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MSU RURAL DEVELOPMENT SERIES
WORKING PAPER
Department of Agricultural Economics
Michigan State University
East Lansing, Michigan 48824
SMALL MANUFACTURING AND REPAIR ENTERPRISES
IN HAITI: SURVEY RESULTS
By
Steve Haggblade, Jacques Defay, and Bob Pitman
Working Paper No. 4
1979
SMALL MANUFACTURING AND REPAIR ENTERPRISES
IN HAITI: SURVEY RESULTS
By
Steve Haggblade, Jacques Defay, and Bob Pitman
Working Paper No. 4
1979
SMALL MANUFACTURING AND REPAIR ENTERPRISES
IN HAITI: SURVEY RESULTS*
By
Steve Haggblade**
Jacques Defay***
and
Bob Pitman***
*This paper has been published as part of Michigan State University's
Off-Farm Employment Project, which is financed by the Office of Rural
Development and Development Administration, Development Support Bureau,
U.S. Agency for International Development (AID/ta-CA-2). Funding for
the survey and analyses were provided by this project as well as
contract # AID-521-C-48 with the Pragma Corporation.
**Michigan State University
***Pragma Corporation
1979
MSU RURAL DEVELOPMENT WORKING PAPERS
Carl K. Eicher and Carl Liedholm, Co-editors
The MSU Rural Development Working Papers series is designed to
report the preliminary results of comparative studies of rural development
in Africa, Latin America, Asia, and the Near East. The papers will report
research findings on community development and rural development in histor-
ical perspective as well as studies of contemporary rural development
programs. The series will include papers on a wide range of topics such
as alternative rural development strategies; off-farm employment and small-
scale industry; alternative farming systems; marketing problems of small
farmers; agricultural extension; inter-relationships between technology,
employment, and income distribution; and evaluation of rural development
projects.
The papers are aimed at teachers, researchers, policy-makers, donor
agencies, and rural development practitioners. Libraries, individuals, and
institutions may obtain single copies of the MSU papers free of charge and
may request their names be placed on a mailing list for periodic
notifications of published papers by writing to
MSU Rural Development Working Papers
Department of Agricultural Economics
206 International Center
Michigan State University
East Lansing, Michigan 48824
U.S.A.
Table of Contents
List of Tables . . . . .
Forward . . . . . .
Acknowledgments . . . .
I. Introduction . . . .
II. Survey Methodology .. ...
2.1. General Strategy . .
2.2. Sample Selection . .
2.2.1. Localities .
2.2.2. Enterprises
2.3. Fieldwork . . .
III. Descriptive Profile . .
3.1. Magnitude of the Small
3.2. Composition . . .
3.3. Seasonality . . .
3.4. Labor Profile . .
3.5. Capital Composition .
Page
. . . . . . . . iv
. . . . . . . . vi
. . . . . viii
. . . . . . . . . 1
. . . . . . . . . 4
. . . . . . . . . 4
. . . . . . . . . 6
. . . . . . . . . 6
. . . . . . . . . 8
. . . . . . . . . 8
Enterprise Sector
3.6. Growth Trends in Small Enterprises
Aggregate SSE Growth
Machine Repair . .
Cement Block Making
Car Repair . . .
Wood Sculpture . .
Tailoring . . .
Metal Working . .
Carpentry . . .
3.6.1.
3.6.2.
3.6.3.
3.6.4.
3.6.5.
3.6.6.
3.6.7.
3.6.8.
......
Page
3.6.9. Shoe Repair . . . . . . . .
3.6.10. Leather Work . . . . . . . .
IV. Potential Constraints Facing Haitian Small Enterprises .
4.1. Demand as a Potential Constraint . . . . .
4.1.1. Consumer Demand in Haiti . . . . .
4.1.1.1. Local Consumer Demand . . .
4.1.1.2. Consumer Demand in Other
Localities . . . . .
4.1.2. Subcontracting . . . . . . .
4.1.3. Export Demand . . . . . . .
4.1.4. Conclusion . . . . . . . .
4.2.
Capital Constraints . . . . . . .
4.2.1. Demand for Capital . . . . . .
4.2.1.1. Initial Capital . . . .
4.2.1.2. Subsequent Investment . .
4.2.1.3. Current Capital Stock . .
4.2.1.4. Methods of Decreasing the
Demand for Capital . . .
4.2.2. Sources of Capital . . . . . .
4.2.2.1. Personal Savings . . . .
4.2.2.2. Family and Friends . . .
4.2.2.3. Moneylenders . . . . .
4.2.2.4. Formal Credit . . . .
4.2.2.5. Terms of Credit . . . .
4.2.3. Evaluation of Capital Constraints . .
4.2.3.1. Barriers to the Formal Credit
Market . . . . . .
4.2.3.2. Interest Rate and the Demand
for Credit . . . . .
4.2.3.3. Fixed Capital Constraints .
4.2.3.4. Working Capital Shortages .
4.2.4. Conclusion . . . . . . . .
4.3. Raw Materials . . . . . . . . .
4.3.1. Bottlenecks in the Supply of Raw Materials
4.3.2. Working Capital Shortages . . . .
4.3.3. Conclusion . . . . . . . .
Page
4.4. Managerial Personnel . . . . .
4.4.1. Formal Education . . . .
4.4.2. Record Keeping . . . .
4.4.3. Selling Goods on Credit . .
4.4.4. Banks . . . . .
4.4.5. Conclusion . . . . .
4.5. Skilled Labor . . . . . .
4.5.1. The Apprenticeship System .
4.5.2. Teaching by Family Members .
4.5.3. Vocational Schools . . .
4.5.4. Self-Teaching . . . .
4.5.5. Conclusion . . . . .
V. Summary . . . . . . . . .
5.1. Profile of the Small Enterprise Sector
5.2. Preliminary Identification of Constrai
5.2.1. Demand . . . . . .
5.2.2. Working Capital . . . .
5.2.3. Fixed Capital . . . .
5.2.4. Credit . . . . . .
5.2.5. Raw Materials . . . .
5.2.6. Management Skills . . .
5.2.7. Supply of Skilled Labor .
5.3. Recommendations . . . . . .
86
87
87
89
90
90
90
92
97
97
99
100
. . . . 101
. . . . 101
nts . . .. 102
. . . . 102
. . . . 102
. . . . 103
. . . . 104
. . . . 104
. . . . 104
. . . . 105
. . . . 105
VI. References . . . . . . . . ..
. . .. .107
List of Tables
Page
Table 1. Distribution of Localities Surveyed in Phase I . . 7
Table 2. Estimates of Employment and Number of Enterprises
in Localities Over 1,000 in Population . . . .. 11
Table 3. "Direct Employment" in Haitian SSE,
by Localitiy Size . . . . . . . ... 13
Table 4. Estimated Employment by Enterprise Type . . ... 14
Table 5. Distribution of Enterprises, by Locality Size .... .16
Table 6. Seasonality . . . . . . . .. . .17
Table 7. Percent of Small Business Entrepreneurs
with Outside Occupations . . . . . ... 20
Table 8. Lack of Seasonality . . . . . . . ... 21
Table 9. Labor Profile of Haitian Small Enterprises . . .. 22
Table 10. The Employment of Women in Haitian Small Enterprises 25
Table 11. Current Capital Structure . . . . . ... 27
Table 12. Buildings, Permanent Versus Temporary . . . ... 31
Table 13. Value of Equipment Per Worker . . . . .... 32
Table 14. Growth Indicators . . . . . . . .... 35
Table 15. Owner/Manager Perceptions of Principle
Problems Facing Haitian SSE . . . . ... 45
Table 16. Current Market Outlets for Haitian SSE Goods . . .47
Table 17. Subcontracting Done for Larger Businesses ...... 49
Table 18. The Importance of Subcontracting, by Industry .... .50
Table 19. Current Markets for Selected Small Industries .... .53
Table 20. Haitian Exports (In Gourdes) . . . . .... 54
Entrepreneurs' Perceptions of Capital Constraints
Table 21.
Table 22.
Table 23.
Table 24.
Table 25.
Table 26.
Table 27.
Table 28.
Table 29.
Table 30.
Table 31.
Table 32.
Table 33.
Table 34.
Table 35.
Table 36.
Table 37.
Initial Capital by Enterprise Type . . .
Gross Annual Investment in Machinery and Tools
Current Capital Investment Per Firm . . .
Sources and Uses of Capital . . . . .
Source of Loans Obtained in 1978, by Locality Si
Processing Time for Loans from Banks
and Caisse Populaire . . . . . .
Estimates of Potential Demand for Credit
in all Localities Over 1,000 in Population .
Proportion of Entrepreneurs Reporting
Raw Materials as a Problem, by Locality . .
Proportion of Entrepreneurs Reporting
Raw Material Supply as a Problem . . . .
Level of Schooling Completed by Owners
of Small Enterprises . . . . . . .
Proportion of Entrepreneurs with
Bank Accounts, by Locality . . . . .
Percent of Entrepreneurs Indicating
Lack of Skilled Labor as a Problem . . .
