey to evaluate the strategy impact. The Canadian strategy aims to increase women-owned businesses’ access to the financing, networks and expertise they need to start up, scale up and access new markets, which also contains programmes helping women-owned businesses to internationalise (see Box 3.12).

Following Canada, the NCW could also implement programmes to support women-owned businesses enter export markets and expand internationally. It could also organise networking events to improve access to business networks. Such events may be particularly valuable for women in remote areas who face greater challenges in accessing networking opportunities. This is relevant given that the limited networks and professional contacts remain a barrier for Egyptian women entrepreneurs (OECD, 2026[78]). More specific recommendations on fostering women’s entrepreneurship will be provided within the framework of the OECD Women Economic Empowerment Review (OECD, 2026[106]).

Box 3.12. The Women Entrepreneurship Strategy in Canada

Copy link to Box 3.12. The Women Entrepreneurship Strategy in Canada

The Canadian government is advancing women’s economic empowerment with the first ever Women Entrepreneurship Strategy, representing nearly CAD 7 billion in investments and commitments. The Women Entrepreneurship Strategy was launched in 2018 with the aim to increase women-owned businesses’ access to the finance, networks and expertise they need to start up, scale up and access new markets. The initiatives are built around the following milestones:

Build a stronger entrepreneurship ecosystem: projects offer training (for example, on financial literacy and business planning), mentorship and access to business networks. In 2021-22, almost 29 500 women entrepreneurs accessed these services. These projects also contribute to creating new jobs, starting new businesses and growing existing ones, including pursuing export opportunities.
Improved access to financing: the Business Development Bank of Canada offers loans to women-owned businesses. As of June 2022, almost 17 000 women-owned businesses had been served.
Helped women export: these programmes support women-owned companies looking to export abroad. Among those, a well-established programme in Canada is Global Affairs Canada’s “Business Women in Trade”, which provides targeted support and service to export-ready and export-active women-owned small and medium-sized enterprises (SMEs). Women entrepreneurs received funding through CanExport SMEs, a grants and contributions programme that helps SMEs cover the cost of international expansion. Similarly, the Export Development Canada’s Inclusive Trade Investments Program (ITIP) provides financial support to women-, indigenous- and minority-owned export businesses with high growth potential, while connecting them to international opportunities, networks and trade programmes.
Improved knowledge and data on women entrepreneurship: The Women Entrepreneurship Knowledge Hub acts as a one-stop-shop for sharing knowledge on women entrepreneurs. It collects, analyses and disseminates data, while sharing best practices among women business support organisations. Statistics Canada also regularly produces key statistics on SMEs and women in business.
Diversified federal procurement: Procurement Assistance Canada, part of Public Services and Procurement Canada, is making it easier for women-owned small businesses to successfully participate on federal contracts.

Monitoring the impact of the Women Entrepreneurship Strategy

The State of Women’s Entrepreneurship in Canada 2024 report is the fifth in a series reviewing research on women’s entrepreneurship in Canada and assessing the progress and achievements of the current strategy (Women Entrepreneurship Knowledge Hub, 2025[107]). To better measure the impact of the Women Entrepreneurship Strategy, a survey was launched in November 2023 to collect insights on participants’ experiences in networking, access to funding and innovation. The survey was conducted online through 35 participating organisations. By February 2025, 965 individuals provided feedback. Preliminary findings, published by the Women Entrepreneurship Knowledge Hub, show that:

16.5% of respondents secured new funding
67.8% engaged in new industries
51.2% established new support networks
66.5% implemented various innovations in their businesses

Source: Government of Canada (n.d.[108]), “Women Entrepreneurship Strategy”, https://ised-isde.canada.ca/site/women-entrepreneurship-strategy/en; Government of Canada (2022[109]), “Women Entrepreneurship Strategy: Progress Report 2022”, https://ised-isde.canada.ca/site/women-entrepreneurship-strategy/en/women-entrepreneurship-strategy-progress-report-2022; Mousseau (2018[110]), “How the Business Women in Trade (BWIT) program can help”, https://www.edc.ca/en/blog/business-women-in-trade-bwit.html; Women Entrepreneurship Knowledge Hub (n.d.[111]) https://wekh.ca/about; and Women Entrepreneurship Knowledge Hub (2025[107]), “The State of Women’s Entrepreneurship in Canada: 2024”, https://wekh.ca/wp-content/uploads/2024/04/WEKH_The-State-of-Womens-Entrepreneurship-in-Canada-2024.pdf.

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Notes

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← 1. The OECD obtained access to half of the sample of the 2022/23 Economic Census containing sampling weights.

