The report reveals that the contribution of microenterprises fell between 2022 and 2023 due to inflation.
Microenterprises contributed to the equivalent of 42.9 per cent of gross domestic product (GDP) in El Salvador over the past eight years, according to research presented by the Salvadoran Comprehensive Support Foundation (Fusai).
The director of Fusai, Luis Castillo, said Thursday that this finding confirms that microenterprises have become the backbone of the Salvadoran economy, with a special focus on those sectors of scarce resources.
“GDP measures the value of services and goods produced in a country, we find that in recent years on average the participation of micro enterprises represents 42 % throughout the country’s GDP,” Castillo said during the presentation of the report “State of the Mype 2024.” The other side of the economy.
Annual change
Data presented by the researcher and director of the Latin American Faculty of Social Sciences (Flacso) in El Salvador, William Pleites, revealed that the percentage contribution of microenterprises to El Salvador’s GDP ranged from 41 percent to 47 percent between 2016 and 2021.
By 2022, the contribution fell to 37.9 percent and last year closed with 36.3 percent. In 2023 inflation had a direct impact on the contribution that microenterprises generate to the country.
According to the foundation, food inflation affected entrepreneurs, limiting poverty reduction.
The president of the National Commission on Micro and Small Enterprises (Conamype), Paul Steiner, said that some of these contributions tend not to include the entire informal sector, and believes that only this group concentrates others.$15,000 million which are not perceived in official statistics.
The country would change, according to the official, if the companies were formalized.
The analysis also estimates that microenterprises contribute 34.9 per cent of gross national income, above 20.4 per cent of the remittance contribution of 27.3 per cent of medium and large enterprises, and 17.4 per cent of government consumption and investment expenditure.
Pleites recalled that microenterprises contribute 70 per cent of the country’s employment. In addition, 60 per cent would be led by women. /Jaqueline Villeda
Fusai points out that, although growth in El Salvador has been sustained by 3 %, this rise has not fully benefited the sector.
Between 2021 and 2023, only 25 per cent of microentrepreneurs reported increases in sales, employment and investment, indicating that only a quarter have benefited from economic revival,” the research said.
Fusai’s director indicated that, although most entrepreneurs externalized their positivism with the situation, one in three microenterprises claimed to have financial difficulties, an increase in competition, as well as debt and competition problems.
Care for the sector
Fusai stressed the need for support to the sector and subsidies, which would allow the reactivation of endeavours and become subject to credit.
Castillo reported that, in view of the needs of the sector, the credit project that Fusai established since 1990 was transformed into the Integral Bank after the approval of the authorities to function as such from this month.
Does it consolidate our vocation to the mypes, being a mype bank is a niche bank, it is not a corporate bank, and why do we become a bank? Because we have understood that entrepreneurs need to be accompanied and need not only financial services but banking, Fusai’s spokesman added.
The foundation estimates that 76 per cent of companies in El Salvador operate in informality, while 24 per cent identify as semi-formal, which comply with only legal obligations.
In addition, 49 per cent are subsistence companies, about 450,000 businesses, and the rest belong to the rest of the sectors such as accumulation or expansion, which have more savings or investment capacities.
Many microenterprises tend to finance part of their remittance business. 44.8 percent of the entrepreneurs receiving remittances said they are allocated to strengthen their business.
40 per cent of companies are funded from their own savings or family members, and more than 60 per cent require funding.