Source of Entrepreneurs' Training . . . .
Duration of Training . . . . . . .
Frequency of Different Compensation
Practices for Apprentices . . . . .
Compensation Practices for Tailoring Apprentices
. . 61
. . 63
. 67
ze . 69
. 72
. . 74
. . 82
. . 83
. 88
. . 91
. . 93
. . 94
. . 95
. . 96
Forward
This paper is one of a series of reports produced by Michigan State
University's Off-Farm Employment Project. The project, which is funded by
the Office of Rural Development and Development Administration, Development
Support Bureau, U.S. Agency for International Development, has the basic
purpose of enhancing the ability of AID missions and host country institu-
tions to identify and implement programs and policies that generate off-farm
employment and income opportunities benefiting the rural poor. One of the
major components of the project is the generation of new knowledge relating
to off-farm activities. In collaboration with host country institutions
and AID missions, detailed field surveys of small-scale enterprises are
currently being conducted in Bangladesh, Jamaica, Honduras, and Thailand;
the results of these studies will be published in this series. A second
component of the project involves the marshalling and dissemination of
existing knowledge of off-farm activities. A state-of-knowledge paper and
special studies relating to off-farm activities will also appear in this
series. Previously completed studies in this area currently available
through the Off-Farm Employment Project include:
1. Carl Liedholm, "Research on Employment in the Rural Nonfarm
Sector in Africa," African Rural Employment Paper No. 5, 1973.
2. Carl Liedholm and Enyinna Chuta, "The Economics of Rural and Urban
Small-Scale Industries in Sierra Leone," African Rural Employment Paper
No. 14, 1974.
3. Enyinna Chuta, "The Economics of the Gara (Tie-Dye) Cloth Industry
in Sierra Leone," February, African Rural Economy Working Paper No. 25,
1978.
4. Adewale Mabawonku, "An Economic Evaluation of Apprenticeship
Training in Western Nigerian Small-Scale Industry," African Rural Employment
Paper No. 17, 1979.
Copies of these papers as well as additional information on the Off-Farm
Employment Project can be obtained by writing
Carl Liedholm
Off-Farm Employment Project
Department of Agricultural Economics
Michigan State University
East Lansing, Michigan 48824
Acknowledgments
Numerous individuals and organizations cooperated in carrying out
the small enterprise survey in Haiti. The organizations which parti-
cipated in this effort are: USAID/Haiti, the Office of Rural
Development and Development Administration Development Support Bureau,
AID/Washington, the Pragma Corporation, and the Off-Farm Employment
Project of the Department of Agricultural Economics at Michigan State
University. Funding was provided by USAID/Haiti and by the Office of
Rural Development and Development Administration, Development Support
Bureau, AID/Washington. USAID/Haiti provided technical assistance
throughout the project and also provided transportation and logistic
support for the survey work. Pragma took primary responsibility for
the fieldwork and data coding. Michigan State University (MSU) took
leadership in the data analysis and in writing up the survey report.
The general methodological framework for the survey came from MSU, but
all three cooperating parties shared in designing the questionnaire for
specific use in Haiti.
A study of this sort requires cooperation in many quarters and a
number of specific individuals need to be thanked for their generous
assistance during various phases of this study. In preparations for
the survey work, Gary Smith, USAID/Guatemala offered many valuable
insights and suggestions. Enyinna Chuta offered valuable advice
throughout and guided the sample selection for the second phase of the
viii
survey. Bob Pitman and Jacques Defay of the Pragma Corporation handled
the fieldwork over difficult terrain and in the face of the Haitian
rainy season. Pere Roger Desir applied his considerable linguistic
skills in translating the Phase II questionnaire. Herb Kriesel,
Enyinna Chuta, Steve Jacobson, Peter Kilby, and Carl Liedholm were
very generous in offering their insights on various drafts of this
report. Jim Boomgard offered timely assistance with the analysis of
the survey data. Jim Pease and Micki Terwillegar provided timely typing
and technical assistance at various stages of the report preparation.
Finally, the Haitian Ministry of the Interior is to be thanked for the
cooperation they showed throughout the study.
I. INTRODUCTION
Small manufacturing and repair businesses are of widespread
importance in Haiti. Despite their importance, remarkably little was
previously known about these small firms. So little was known that a
recent ILO report on Haitian small enterprises felt obliged to begin
with a complaint about "the cruel lack of information" concerning small
enterprises (Stimbre, 1978, p. 3). The report goes on to insist that
such information would be invaluable to policy makers interested in
assisting the small enterprises. Given their great potential for employ-
ment creation and broadly-based income generation, a survey of small
enterprises in Haiti was undertaken to fill this important information
gap. The goals of the survey were twofold: (1) to determine the magni-
tude, composition, and basic characteristics of the small-scale
enterprises in Haiti, and (2) to make a preliminary identification of
major constraints facing these small firms.
For purposes of this study small enterprises are defined as those
with less than fifty workers. Among the different kinds of small firms
in Haiti, this survey concentrated specifically on small manufacturing
and repair enterprises. Retailers, traders, and services were not
enumerated, and it is important to bear this in mind while reading this
report.
Before proceeding with the results of the small enterprise survey,
it will be useful to give some general background information on Haiti
and, in particular, a brief outline of the overall industrial sector
within which the small enterprises operate. One of the most distinguish-
ing features of Haiti is its high population density. An estimated five
million people live on Haiti's third of the Caribbean island of Hispanola.
Haiti covers 27,750 km square kilometers of extremely mountainous terri-
tory. Total Gross Domestic Product (GDP) was approximately one billion
dollars in 1976, which makes GDP per capital approximately $220. Agricul-
ture accounts for 45 percent of GDP, and an estimated 75 percent of the
population works in agriculture. The principal crops grown are corn,
sorghum, sugar cane, and coffee.
The industrial sector accounts for 12 to 18 percent of Haiti's GDP.
Within the industrial sector, by far the most dynamic segment is the
assembly-goods industries, which have been established in the 1970s. These
assembly industries are export-oriented. They manufacture primarily
electronic components, baseballs, and undergarments all of which
utilize almost exclusively imported raw materials. These export-oriented
assembly industries account for 40 percent of the value added in Haitian
manufacturing and two-thirds of the formal sector industrial employment.
Agro-industries are the second major component of Haiti's industrial
sector. Older agro-industries, which process primarily local raw
materials, include the manufacturers of sugar, rum, essential oils,
twine, and leather products. More recent agro-industries, such as tex-
tiles, flour, cigarettes, and beer, utilize mainly imported inputs.
Heavy industry in Haiti is extremely small. It consists of one cement
plant and a small steel mill which produces mainly reinforcing rods used
in construction. It should be noted in conclusion that the vast majority
of Haiti's formal industry is concentrated in the Port-au-Prince area.
With this general background we turn to our report of the basic
characteristics of the small enterprise sector in Haiti. The paper is
divided into four major sections. In the first, the survey methodology,
geographic coverage, and data collection procedures are outlined. The
second section of the paper provides a broad overview of the small
enterprise sector, describing its extent, composition, and basic char-
acteristics. The third portion of the report examines in detail the
potential constraints faced by Haitian small enterprises. Specifically
discussed in this section are issues concerning the demand for small
enterprise output, capital constraints, raw materials, and management
and skilled labor problems. The final chapter of the report provides a
summary of the main findings. We turn now to our discussion of the
survey methodology as this will lay the groundwork for the subsequent
analysis of the survey results.
II. SURVEY METHODOLOGY
2.1. General Strategy
As with other small enterprise surveys in which Michigan State
University has participated, this survey was divided into two phases.
During Phase I, a census of small industries was conducted in all major
urban areas of Haiti as well as in many of the smaller rural localities.
The objective of the census was to provide a sampling frame from which a
representative sample of enterprises could be drawn for more intensive
study in Phase II. The principle difference between the Haiti survey
and other MSU studies lies in the Phase II portions. In Haiti, time
constraints necessitated a single-interview Phase II survey whereas,
in Sierra Leone, Jamaica, Bangladesh, (and soon Thailand and Honduras),
the Phase II surveys are multiple-visit, year-long data collection efforts.
In the Phase I census in Haiti enumerators traveled street by
street in each of 36 chosen localities listing all small enterprises
and their locations.2 Enumerators obtained basic descriptive information
on each enterprise information such as the number of employees, number
of machines, and a brief description of the workshop.
1The United Nations defines rural localities as those with less
than 20,000 inhabitants, and that convention is adopted in this paper.
For reasons which are explained on the following page, this survey
thoroughly covered only those localities of over 1,000 in population.
Therefore, when the term "small, rural localities" is used in this
paper, it refers to the localities between 1,000 and 2,000 in population.
2Addresses were listed where possible, but formal addresses often
did not exist. In those cases where formal addresses were not available,
a serial number was marked on the wall of the enterprise and its
location was carefully noted.
From the Phase I listing a sample of firms was drawn for study in
Phase II. At each Phase II enterprise a single one to two hour
questionnaire was administered to the owner or manager of the firm.