← 2. OECD countries include Austria, Belgium, Canada, Costa Rica, Croatia, Denmark, Finland, Germany, Italy, Japan, Latvia, New Zealand, Portugal, Slovenia, Spain, Sweden and Türkiye. Emerging economies include Brazil, Cambodia, Indonesia, Tunisia and Viet Nam. Croatia was included in the OECD benchmark despite not being an OECD country yet, as it started its accession process (on 25 January 2022, the OECD Council decided to open accession discussions with Croatia). For more information regarding the methodology of the DynEmp project, see Annex D.

← 3. In this report, following the standard DynEmp definition, young firms are defined based on age. This definition does not distinguish between innovative (start-ups) and non-innovative young firms.

← 4. Firms without employees are excluded. The percentage of start-ups reaches 16% in manufacturing and 20% in non-financial market services when also including firms without employees.

← 5. OECD countries included in this and the following analyses are Austria, Belgium, Canada, Costa Rica, Croatia, Denmark, Finland, Germany, Italy, Japan, Latvia, New Zealand, Portugal, Slovenia, Spain, Sweden and Türkiye. Emerging economies include Brazil, Cambodia, Indonesia, Tunisia and Viet Nam. For more information regarding the methodology on the DynEmp analysis, see Annex D. Comparison with emerging economies in this analysis should be taken with caution because limited data availability means they refer to a less recent time period (see Annex D for details).

← 6. The number of informal young firms with at least one employee is approximately 45 000 in the manufacturing sector and about 180 000 in the non-financial market services sector.

← 7. Additionally, firms with a more educated owner have a significantly greater chance of being formal, having 3.5-4 times greater odds of formalising their firms than illiterate owners (Krafft et al., 2020[97]). A more educated owner may be more at ease with the bureaucracy of formalisation.

← 8. Examining the original micro-data shows that in 2022/23, most of the entrants were new single establishments, while only 0.6% were branches of existing firms.

← 9. Household enterprises are defined as households holding an enterprise.

← 10. Specifically, 27% of household enterprises in 2006 were newly created, compared to 20% in 2012, 25% in 2018 and 22% in 2023. The analysis uses the panel dimension of the survey to track newly established household enterprises over time and their characteristics. The ELMPS recorded 1 607 household enterprises in 1998, 2 125 in 2006, 2 358 in 2012, 2 337 in 2018 and 4 578 in 2023. Following Krafft et al. (2020), the data are treated in four pairs of waves: 1998-2006, 2006-12, 2012-18 and 2018-23. The number of new firms corresponds to the number of firms created between the two waves of each pair, for which the “start year” is not before the previous wave’s year.

← 11. To track the location of the newly established enterprises, the region of the enterprise’s owner is used.

← 12. In April 2021, the Egyptian government launched the National Structural Reforms Program under the auspices of the Ministry of Planning and Economic Development, as the second phase of the National Program for Economic and Social Reforms initiated in 2016. The objective of the second phase is to enhance economic resilience, promote employment and employability, and raise the productive capacity and competitiveness of the economy, and in particular export-oriented industries. This package focuses on increasing the role of the manufacturing; agriculture; and information and communications technology sectors to diversify the production structure of the economy.

← 13. The hubs opened as part of a plan to establish 30 creative innovation hubs across the country to create an enabling environment for technology innovation and entrepreneurship.

← 14. See https://mcit.gov.eg/en/Innovation/Boost_your_Business/Creativa_Innovation_Hubs.

← 15. The ISC had established a total of 14 branches in 14 of Egypt’s 28 governorates as of the end of 2022.

← 16. For more information, see https://www.gafi.gov.eg/English/Howcanwehelp/OneStopShop/Pages/default.aspx.

← 17. To facilitate data collection on businesses and streamline procedures, Egypt is also planning to establish a unified electronic platform for all entities responsible for establishing a busniess (GAFI-FRA Law No. 95 of 1992 – SE Zone Law No. 83 of 2002) for the establishment, operation and liquidation of companies. This platform can contribute to streamlining business procedures and may also facilitate the construction of a single database of registered firms.

← 18. Individual companies refer to sole proprietorships owned and managed by a single individual, who assumes all profits and losses. These companies are established in accordance with the provisions of Investment Law No. 72 of 2017.

← 19. Registration into the IDA register is crucial for the legal recognition of a business, allowing them to operate and engage in trade activities. The IDA, on behalf of the investor, co-ordinates with the concerned authorities to issue all approvals and permits necessary to issue an operating license, like environmental and civil protection approval.

← 20. In October 2022, the President launched a website for the project, which provides a list of requirements, rules and regulations for prospective investors. The Egyptian Cabinet launched an English version in May 2023 to expand its reach to global communities (State Information Service, 2023[112]).

