El Salvador Introduces Bill for SMEs

The preliminary draft presented by the Ministry of Economy aims to create a favorable environment for Small and Medium Enterprises.

Wednesday, October 27, 2010

The sector represents 99.4% of companies established in the country, demonstrating their importance in the national economy. Within this percentage, there are 463.803 micro family businesses, 148.574 micro and 13.208 small enterprises.

General Provisions: It contains aspects related to nature, scope, purpose, classification and definitions used in the draft, it also sets the objective of the proposal, the promotion of micro and small enterprises and the consolidation of existing units capable of creating jobs and value added products and promoting their integration into the economy. Also sets definitions of what is a micro and small enterprise, which is essential for establishing a general framework which should allow all state institutions to standardize the use of these terms.

Institutional Framework: This refers to the powers of central and local governments to support new entrepreneurs and existing MSEs, through incentives.

Economic Inclusion of MSEs: In this section, aspects of business registration and benefits which entails, in terms of obtaining training services, technical support, legal assistance and others.

It also states obligations of state institutions to promote participation of micro and small enterprises in government purchases. It also empowers municipalities to establish special arrangements on favorable rates and contributions for services, this as an incentive for entrepreneurship and development of MSEs in their municipalities.

In financing, it is determined by two funds: one called Guarantee Fund for MSEs, which aims to guarantee loans, short, medium and long term; the second is a Seed Capital Fund, which aims to promoting social entrepreneurship, seeking to fund projects or companies with environmental technology.

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