The information obtained in the Phase II survey was more detailed than
that obtained in Phase I. In particular, the Phase II questionnaire
covered the following topics: socioeconomic characteristics of the
owners, education and training of the owners and workers, initial capital
and its sources, a detailed inventory of current capital goods, season-
ality of the business, linkages with other sectors, perceptions of growth
patterns of the industries, detailed credit histories, management
practices, and entrepreneurs' perceptions of principal constraints faced
by the small businesses.1
The survey methodology outlined above was designed for operation
within the six month time horizon required by USAID/Haiti. The USAID
mission determined that information adequate for their project identi-
fication could be gathered within that period. The six month time
horizon did, however, necessitate two compromises of which the reader
should be aware:
1. The focus of the study was limited to the more densely settled
areas of Haiti. The sample of localities surveyed included only six from
among those with population under 1,000. Because of the time limitation,
these six were largely selected for purposes of convenience; often they
were located along main roads. In addition, these six areas account for
only .5 percent of the population living in communities of less than
1Copies of both the Phase I and Phase II questionnaires are
available upon request from the author.
1,000 inhabitants (table 1). Because of lack of representativeness it
is not feasible to extrapolate the data from these six localities to
the rest of the very small Haitian localities. In three cases we have
made extrapolations in this report, in tables 2, 4, and 28. These
extrapolations concern the number of small enterprises, magnitude of
employment, and demand for credit. It is important to realize that
these extrapolations are made only for areas of Haiti over 1,000 in
population.
2. Time required that this survey consist of a single Phase II
interview rather than a very intensive, multiple-visit investigation.
Because the Phase II was limited to a single interview, the prospects
for obtaining reliable information on flow variables such as annual out-
put, purchased inputs, and profits were exceedingly low. The difficulty
of obtaining reliable flow information from a single interview arises
since, in the absence of systematic, uniform records, one must rely on
the respondent's memory for obtaining the required information.
Generally, data relating to flow variables are subject to high measure-
ment and reporting errors since there exist large fluctuations in
seasonal activity levels and long periods of memory recall are involved.
For these reasons information on magnitude of annual output and on
profitability were not obtained from this survey.
2.2. Sample Selection
2.2.1. Localities. Thirty-six localities were enumerated in the
Phase I survey. These 36 localities were chosen in an effort to assure
geographic representation, the representation of different locality
sizes, and areas of special interest to the USAID mission. The localities
TABLE 1
DISTRIBUTION OF LOCALITIES SURVEYED IN PHASE I
Percent of
Localities Population-
Group
Locality Percent Covered In
Population of Phase I
Size Number Names Total Survey
Under 1,000 6 Recourt, Pont Sonde, -- 0.5
Estere, Les Poteaux,
La Chapelle, Ennery
1,000 2,000 7 Duvalier-Ville, Bainet, 16 21.0
Marigot, Caracol,
Plaisance, Anse Rouge,
Camp Perrin
2,000 5,000 9 Leogane, Mirebalais, 28 29.0
Lascahobas, Belladere,
Acul-du-Nord, Gros
Morne, Dessalines,
Aquin, Verette
5,000 20,000 9 Petit-Goave, Jacmel, 69 81.0
Trou-du-Nord, Limbe,
St. Marc, Hinche,
Petite-Riviere-de-
1'Artibonite, Jeremie,
Port-de-Paix
20,000 100,000 4 Cap-Haitien, Gonaives, 100 73.0
Les Cayes, Carrefour
Over 100,000 1 Port-au-Prince 100 80.0
SOURCE: Population figures are taken from the Institut Haitien de
Statistique, Resultats preliminaires du recensement general de la
population du logement et de l'agriculture, September 1971.
surveyed were: Port-au-Prince, Carrefour, Cayes, Gonaives, Cap-Haitien,
Port-de-Paix, Jeremie, Petite-Riviere-de-l'Artibonite, Hinche, St. Marc,
Limbe, Trou-du-Nord, Jacmel, Petit-Goave, Verette, Aquin, Dessalines,
Gros Morne, Acul-du-Nord, Belladere, Lascahobas, Mirebalais, Leogane,
Camp Perrin, Anse Rouge, Plaisance, Caracol, Marigot, Bainet, Duvalier
Ville, Ennery, La Chappelle, Les Poteaux, Estere, Pont Sonde, and Roucourt.
In the Phase II sample, 28 of these localities were represented.
The areas excluded from the Phase II survey were: La Chapelle, Ennery,
Duvalier Ville, Bainet, Marigot, Caracol, Dessalines, and Petit-Goave.
The size distribution of these localities is outlined in table 1.
2.2.2. Enterprises. The survey was limited to manufacturing and
repair industries with less than 50 employees. The Phase I census of
small firms yielded a sample frame consisting of 4,950 small enterprises.
That sample frame was stratified by enterprise type and size, and by
locality size. From the stratified sample frame 1,100 firms were randomly
selected for study in Phase II. In addition to the 1,100 random choices
for the Phase II sample, 200 firms were chosen in a purposeful manner in
order to ensure that the smaller industry classifications would be ade-
quately represented in the sample. Thus the firms ultimately chosen for
study in Phase II represented a cross-section of enterprise types,
enterprise sizes, and locality sizes.
2.3. Fieldwork
Including the basic survey organization, questionnaire protesting,
enumerator training and coding, the fieldwork for the entire survey
lasted from 1 October 1978 to 15 March 1979. The Phase I data was
9
gathered between 24 October and 17 November 1978. Phase II interviewing
took place between 18 January and 17 February 1979, and during that
period 1,256 questionnaires were satisfactorily completed. All
interviews were conducted in Creole.
III. DESCRIPTIVE PROFILE
3.1. Magnitude of the Small Enterprise Sector
Small-scale enterprises (SSE) are of widespread importance in
Haiti. The Phase I survey found SSE in large numbers all across the
country and at all locality size levels. In total, 4,950 enterprises
were surveyed during Phase I and these enterprises employed a total of
20,404 individuals. Since inadequate representation of localities
below 1,000 in population will not permit extrapolation to other similar-
size areas in Haiti, extrapolations of the enterprise and employment
figures are offered in table 2 for all localities of over 1,000 in popu-
lation. From these extrapolations we estimate that approximately 8,500
small-scale enterprises operate in Haitian localities with population
over 1,000 and these enterprises employ roughly 34,000 people.
In assessing the absolute magnitude of the SSE in Haiti it is
important to note that these projections undoubtedly underestimate both
the number of firms and the employment generated in Haitian small enter-
prises. This underestimation occurs because the smallest localities
(those below 1,000 in population) were not surveyed, and these areas
account for 80 percent of the population in Haiti. Furthermore, the
importance of small enterprises appears to increase in the smaller locali-
ties. The percentage of population "directly employed" by the SSE rises
ISee p.5 -for elaboration.
TABLE 2
ESTIMATES* OF EMPLOYMENT AND NUMBER OF ENTERPRISES IN
LOCALITIES OVER 1,000 IN POPULATION
Enterprises Employment
Number Estimated Number Number Estimated Number
Localities Surveyed By Locality Surveyed By Locality
Number Percent Number Percent
Under 1,000 136 --- -- 414 --
1,000 2,000 288 1,632 19 820 4,659 14
2,000 5,000 525 1,805 21 2,100 7,219 21
5,000 20,000 1,288 1,585 19 4,592 5,648 17
20,000 100,000 948 1,291 15 4,577 6,223 19
Over 100,000 1,765 2,199 26 7,901 9,876 29
Total 4,950 8,517 100 20,404 33,625 100
SOURCE: Phase I survey.
*Estimates are made by multiplying actual numbers surveyed by the
inverse of the sampling fractions for each locality size.
from 2.2 percent in Port-au-Prince to 8.4 percent in the localities with
population between 1,000 and 2,000 (table 3). Since our figures do not
include estimates for four-fifths of the population living in the
extremely small localities, and since the importance of the SSE seems to
increase in small localities, the 34,000 employment figure presents only
a partial estimate as to the aggregate importance of the SSE. The actual
importance of the SSE contribution to total Haitian employment would loom
much larger if the extremely small localities could be considered.2
3.2. Composition
The small enterprises in Haiti are involved in a wide variety of
activities from cement block making and printing shops to candy
making, tailoring, and leatherwork. Most numerous among small enterprises
are the tailors. Tailors also offer the bulk of the employment in the
SSE sector with 45 percent of those employed (table 4). Carpenters are
the second most important with 11 percent of SSE employment, followed by
1The reader is urged to consult the note in table 3 for a discussion
of potential biases in these figures.
2It would be desirable to compare SSE employment with that generated
by the large-scale industries in Haiti, however, the data do not currently
exist that would permit a satisfactory comparison. Our survey covered
enterprises employing under fifty persons. A study in the Institut
Haitien de Statistique (IHS) has studied firms that employ over 100
workers. The IHS survey found that the large firms generate a total of
24,819 jobs, mainly in the Port-au-Prince area (Institut Haitien de
Statistique, 1978). A comparison of this figure with the 34,000 we pro-
ject is not particularly meaningful. When data can be gathered on
firms employing between fifty and one hundred workers, and also gathered
for the extremely small localities in Haiti, one will be able to make
meaningful assessments of the relative importance of the large versus
the SSE sector. We signal this lacuna in the hope that some future
researchers will be able to supply the final missing data.