← 21. See https://tracklicence.gafi.gov.eg/ for more details.

← 22. The financial incentives are now under the Ministry of Finance.

← 23. In 2013, an integrated plan to reduce non-registered employment, led by the Ministry of Labour, Employment and Social Security, was launched in Argentina. This plan fit in the broader strategy to tackle informality. It defined new policies and instruments to make further progress on the subject of employment formalisation. Within this plan, social awareness campaigns on informality issues were implemented through mass media. The media highlighted the advantages of complying with labour and tax obligations, as well as the resulting social protection. Moreover, through the Corporate Social Responsibility Plan, leading businesses raised awareness among their clients and suppliers about the need and obligation of complying with labour regulations.

← 24. For example, North Sinai has most of its young firms born in the informal sector (around 80% of them), followed by Matrouh and Kalyoubia.

← 25. OECD countries include Austria, Belgium, Canada, Costa Rica, Croatia, Denmark, Finland, Germany, Italy, Japan, Latvia, New Zealand, Portugal, Slovenia, Spain, Sweden and Türkiye. Emerging economies include Brazil, Cambodia, Indonesia, Tunisia and Viet Nam. Croatia has been included in the OECD benchmark despite not being an OECD country yet, as it has started its accession process (on 25 January 2022, the OECD Council decided to open accession discussions with Croatia). For more information regarding the methodology of the DynEmp analysis see Annex D.

← 26. Establishments without employees were excluded from the analysis to improve cross‑country comparability, as discussed in Annex D. Thus, the population of firms encompasses firms with at least one employee.

← 27. The presence of micro-sized firms significantly contributes to explaining the differences in size distribution for Egypt. This is confirmed when restricting the analysis to firms with 10+ workers. In doing so, the distribution of employment converges with the OECD average.

← 28. In line with Tybout’s (2014[53]) perspective, this analysis is based on the comparison of the firm distribution in Egypt with a hypothetical non-distorted scenario, approximated by the “average” distribution in OECD countries. As discussed above, the analysis reveals the presence of a missing middle in the Egyptian manufacturing sector and a concentration of micro-firms in non-financial market services.

← 29. Basic metals and fabricated metal products, except machinery and equipment [CH] and Furniture; other manufacturing; repair and installation of machinery and equipment [CM] industries account for a large share of the businesses in the manufacturing sector, respectively representing 13% and 31% of manufacturing firms. Moreover, basic metals represents around 9% of total manufacturing employment, while furniture employs 15% (Annex B).

← 30. Wholesale and retail trade repair of motor vehicles and motorcycle [G] accounts for 70% of employment in non-financial market services (Annex B).

← 31. When examining only formal firms, the distribution of employment is similar to the distribution of OECD countries, especially for Rubber and plastics products, and other non-metallic mineral products [CG] and Food products, beverages and tobacco [CA] (back-of-the-envelope calculation using DynEmp). Meanwhile, for industries like Basic pharmaceutical products and pharmaceutical preparations [CF], Publishing, audiovisual and broadcasting activities [JA] and IT and other information services [JC] where all firms are already formal, the distribution of employment by size class does not change when the sample is restricted to formal firms only.

← 32. Note that the survey was conducted between February 2019 and July 2020 and only 13 firms were surveyed after the onset of the COVID-19 pandemic (March 2020).

← 33. Under this regime, firms with turnover below EGP 250 000 paid a flat tax of EGP 1 000. Firms with turnover between EGP 250 000 and EGP 500 000 paid EGP 2 500. Firms with turnover between EGP 500 000 and EGP 1 million paid EGP 5 000. Firms with turnover between EGP 1 million and EGP 2 million paid 0.5% of turnover. Firms with turnover between EGP 2 million and EGP 3 million paid 0.75% of turnover. Firms with turnover between EGP 3 million and EGP 10 million paid 1% of turnover.

← 34. MSMEs are defined based on their revenue, or capital if revenue is missing. Micro enterprises: annual turnover of less than EGP 1 million, or any newly incorporated enterprise with capital less than EGP 50 000; small enterprises: annual turnover between EGP 1 million and EGP 50 million, any newly incorporated industrial enterprise with capital between EGP 50 000 and EGP 5 million, or any newly incorporated non-industrial enterprise with capital between EGP 50 000 and EGP 3 million; medium-sized enterprises: annual turnover of EGP 50 million or more and does not exceed EGP 200 million, any newly incorporated industrial enterprise with capital between EGP 5 million and EGP 15 million, or any newly incorporated non-industrial enterprise with capital between EGP 3 million and EGP 5 million.

