Study on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR
2. Micro and Small Enterprises : 2.1 Definitions

MICRO AND SMALL ENTERPRISES

This section defines micro/small enterprises and reviews their general characteristics including size and sectoral composition. It reviews the contribution of micro/small enterprises to employment creation, household income, and the national economy. It then looks at rural entrepreneurs, women entrepreneurs and entrepreneurs with disabilities.

2.1 Definitions

Proper targeting of development programmes requires a clear and accepted set of definitions. However definitions of micro/small enterprises can change from one place to another and one time to another, according to the different socio-economic conditions that apply or to the different purposes for which the definition is designed.

A distinction is made between qualitative and quantitative definitions of small enterprises. (Harper, M., Small Business in the Third World: guidelines for practical assistance, 1984.) Quantitative definitions use the criteria of number of workers or volume of sales, or a combination of both. These simple measures are commonly used by developing countries and are useful for programmes that focus on employment creation. (ibid.) However they can be inaccurate, because of the seasonal nature of small enterprise employment and the extensive use of part-time workers and unpaid family labour.

Qualitative definitions are more flexible and relate to how enterprises differ in aspects of business development -- such as financial development, and technical or managerial capacity. For example, if an enterprise has one to two persons responsible for managerial decisions it will usually be defined as small-scale. Qualitative definitions distinguish between different kinds of business and are more widely used in industrialised countries. (ibid.)

There is no agreed definition in Laos for different sizes of enterprises in different sectors.

1. The Ministry of Industry and Handicraft (MIH) uses a quantitative definition: i.e. the number of people employed. The definitions used in 1996 by MIH and in the MIH-GTZ survey of that year were: Small: between 1 and 9 workers; Medium: between 10 and 29 workers; and Large: 30 or more workers.
    
2. In 2000 the Ministry of Industry and Handicraft changed its definition when it gave definitions for factories in the processing industry. (Ministry of Industry and Handicraft, Law for Processing Industry, 2000.) These were: Small: 10 to 50 workers, or 10 to 50 horsepower, Medium: 51 to 200 workers, or 51 to 200 horsepower, Large: more than 200 workers, or 200 horsepower.
    
3. Also in 2000 the National Statistical Centre noted a new definition by the Ministry of Industry and Handicraft which has become the one most commonly used by practitioners and academics working with micro/small enterprises in Laos: Small between 1 and 9 workers; Medium: between 10 and 99 workers and Large: more than 99 workers. (National Statistical Centre, Basic Statistics of the Lao PDR 1975-2000.)
    
4. With its focus on micro/small enterprises, this study adapted the definitions used by the MIH-GTZ 1996 survey (Nicholas M., Small and Medium Enterprises in Lao PDR: The Results of a National Survey, MIH-GTZ 1996.) so that Micro would describe enterprises between 1 and 9 workers; and Small those between 10 and 29 workers. While this enables the report to draw on the 1996 survey data -- the only comprehensive data available -- it should be noted that enterprises as large as 5 to 9 workers would not normally be regarded as micro-enterprises. However the bulk of the Lao enterprises described as Micro do seem to fit within international quantitative definitions of Micro.

2. Micro and Small Enterprises : 2.1 Definitions
Study on Generating Employment through Micro and Small Enterprise and Cooperative Development in Lao PDR

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