TABLE 3
"DIRECT EMPLOYMENT"* IN HAITIAN SSE, BY LOCALITY SIZE
Locality SSE Employment (1978)
Population Total Population (1971)
1,000 2,000 8.4
2,000 5,000 7.5
5,000 20,000 4.7
20,000 100,000 4.7
Over 100,000 2.2
SOURCE: Phase I survey and Resultats preliminaires du recensement
general de la population, du logement et de l'agriculture. Institute
Haitien de Statistique, September 1973.
*These "direct employment" percentages are biased upwards because
1978 employment figures are used in the numerator while 1971 population
figures are all that is available for the denominator. This bias should
not pose a problem given that the purpose of these figures is only to
rank the importance of small enterprises by locality size. Biases in
the locality rankings may occur because of the time lag between the
gathering of the population and employment data and because population
may be growing at different rates in the various locality size groups.
For example, it is most probable that the population of Port-au-Prince
has been growing more rapidly than the population in other areas, and
it is likely that the number of small enterprises is also increasing
more rapidly than in the other localities. Therefore our 1978 employ-
ment figures for Port-au-Prince are biased upwards compared to other
areas. Using inflated 1978 employment figures we tend to overstate the
importance of small enterprises in Port-au-Prince relative to their
importance in other localities. Therefore, if we could correct for
this bias, the trend would be accentuated.
TABLE 4
ESTIMATED EMPLOYMENT BY ENTERPRISE TYPE
(For Localities with Population Over 1,000)
Enterprises Employment
Enterprise
Type Number Percent Number Percent
Tailoring 3,956 46.4 15,210 45.2
Carpentry 990 11.6 3,664 10.9
Car repair 219 2.6 2,538 7.5
Bakery 297 3.5 2,007 6.0
Metal working 528 6.2 1,887 5.6
Shoe repair 723 8.5 1,432 4.3
Wood products 213 2.5 1,012 3.0
Machine repair 264 3.1 942 2.8
Beverage manufacture 175 2.1 893 2.7
Cement block making 145 1.7 600 1.8
Grain milling 113 1.3 431 1.3
Goldsmithing 142 1.7 406 1.2
Cloth making, nets 64 .8 376 1.1
Straw, sisal, bamboo 130 1.5 359 1.1
products
Candy making 165 1.9 316 .9
Production of soap, oils, 22 .3 276 .8
and essential oils
Tire repair 95 1.1 267 .8
Pastry shop 71 .8 190 .6
Printing 24 .3 181 .5
Leather work 49 .6 102 .3
Mattress making 24 .3 93 .3
Watch repair 53 .6 88 .3
Other 55 .6 356 1.1
Total 8,517 100.0 33,625 100.0
SOURCE: Phase I survey.
car repair with 9 percent, metal work with 6 percent, bakeries with
6 percent, shoe repair with 5 percent, and wood products and machine
repair with 3 percent.
Within each enterprise group it is interesting to note how
relative importance, in terms of employment, varies by locality size.
As table 5 shows, tailoring, carpentry, and bakeries become less impor-
tant in larger towns. On the other hand, car repair, metal work, and
machine repair are more prevalent in the large urban areas where demand
for their output is greater. Wood products (largely wood sculpture) are
also more important in large urban areas than in the rural areas; as we
shall see later, this is because of the availability of the export and
tourist markets which are centered in the large cities.
3.3. Seasonality
The vast majority of small enterprises visited experienced seasonal
fluctuations in their levels of activity.1 Of the firms surveyed,
94 percent have either a high or a low season. The high season seems to
coincide for a large number of enterprises; 63 percent of the firms indi-
cated their peak season to be in December (table 6). On the other hand,
the periods of low activity appear to be spread more uniformly throughout
the year. Even so, there does seem to be a large slump in January and
1In a single-interview survey it is difficult to obtain accurate
estimates of the magnitude of seasonal variations. To get any feel for
the size of the seasonal fluctuations requires a whole series of
questions which attempt to compare activity levels in different months.
Such a series of questions was not asked, both because of the difficulty
of obtaining reliable estimates and because it was felt the interview
time could more profitably be spent exploring other areas of interest
concerning the functioning of the small enterprises.
TABLE 5
DISTRIBUTION OF ENTERPRISES, BY LOCALITY SIZE
Locality Size
Enterprise 1,000- 2,000- 5,000- 20,000- Over
Type 2,000 5,000 20,000 100,000 100,000
Percent of Total SSE Employment -
Tailoring 46 58 49 47 32
Carpentry 14 11 12 11 9
Car repair 3 5 12 14
Metal working 5 3 5 6 8
Shoe repair 4 1 5 5 6
Bakeries 8 8 9 4 3
Wood products 3 1 1 7
Machine repair 2 1 1 2 6
Beverage manufacture 0 9 1 1 T
Cement block making 0 1 2 1 3
Milling 0 4 2 0 0
Goldsmithing 0 1 1 1 2
Cloth and net making 4 0 0 2 1
Straw, sisal, and 2 1 1 0 1
bamboo products
Candy making 2 0 2 0 1
Essential oils 3 0 1 1 0
Tire repair 1 0 1 0 2
Pastry shop 1 1 1 0 1
Printing 0 0 0 0 2
Leather work 0 0 0 1 0
Mattress making 0 0 0 0 1
Watch repair 0 0 0 0 1
SOURCE: Phase I survey.
TABLE 6
SEASONALITY
Entrepreneurs Indicating Their:
High Season Low Season
Percent Percent
January 3 23
February 2 21
March 3 7
April 1 4
May 1 7
June 2 8
July 2 14
August 1 3
September 5 2
October 10 3
November 3 1
December 63 2
Total 100 100
SOURCE: Phase II survey.
February. Forty-four percent of the entrepreneurs indicated these two
months to be their period of lowest activity.
The seasonality in small businesses is caused by several factors.
In some cases the supply of inputs used by the small enterprises varies
substantially over the course of the year. This is the case, for example,
in agricultural processing activities such as grain milling. At harvest
time the supply of inputs (grain) rises sharply and activity levels among
the small mill operators increase substantially. In other industries the
supply of inputs remains stable throughout the year, but demand for the
small industry output varies greatly over the course of the year. This
is true, for example, among tailors. Seventy-seven percent of the tailors
interviewed pointed to a high season in December, and 88 percent of them
attributed this increase in activity to the demand generated by the
festivals which occur during Christmas and New Year. Thus variations in
the supply of inputs as well as variations in demand patterns play
important roles in determining the seasonal patterns of small businesses.
In addition to fluctuations in input supply and output demand, there
exists a third possible cause of variations in small enterprise activity -
seasonal work requirements in other activities, primarily agriculture.
Alternative employment is important among the small enterprises surveyed.
Twenty-eight percent of the entrepreneurs visited were currently working
at another job. This is not surprising given that we interviewed them
in Janaury and February, months which 44 percent of them considered to be
their period of lowest activity. Of the 28 percent who were working at
another job, the single largest source of outside employment was
agriculture, which employed 31 percent.1 Given the importance of
agriculture as an outside source of employment, it is not surprising
to find that additional occupations are much more important in rural
areas than in the larger localities. Forty-five percent of the entre-
preneurs in the smaller localities work at other jobs in addition to
their small-scale enterprise, while only seventeen percent of those in
Port-au-Prince have another job (table 7). Given the importance of out-
side employment in agriculture, which is itself very seasonal, it is
easily seen how fluctuations in agricultural labor demands can be impor-
tant causes of seasonality in the small enterprise activity.
While seasonality is important for the majority of businesses,
there are several enterprises which are less susceptible to seasonal
fluctuations. It is primarily the machine repair, car repair, and print-
ing businesses which indicated no seasonality in their levels of activity
(table 8). For these industries the lack of seasonality is probably due
to consistent, year around demand for their products.
3.4. Labor Profile
The average size of the enterprises studied was quite small,
4.1 employees per firm. Firms in the large towns, though, do tend to be
larger than those in rural areas. In the smallest localities, enter-
prises employ 3 workers per firm on average while in the largest cities
the average size is 4.5 workers (table 9).
The workers in Haiti's SSE include entrepreneurs, family workers,
apprentices, hired workers, and "jobbers." Virtually all firms are owned
1The second largest source of alternative employment was retailing,
which employed 22 percent.
TABLE 7
PERCENT OF SMALL BUSINESS ENTREPRENEURS WITH OUTSIDE OCCUPATIONS
(January, February 1979)
Locality
Size
Percent
1,000 2,000
2,000 5,000
5,000 20,000
20,000 100,000
Over 100,000
SOURCE: Phase II survey.