← 35. The theory of capital constraints suggests that the return to capital should be bimodal, with one mode representing large firms using high capital-intensive technologies and another representing smaller firms relying on low capital-intensive technologies (Hsieh and Olken, 2014[58]). In an economy where there are capital constraints, smaller firms may find it challenging to invest in high capital-intensive technologies due to limited access to capital. As a result, these firms might predominantly adopt low capital-intensive technologies, which are more affordable and require less initial investment. The theory of dual technology model with high capital-intensity and low capital-intensity technologies using the Cobb-Douglas production function suggests that large firms operating capital-intensive technologies with high fixed costs have lower marginal product of capital, while smaller firms have higher marginal product of capital.

← 36. Egypt has implemented a National Strategy for Combatting Corruption since 2014, with two completed phases (2014-18 and 2019-22). The third phase is expected to run from 2023 to 2030 (OECD, 2024[40]).

← 37. It should be noted that the data reflect the situation in the country six years ago at the time of writing, and the situation may have changed now.

← 38. Microenterprises are identified as those with an annual revenue less than EGP 1 million, small enterprises as those with revenues between EGP 1 million and EGP 50 million, medium-sized enterprises as those with revenues between EGP 50 million and EGP 200 million, and large enterprises as those with revenues above EGP 200 million.

← 39. See footnote 34.

← 40. This information was the result of informal discussions during 2024 policy mission in Cairo.

← 41. Notice, however, that this may discourage firms to hire formal workers, if they lose their benefits by reporting a larger number of formal employees. At the same time, this can incentivise small firms to report their number of formal employees to access the benefit.

← 42. It is worth noting that this is not the case in the agriculture, forestry and fishing sector (ISIC Rev.4 Section A), where the percentage of formal workers was below 25% in large firms in 2023.

← 43. See OECD (2026[22]) for further information on the initiatives related to human capital.

← 44. As a first step, the degree of “labour market pressure” for each occupation in each country is assessed by five performance measures, namely, wages, working time, employment, underemployment and under-qualification with the country average, where the five relative performance measures are standardised. They are then aggregated into a single index of occupational imbalance for each occupation (OECD, 2019[94]). As a second step, the occupational imbalance index is mapped to the underlying skills requirements associated with each occupation based on a widely used taxonomy (O*NET) and aggregated to the country level (OECD, 2019[94]).

← 45. The percentage of firms only slightly increases when including one-person firms (4.2% in manufacturing and 12.2% in non-financial market services). Interestingly, especially in non-financial market services, a large share of female-owned businesses (around 45% of total female-owned businesses) was single-worker firms (back-of-the-envelope calculation using DynEmp).

← 46. However, due to limited data collection, Cambodia (2011) and Indonesia (2013-14) have different time periods, which may affect comparisons with Egypt.

← 47. Only Cambodia is available for non-financial market services, as Indonesia is available only for manufacturing in the DynEmp XS.

← 48. A back-of-the-envelope calculation using DynEmp shows that while the share of female workers is considerably in female-owned firms, the share of female workers tends to decrease as the firm size increases. On the contrary, in male-owned firms, the share of female participation tends to be higher in larger firms. Another calculation shows that the percentage of female workers decreases as firm age, with younger firms (below 10 years) employing higher shares of women in both manufacturing and non-financial services.

← 49. The share of female workers is highly heterogeneous across industries. In the manufacturing sector, the pharmaceutical and textile sectors employ higher shares of women (respectively 22% and 16% of total workers on average). In non-financial market services, 28% of workers are, on average, female in the IT sector and 27% in legal and accounting activities (Annex Figure D.6).

← 50. These shares are similar when accounting for cases in which the head of household is male and is also working in the household enterprise.

← 51. El-Haddad and Zaki (2023[98]) show that 6.7% of enterprises were female-owned in 2006, 5.7% in 2012, 7% in 2018 and 8.3% in 2023 when restricting to owners that are the head of household.

← 52. The definition is according to ownership (capital): one or more women owning no less than 51% of the company’s capita; according to ownership (capital) and management: one or more women owning a percentage of not less than 20% of the company’s capital and at least one woman holding the position of CEO or deputy CEO (OECD, 2026[78]). See CBE Circular dated 16 August 2018: www.cbe.org.eg/-/media/project/cbe/listing/circulars/august/16-august_125_en.pdf.

← 53. See https://top50women.com/msmeda-afd-backed-initiative-finances-24000-women-led-businesses-in-egypt-creating-over-60000-jobs/; and https://top50women.com/msmedas-2024-milestones-and-vision-for-womens-empowerment-and-economic-growth-in-egypt/

← 54. See https://tiec.gov.eg/English/Programs/She-Program/Pages/default.aspx for more details.

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