TABLE 8
LACK OF SEASONALITY
Percent of Entrepreneurs
Enterprise Indicating:
Type
No Low Season No High Season
Percent Percent
Machine repair 21 18
Car repair 20 16
Printing 18 10
Candy making 16 7
Straw products 15 12
Wood products 14 16
Cement block making 14 12
Cloth, net making 13 19
Tire repair 12 11
Goldsmithing 9 6
Pastry shops 8 14
Bakery 7 6
Beverage manufacture 6 6
Mattress making 6 13
Metal working 6 7
Leather working 4 4
Carpentry 2 3
Tailoring 1 1
Shoe repair 1 1
Average for all firms surveyed 6 5
SOURCE: Phase II survey.
LABOR PROFILE
TABLE 9
OF HAITIAN SMALL ENTERPRISES
Total Entre- Ap-
Locality Employ- pre- Family pren- Hired
Size ment neurs Workers tices Workers Jobbers
Under 1,000 3.0 1.0 .05 .5 1.1 .06
1,000 2,000 2.9 1.0 .10 1.0 .7 .06
2,000 5,000 4.0 1.0 .20 1.8 .9 .07
5,000 20,000 3.6 1.1 .20 1.4 .9 .08
20,000 100,000 4.8 1.1 .40 2.0 1.4 .06
Over 100,000 4.5 1.1 .30 1.3 1.7 .14
Average for all 4.1 1.0 .25 1.5 1.3 .10
firms surveyed
SOURCE: Phase I survey.
by a single entrepreneur. The average entrepreneur interviewed has eight
dependents. Roughly 80 percent of the entrepreneurs are men and 20 per-
cent are women. Over half of the owners/managers have completed six
years or more of education. The majority (60 percent) received their
training as apprentices in other small enterprises, while 11 percent were
trained in vocational schools and 14 percent are working the same
line of business as their father or mother. In looking further at the
family background of the entrepreneurs, one finds that farming was by
far the most common occupation of the entrepreneurs' fathers. Many of
the mothers were also farmers (34 percent) but large numbers of them were
involved in business activity. Thirty percent of the mothers were
retailers and twenty-two percent were tailors. Slightly under half
(40 percent) of the current small business entrepreneurs were involved in
another line of work prior to opening their small business. Of these,
the most common previous occupations were farming (20 percent) and
retailing (15 percent).
Family workers are of minor importance in Haitian small enterprises.
They constitute 6 percent of SSE employment.
It is hired workers and apprentices which form the bulk of the
employment in Haitian small enterprises. Together these two groups
account for 66 percent of total SSE employment, with hired workers
accounting for 31 percent and apprentices 35 percent. The importance of
apprentices does not vary across locality sizes. Hired workers, however,
are used more commonly in large urban areas than they are in the rural
areas. In the rural areas, firms average one hired worker each, whereas
firms in Port-au-Prince employ an average of 1.7 hired workers each.
The "jobbers" constitute the smallest, but still a very interesting,
segment of the SSE work force. A jobber is a worker who possesses a
skill but no workshop or equipment. He receives orders for work and
then arranges to use the facilities of an established shop in order to
perform the requested job. Jobbers constitute only 2 percent of overall
employment in the enterprises surveyed, but that figure rises to 7.3 per-
cent in machine repair shops, 7.1 percent in wood products, and 4.5
percent for car repair businesses.
Women account for 16 percent of the employment in Haitian small
enterprises. The importance of women employees varies markedly by
industry. Of total pastry shop employment, women account for 50 percent
(table 10). Tailors are next with 30 percent, followed by manufacturers
of straw products at 27 percent. At the other extreme, carpenters employ
only 1.2 percent women, metal workers .8 percent, while the tire repair
and leather workshops surveyed employ no women. Across locality sizes,
though, the employment of women is fairly uniform.
Women are owners or managers of 18 percent of the firms surveyed.
In many respects, male and female entrepreneurs have very similar char-
acteristics. Their educational background, age, training, and the number
of employees they supervise are virtually the same. One major difference,
however, is that women entrepreneurs tend to employ many more female
workers than do their male counterparts. Among establishments run by
male entrepreneurs, only 6 percent of the workers are female, whereas
under women entrepreneurs two-thirds of the employees are female. This is
closely associated with the fact that women are concentrated in certain
industries such as pastry shops, tailoring, straw products, and candy
TABLE 10
THE EMPLOYMENT OF WOMEN IN HAITIAN SMALL ENTERPRISES
Women As A Percent Of
Enterprise Percent of Total Women
Type Employment Entrepreneurs
Pastry 50 86
Tailoring 30 43
Straw products 27 23
Cloth making, nets 25 6
Wood sculpture 24 7
Milling 22 6
Printing 16 0
Baking 16 20
Candy making 15 86
Goldsmithing 10 0
Beverage manufacture 7 6
Cement block making 3 3
Oils and essential oils 3 0
Machine repair 3 0
Carpentry 1 0
Shoe repair 1 0
Car repair 1 0
Metal working 1 0
Leather working 0 0
Watch repair 0 0
Mattress making 0 0
Tire repair 0 0
SOURCE: Phase II survey.
making. In these industries women entrepreneurs account for 86, 43, 23,
and 86 percent respectively of all entrepreneurs in those lines of
activities. It is clear from table 10 that large amounts of female
employment is concentrated .in those particular industries.
3.5. Capital Composition
In describing the capital composition of small enterprises in
Haiti, we will examine three measures of capital usage: equipment per
worker, total capital per worker, and total capital per firm.1 The value
of equipment per worker is the most accurate capital figure obtained from
the survey because enumerators made an item-by-item inventory of machin-
ery and tools in each firm visited. Estimates of total capital were also
obtained but they are less reliable than the equipment figures because
entrepreneurs gave lump sum estimates for three of the total capital
components raw materials, building, and inventory of finished goods.
By any of the three capital measures, the sums of capital required
by small enterprises in Haiti are modest. The average value of equipment
per worker currently lies between $130 and $3002 among tailors, carpenters,
metal workers, and car repair shops, four of the largest employers among
the small enterprises (table 11). This equipment per worker figure varies
more dramatically when all types of small enterprises are considered.
Equipment per worker ranges roughly from $2,200 among ice makers to $20
for manufacturers of straw products.
1Equipment is machinery plus tools. Total capital is equipment plus
building, raw materials, and inventory of finished goods.
2All capital values in this report are given in 1978 dollars. To
arrive at this current dollar valuation we used the capital price
deflators given by Zuvekas (1978, p. 6). Using these deflaters along
with original purchase price and year of purchase, one is able to reflate
the original purchase price to 1978 dollars.
TABLE 11
CURRENT CAPITAL STRUCTURE
(1978 Dollars)
Capital/Labor Ratios
Total
Enterprise t Equipment Plus Capital Per
Type Equipment/Worker Building/Worker Capital/Worker Firm
Ice making $2,161 $3,714 $3,814 $21,615
Printing 1,969 4,816 5,482 28,892
Grain milling 1,763 3,171 3,364 14,019
Heavy wood products 1,285 1,285 1,554 4,819
(boats and truck bodies)
Essential oils 919 2,321 4,428 73,803
Cement block making 429 804 1,624 10,162
Shoe repair 404 1,039 1,209 2,437
Goldsmithing 344 1,013 1,367 2,412
Car repair 294 464 654 5,248
Pastry shops 280 3,931 3,985 12,524
Metal work 272 1,094 1,230 2,633
SOURCE: Phase II questionnaire.
*Total capital is equipment plus building, raw materials, and inventory of finished goods.
tEquipment is machinery plus tools.
Table 11 continued
Capital/Labor Ratios
Total
Enterprise Equipment Plus Total Capital Per
Type Equipment/Worker Building/Worker Capital/Worker* Firm
Machine repair $257 $2,427 $2,524 $8,858
Cloth, net making 251 333 364 1,797
Beverage manufacture 243 829 1,760 17,987
Tailoring 176 1,512 1,665 7,484
Tire repair 155 156 232 866
Carpentry 126 639 816 3,302
Wood sculpture 93 135 929 7,939
Mattress making 75 829 1,033 2,296
Candy making 42 343 373 635
Straw products 18 104 385 1,540
SOURCE: Phase II questionnaire.
*Total capital is equipment plus building, raw materials, and inventory of finished goods.
tEquipment is machinery plus tools.
Total capital per worker ranges between $650 and $1,700 among
the tailors, metal workers, shoe repair shops, and carpenters. Outside
of these major 4 employers the total capital per worker varies
between a high of $5,500 in printing shops and a low of $230 among tire
repair businesses. Total capital per firm varies from $74,000 in
essential oil plants to $870 in tire repair shops.1
Part of the reason that capital costs are kept as low as they are
among small businesses is that many entrepreneurs do not own buildings.
In fact, 30 percent of the firms surveyed do not operate inside buildings.
They work outside on sidewalks or on verandas. There are certain
lIt is somewhat difficult to compare these capital figures with
those for large-scale industries in Haiti (large-scale industries are
those employing over fifty workers). In heavy industry investments
per worker are much larger than those in small enterprises. Schwartz
(1978, p. 5) maintains that investment per worker in large agro-
industries and in import substituting industries (presumably steel and
cement) ranges between $20,000 and $35,000 per worker. These figures
are an order of magnitude larger than most of the capital/labor ratios
for the small enterprises cited in table 11.
At the other end of the large-scale spectrum are the export-oriented
assembly industries which manufacture baseballs, textiles, and electronic
goods. For these large assembly industries it is not clear whether
large firms require more or less capital per worker than do the small
enterprises surveyed. Schwartz (1978, p. 5) states that in the export-
assembly industries, "capital investment per worker" ranges between
$750 and $3,500. This corresponds to the World Bank estimate that,
"average investment per employee" in enterprises created under the
industrial incentive laws is between $200 and $3,200 (World Bank, p. 21).
A mimeographed publication put out by the U.S. Commercial Library
indicates that, "average investment per assembly job is less than
$2,000" (U.S. Commercial Library, 1978, p. 1). It is difficult to com-
pare these figures with the capital/labor ratios given for Haiti's small
enterprises. The comparison is difficult because the investment figures
given for the large firms, figures such as "capital investment per
worker," are not defined. It is not clear whether they refer to equipment
per worker, fixed capital per worker, or.total capital per worker.
Furthermore, the range of values given for investments per worker is
very large. Any comparison between small firms and assembly industries
will have to be made for specific industries and this will require
additional information concerning the large assembly firms.
industries in which working from outside of a permanent building is less
common than in others. For example, in milling operations, printing
shops, bakeries, and tailoring the vast majority of the enterprises sur-
veyed operate from permanent buildings (table 12). However, in other
types of enterprises such as metal working, mattress making, cloth
making, car repair, tire repair, and cement block making over half of
the businesses interviewed are located either on sidewalks, verandas, or
outside. It should not be inferred that industries such as these, in
which large numbers of firms operate outside of a permanent structure,
are of a less stable nature than those industries which are more securely
housed. Firms operating on verandas or outside will often open for
business in the same location week after week and year after year. In
fact, 58 percent of the tire repair shops, 40 percent of the car repair
businesses, 47 percent of the metal workers, and 44 percent of the mat-
tress makers surveyed have been in business for over 10 years. These
industries operate largely outside and that clearly has not precluded
their ability to remain in business for long periods of time.
Capital usage varies not only among industries; it also fluctuates
widely within given industries. For example, tailors in the 2,000 to
5,000 person localities use only $47 worth of equipment per worker,
whereas in Port-au-Prince tailors use an average of $310 worth of equip-
ment per worker (table 13). Among metal workers, capital equipment per
worker increases from $40 in the smallest localities to $330 in
Port-au-Prince.
In both of these cases, for metal workers and tailors, the trend is
for enterprises to be more capital-intensive in the larger urban areas
TABLE 12
BUILDINGS, PERMANENT VERSUS TEMPORARY
Proportion Operating:
Outside On
Enterprise In Permanent Sidewalks Or
Type Structures Verandas
Percent Percent
Milling (sugar and grain) 95 5
Printing 95 5
Bakery 93 7
Tailoring 85 15
Pastry shops 85 15
Oils and essential oils 73 27
Machine repair 71 29
Leather products 68 32
Goldsmithing 67 33
Wood products 64 36
Candy making 63 37
Carpentry 58 42
Shoe repair 58 42
Straw products 57 43
Watch repair 57 43
Mattress making 50 50
Metal working 49 51
Cloth and net making 44 56
Car repair 47 63
Cement block making 28 72
Tire repair 22 78
Average for all firms surveyed 71 29
SOURCE: Phase I survey.
TABLE 13
VALUE OF EQUIPMENT1
PER WORKER
Locality Size
Enterprise 1,000- 2,000- 5,000- 20,000- Over
Type 2,000 5,000 20,000 100,000 100,000
1978 Dollars
Tailoring 83 47 98 124 310
Metal working 39 127 130 383 328
Carpentry 42 51 114 189 137
Shoe repair 93 200 551 331 418
Leather work -- -- 91 123 168
Car repair -- 387 279 276
Machine repair -- 455 945 149 153
Bakery 95 162 715 173 779
Candy making 17 -- 56 43 20
Straw products 22 31 14 33 19
Cement block making -- 419 389 155 478
SOURCE: Phase II survey.
NOTE: The enterprises included in this table are the only ones for
which the data base was large enough to display differing capital costs
over several locality sizes. Missing entries in the table indicate an
inadequate number of observations.
1Equipment is machinery plus tools.
than in the rural localities. This same trend prevails among many other
small enterprises. For example, carpentry, shoe repair, and leather
working shops tend to use more capital per worker in urban areas than do
their counterparts in rural localities. This trend probably results
because of the greater availability of electricity and power machines in
the major urban areas and because capital costs may well be lower in the
larger towns than in the rural areas. The lower capital costs in large
towns can result from the greater availability of low-cost credit and
lower equipment prices because fewer transport and handling costs are
incorporated into the final price. In addition, higher wages in the
cities may make capital cheaper relative to labor, creating an incentive
for the use of more capital-intensive methods of production in the large
towns.
The trend of increasing capital per worker in larger towns does
not appear to hold for all industries. For example, in machine repair
more capital per worker is used in the rural than in urban areas. This
reversal is probably due to the nature of the repair work taking place.
The repair work in the rural areas may be repair of agricultural equipment,
whereas the machine repair in the urban areas includes many light house-
hold appliances among the machines that are worked on. In other
industries such as candy making, cement block making, and the manufacture
of straw products, capital per worker is roughly constant across locality
sizes. These three industries, though, seem to be exceptions. In general,
there exist substantial variations in the amounts of capital per worker
in the small firms.
3.6. Growth Trends in Small1 Enterprises
The preceding discussion has addressed static issues: the current
structure of Haitian small enterprises and the current importance of
each of the different types of SSE. This concluding section of the
Descriptive Profile will consider the dynamics of the small enterprise
sector. In particular, an attempt is made to give some indication of how
the relative importance of different small industries may be changing
over time.
The basis for discussing growth trends in Haitian small enterprises
is table 14. Table 14 provides several sets of information which offer
indications on different aspects of small enterprise growth. The data
deal with entrepreneurs' estimates of: increases in the number of firms
per industry (column B), and indications of how their individual output
per firm has been changing (column C). Also included is information on
the age distribution of firms in each industry (column A) and on rates of
net investment in capital equipment (column D). It is important to note
that an inevitable inconvenience arises with these data because of the
fact that, of all the firms in the growth process, we are only able to
interview the survivors. Had it been possible to obtain information from
those firms which have dropped out of business, the picture presented
below might have been less rosy. This potential upward bias is particu-
larly likely with respect to the rates of net investment given in
column D. In addition to the survivor firm bias, it should be noted that,
in giving their estimates of growth trends, entrepreneurs were asked to give
lIt is important to remember that the ensuing discussion pertains
only to trends within the small enterprise segment of each industry. Firms
with more than fifty employees are not included in the analysis.
TABLE 14
GROWTH INDICATORS
A
Age
Composition
Percentage of Firms
In Business For:
1-4 5-9 10-19 Over 20
Years Years Years Years
B
Number
of Firms
Net Percentage Of
Entrepreneurs
Indicating
Increased
C
Output
Per Firm
Net Percentage Of
Entrepreneurs
Indicating
Increased
Past 5 Past Past 5 Past
Years Year Years Year
D
Rite of Net Investment
In Equipment, 1974-19783
Industry
As A
Whole
Average of
Individual
Firms'
Rates of
Investment
Percent
All enterprises (1256)
Watch repair (15)
Machine repair (55)
Essential oils (8)
Cement block making (35)
Candy making (28)
Car repair (45)
Pastry (13)
Bakery (49)
Beverage manufacture (18)
Mattress making (9)
Wood sculpture (34)
Goldsmlthing (34)
Metal working (74)
2.4
- 5.6
- 1.3
4.1
-21.0
1.0
-17.0
- 2.0
5.9
- 4.5
1.0
3.7
2.3
6.3
-19.0
8.9
1.0
12.9
1.2
-22.0
- 5.8
- 6.6
.0
- 4.5
46.8
- 5.6
Table 14 continued
Straw products (44)
Tailoring (378)
Printing (11)
Cloth, net making (17)
Heavy wood products (9)
Milling (36)
Shoe repair (128)
Carpentry (74)
Leather working (24)
Tire repair (19)
28 28 17 28
27 25 26 20
27 18 36 18
24 29 29 18
22 11 22 44
20 26 26 29
17 16 27 38
14 21 29 36
13 29 17 42
0 42 26 31
0 -2
28 33
9 18
35 35
45 22
16 30
2 -9
30 10
-25 8
5 26
6 -15
13 -15
18 0
18 6
45 0
19 -19
12 -45
19 -23
- 6.3 11.0
7.1 7.7
--- ---
13.8 -38.9
.5 2.6
.5 2.1
2.8 2.0
- 4 -21 -11.3 7.5
11 -16
- 4.3
SOURCE: Phase II survey.
1Column B is defined as the percent of entrepreneurs indicating an increase in number of firms
entrepreneurs indicating a decrease. Each entrepreneur gave estimates only for his/her industry and
or neighborhood. Note that this column says nothing about the magnitude of the increase or decrease
positive number only indicates that more entrepreneurs lived in localities with an increasing number
localities with a decreasing number of firms.
minus the percent of
for his/her own locality
in number of firms. A
of firms than lived in
2Column C is defined as the percent of entrepreneurs indicating that their own output had increased minus those indicating
their output had decreased. A sample calculation is performed in paragraph 2, page 37.
3Column D is defined as the rate at which new equipment is purchased =9 4 k- /5 minus the rate of depreciation
(annual depreciation/K) of the total stock of equipment. Straight-line depreciation is used. The first figure, for the industry
as a whole, computes the net investment rate when the entire industry is considered as a single unit. The second figure, the
average of individual firms' rates of investment, computes net investment rates for each firm and then averages those rates. See
page 39, paragraph 1 for a description of how to interpret the two figures.
only directions, not magnitudes. Thus for estimates of changes in the
number of firms and output per firm the figures in table 14 (columns B
and C) give only rough indications of the direction of change. With
these two caveats in mind, we turn to an evaluation of the figures in
table 14. When used judiciously the four sets of data information pro-
vided can offer important insights into growth trends in Haitian small
enterprises. The information is particularly useful for constrasting
trends among different industries.
3.6.1. Aggregate SSE Growth. The small enterprise sector in
Haiti appears to be growing over the medium run, that is, over the past
five years. Looking at the aggregate of all small enterprises, entre-
preneurs indicate that both output per firm and the number of firms have
increased over the past five years. There has been a positive net rate
of investment in capital equipment over the past five years; the rate
of increase in equipment has been 6.3 percent per year for the average
firm. Apparently increases in output per firm are due at least in part
to increased capitalization of the small firms.
Looking at the short-run, it appears that 1978 was perceived to be a
difficult year for the small enterprises in Haiti. While 28 percent of the
firms interviewed indicated that their output had increased last year, 41 per-
cent indicated declines in output.1 Adopting the convention used in table 14
we can say that a net of 13 percent of the firms indicated their output had
decreased.
The age distribution of small firms indicates that there are large
numbers of experienced firms currently operating in Haiti. Three-fourths of
1The remaining 31 percent indicated their output was stable or that
they were too new to respond.
the small enterprises surveyed have been in business for over five years,
half have been in business over ten years, and one-fourth of the small firms
have been producing for more than twenty years. In the aggregate, the small
enterprises appear to be growing on all fronts in terms of number of
firms, capital stock, and in terms of output per firm.
As always, the average figures mask considerable variations among
trends in different industries. We turn, therefore, to look at certain spe-
cific industries. The enterprises discussed below were selected for two
reasons: either clear judgements could be made about their growth records,
or they account for such a large proportion of SSE employment that they can-
not be ignored. Of the industries selected for comment, the growth industries
appear to be machine repair, cement block making, car repair, wood sculpture,
and tailoring. The moderate gainers appear to be metal working, shoe repair,
and carpentry. The declining small industries seem to be leather working
and bakeries.
3.6.2. Machine Repair. The machine repair industry offers clear
indications of growth. Large numbers of entrepreneurs have been moving into
the machine repair business in recent years. So many have been entering the
industry that fully 44 percent of the firms interviewed were less than five
years old and 70 percent have been in business for 9 years or less.1
lit is recognized that large numbers of new firms do not necessarily
imply that an industry is growing. It is possible that failure rates are
even higher than the entry rates, and that the industry is in fact de-
clining. What large numbers of young firms does indicate is interest on
the part of entrepreneurs, and ease of entry and movement into an indus-
try. Where this movement into an industry occurs along with an increase
in the number of firms and in output per firm (as in machine repair) we
consider this to be a sign of growth within an industry. On the other
hand, in the bakery industry there are also large numbers of new firms
being established, but the total number of firms in the industry appears
to be declining. Drop-out rates apparently exceed the rate of new firms.
In this case large numbers of new firms are not a sign of growth in the
industry.
Entrepreneurs indicate that the total number of machine repair firms has
increased over the past five years. Even with the increasing number of firms
it appears that the older firms (those in business for over five years) have
still been able to increase their individual output over that period.
At 8.9 percent the average rate of investment in equipment is among
the largest of all small industries. Only industries such as straw pro-
ducts, goldsmithing, and candy making, which start from very low bases,
have invested faster than the machine repair shops. To arrive at the
8.9 percent figure, rates of investment are computed for each firm and
then the rates are averaged together. This procedure gives small firms
and large firms equal weight, and the figures computed in this fashion
are the second figures listed in column D of table 14. However, invest-
ment rates can be computed in a different manner. The first figure in
column D is computed in this different fashion where the capital for all
machine repair shops is lumped together and a net investment rate is com-
puted for the industry as a unit. When the capital is aggregated in this
manner, changes in capital in the larger firms carry more weight than
those among the small firms. Under this aggregate, industry-wide
calculation there appears to be a slight, 1.3 percent, rate of disinvest-
ment in capital stock. Since aggregate industry investment (where larger
firms have a greater weight) is slightly negative and the average of
individual firms' rates of investment (where small and large firms have
equal weight) are large and positive, it is clear that the large firms
are net disinvestors while the small firms are increasing their stock of
equipment quite rapidly.
Indications are that the machine repair industry is growing both in
terms of number of firms and in output per firm. In terms of stock of
equipment, the larger small-scale firms are net disinvestors while the
smaller firms are investing at a rapid rate.
3.6.3. Cement Block Making. The cement block making industry also
appears to be growing over the short- and medium-run. Large numbers of
entrepreneurs have been investing in the cement block making industry in
recent years. Forty-three percent of the firms have begun operations in
the past five years and seventy-five percent have been in business for
nine years or less. These large numbers of newly established firms make
the cement block industry the youngest of all the small industries.
As with machine repair, the total number of cement block making
firms appears to have increased over the past five years. Output per firm,
though, appears to have remained roughly constant over that period. Rates
of investment in equipment have been moderate but positive.
An indicator of short-run strength in the cement block making
industry is the fact that the majority of cement block makers did not
complain of a downturn in their activity levels last year. This is in
marked contrast to the large majority of industries which felt 1978 to
be a poor year. While bakers, metal workers, carpenters, shoe repair
shops, and even tailors and car repair shops fell prey to the short-run
downturn, the cement block makers continued to increase their output.
One suspects that it is the existence of a local cement plant in Port-au-
Prince as well as a strong demand for construction materials which have
allowed the cement block makers to grow in recent years.
3.6.4. Car Repair. The growth indicators in the car repair industry
are very similar to those in the machine repair and cement block making
businesses. The more established firms have been increasing their output
over the past five years and still there has been room for substantial
numbers of new firms to enter the trade; 39 percent of the firms visited
have been established in the past five years. The total number of firms
appears to have increased over that time span. Rates of investment in the
car repair businesses have been positive but small, indicating that
increases in output per firm may be resulting from the additional
utilization of labor.
3.6.5. Wood Sculpture. Wood sculptors also appear to have been
doing well. There are large numbers of young firms in the business indi-
cating that it is attracting new entrepreneurs. In addition, both the
number of firms and individual firm output have been growing over the past
five years. The small wood sculpture firms have been net disinvestors in
capital while the large firms have increased their stock of equipment
slightly. Given the low net rate of investment in equipment it would
appear that, as in the car repair business, increases in output per firm
may be the result of increasing labor utilization.
3.6.6. Tailoring. Tailoring is the largest of Haiti's small
industries and business in this line appears to be increasing over time.
There are clear indications that both the number of firms and the output
per firm have increased over the past five years. In addition, investment
rates appear to be high among tailors, higher than in most other industries.
The main cause for concern in reviewing the tailoring industry lies in the
fact that many firms felt their output had declined over the past year.
This implies that the tailoring industry may be susceptible to short-run
fluctuations in general economic conditions. Despite this sensitivity to
short-run downturns, the tailoring industry appears to be strong over the
medium- to long-run. Over the past five years small tailoring firms have
been growing in numbers in terms of output per firm and in terms of total
capital stock.
3.6.7. Metal Working. Both the number of firms and output per
firm have increased over the past five years among metal working firms.
Reinvestment figures indicate that small firms have been net disinveStors
in equipment while the larger metal working firms have increased their
stock of equipment moderately over the past five years.
3.6.8. Carpentry. The carpentry firms constitute a rather old
industry; 36 percent of the firms have been in business for over 20 years
and there are very few new firms. Only 14 percent of the carpenters have
been established in the past 5 years. This small number of new firms, com-
bined with entrepreneurs' estimates that the total number of carpentry
firms has been increasing, implies very low drop-out rates among carpen-
ters. Output per firm appears to have increased over the past five years,
and rates of capital investment have been positive but small. Many
enterprises felt their output had declined last year indicating perhaps
a sensitivity to short-run economic downturns.
3.6.9. Shoe Repair. Trends in the shoe repair industry are very
similar to those in carpentry. There exist large numbers of very old
shoe repair shops. Thirty-eight percent of the shops have been in busi-
ness for over twenty years, and the number of new firms entering in the
past five years has been small. Only 14 percent of the current firms have
begun business within the past 5 years. Output per firm has increased
over the past five years and the net rate of investment in equipment has
been small but positive. As with carpenters, shoe repair shops appear to
be sensitive to short-run downturns in activity.
3.6.10. Leather Work. Even more clearly than the bakers, small
leather workers in Haiti appear to be on the decline. The number of firms
seems to have dropped noticeably in the past five years; even output per
43
firm has declined. Very few entrepreneurs are getting into the leather
working business and a huge proportion, 42 percent, have been in business
for over 20 years. Rates of investment in capital equipment, strongly
negative, are among the lowest of any industry.
This concludes the descriptive overview of small enterprises in
Haiti. Having discussed the current structure of small enterprises as
well as past growth trends, we turn to examine factors which can constrain
the future growth of small-scale firms.
IV. POTENTIAL CONSTRAINTS FACING HAITIAN SMALL ENTERPRISES
A major goal of this study is to make a preliminary identification
of constraints faced by small-scale industries in Haiti. A useful way to
launch such a discussion is to look briefly at what entrepreneurs them-
selves perceive to be their principal problems; table 15 summarizes their
concerns. Lack of machines and tools, and cash limitations are clearly
perceived to be the most important problems facing the small entrepreneurs.
Insufficient demand, shortage of raw materials, lack of credit, and lack of
working space are also of concern. The variation in these problems across
regions, locality sizes, and across industries will be examined in the
following sections where each type of problem is examined individually.
As a framework for analyzing the constraints faced by small
entrepreneurs we will look first at demand constraints faced by the small
firms and then turn to supply problems. On the demand side current and
potential markets for SSE products are examined and an attempt is made to
evaluate their potential for growth. On the supply side a look is taken
at the inputs used by small enterprises inputs such as capital, credit,
management skills, trained labor, and raw materials. Attention to the
supply side is important as bottlenecks associated with any of these.
inputs can hamper the growth of the small enterprise sector. Each of the
potential supply and demand constraints will be examined in turn, and
the first constraint to be discussed is that of demand for the small
enterprise output.
TABLE 15
OWNER/MANAGER PERCEPTIONS OF PRINCIPLE PROBLEMS FACING HAITIAN SSE
Owners/Managers
Owners/Managers Listing This As
Listing This Most Important
Problem Problem Problem
Percent
Lack of machines and tools 62.8 20.2
Cash 41.4 38.1
Insufficient demand 35.1 8.7
Shortage of raw materials 31.9 5.6
Lack of credit 27.7 7.7
Lack of working space 25.0 5.2
Lack of electricity 16.7 .9
Lack of storage space 13.4 1.0
Lack of skilled labor 10.3 1.6
Transportation problems 5.8 .3
Maintenance and spare parts 5.7 .9
SOURCE: Phase II survey.
4.1. Demand as a Potential Constraint
Demand is the first constraint considered because it is so
fundamental. Industries can function with poor quality machines and
credit shortages, but they cannot survive without a market for their pro-
ducts. Limitations of the market tend to prescribe limits for the scope
of small enterprise activity.
Thirty-five percent of the entrepreneurs surveyed listed demand as
one of their major problems. The demand problem was prevalent across all
industries and was deemed particularly acute in the leather goods industry
where 63 percent of the entrepreneurs mentioned it, and among bakers
where 41 percent complained of demand inadequacies. Demand appears to be
least important in the car repair and machine repair business where 22 to
24 percent of the firms expressed concern.
In reviewing the role of demand our first task is to determine where
the current demand lies. Table 16 indicates, by locality size, the nature
of current market for Haitian SSE products. With table 16 as a starting
point we will explore the demand issue in detail considering three major
sources of demand: (1) consumer demand in Haiti, (2) subcontracting
demand by larger businesses, and (3) export demand.
4.1.1. Consumer Demand in Haiti
4.1.1.1. Local Consumer Demand. Local consumers provide
the major market outlet for products of Haitian small enterprises. Eighty-
four percent of the businesses interviewed sell to local consumers, and
this dependence on local incomes is stronger in the smaller, rural areas
where export and tourist markets are less readily available. Local
traders are also an important source of demand in the smaller localities.
TABLE 16
CURRENT MARKET OUTLETS FOR HAITIAN SSE GOODS
Locality Local Local Outside
Size Consumers Traders Traders Exporters Tourists Other Total*
Percent of Enterprises which Sell to Each Source
All Haiti 84 13 17 4 2 56 175
Under 1,000 93 25 29 36 189
1,000 2,000 76 18 22 51 169
2,000 5,000 87 21 18 58 183
5,000 20,000 88 6 17 3 1 59 174
20,000 100,000 89 15 9 1 2 59 175
Over 100,000 78 12 19 6 4 54 174
SOURCE: Phase II survey.
*Entrepreneurs were allowed up to three answers which is why the total percent can exceed
one hundred.
To the extent that these local traders circulate the SSE goods within a
single locality, their importance in the rural areas reinforces the con-
clusion that small enterprises in the rural areas are highly dependent
on local incomes as a source of demand for their goods.
4.1.1.2. Consumer Demand in Other Localities. There is
considerable mobility of small-scale industry goods across Haiti. Thirty
percent of the enterprises sell to traders, seventeen percent of whom are
outside traders, indicating that trade with other localities is not uncom-
mon in Haitian SSE. Bakeries (47 percent), leather work (38 percent), and
grain mills (33 percent) are the enterprises most heavily involved in
trade with other localities.1 With the exception of the service industries
such as car, tire, and machine repair, considerable mobility exists in all
the other types of enterprises as well.
Consumer demand within Haiti both local consumers and the demand
from other localities is of crucial importance for the small enter-
prise. Given the dependence on consumer demand and assuming a positive
income elasticity of demand,2 the growth of incomes in Haiti becomes a
crucial determinant of the growth prospects in Haitian small enterprises.
The limited data available indicate that, from 1960 to 1967, real per
capital annual GDP fell slightly; since 1967 it has grown at a rate of
about 1.3 percent per year (Zuvekas, 1978, p. 2). The data on which these
1Straw products (38 percent) and wood sculpture (26 percent) are
also heavily involved in outside trading, but as we will see shortly, this
is primarily due to export demand rather than to the demand generated by
consumers in other localities.
2Indeed evidence from other countries reveals that these coefficients
'e positive. See, for example, King and Byerlee, 1977.
income projections were made is admittedly weak, but in the absence of
any other information, these figures are sobering. The growth of local
incomes is of critical importance to the future growth prospects for
small industries in Haiti.
4.1.2. Subcontracting. Another component of the local market
demand for SSE goods is that afforded by larger businesses. A major
reason for interest in this question of the demand relationship between
small and large industries is the fact that in other countries, notably
Japan, subcontracting arrangements between smaller and larger firms have
been very important in the growth of small industries. Subcontracting can
be an important potential source of demand for SSE products.
On average, 7 percent of the small firms interviewed do subcontracting
work for larger businesses. However, as table 17 shows, the demand
generated by the larger businesses is clearly much greater in the
TABLE 17
SUBCONTRACTING DONE FOR LARGER BUSINESSES
Percent of Total Enterprises Surveyed
Which do Subcontracting for
Locality Size Larger Enterprises
Under 1,000 0.0
1,000 2,000 4.1
2,000 5,000 4.0
5,000 20,000 4.3
20,000 100,000 8.7
Over 100,000 9.8
SOURCE: Phase II survey.
larger towns than in the rural areas. None of the enterprises surveyed in
the smallest localities were involved in subcontracting work whereas almost
one-tenth of the firms in Port-au-Prince were so engaged. The bulk of the
larger industries are located in the larger towns, particularly in Port-au-
Prince, and so it is not surprising that the demand generated by larger
industries is more prominent in the larger cities.
The importance of subcontracting varies not only by locality size;
it also varies considerably by industry type (table 18). Tailors and shoe
TABLE 18
THE IMPORTANCE OF SUBCONTRACTING, BY INDUSTRY
Percent of Enterprises Surveyed
Which do Work Under Contract
Enterprise Type For Larger Enterprises
Wood products 20.9
Machine repair 20.0
Cement block making 20.0
Straw products 13.0
Car repair 13.0
Metal work 10.8
Carpentry 6.2
Shoe repair 3.9
Tailoring 2.4
All other
Average 7.0
SOURCE: Phase II survey.
repair shops do essentially no subcontracting work for larger firms.
However, for wood products, machine repair, and cement block making
roughly 20 percent of the small firms do contract work for bigger enter-
prises. For straw products, car repair, metal working shops, and
carpenters there is also a high frequency of subcontracting work done for
larger firms.
Of the five industries in which subcontracting is most important,
four were tagged as growth industries in our evaluation at the end of the
Descriptive Profile. It is very possible that the subcontracting demand has
played a role in the expansion of those four enterprises wood products,
machine repair, cement block making, and car repair. If so, further
exploration of these subcontracting arrangements would be of crucial
importance in industrial policy making because where complementarities
exist between large and small enterprises the two sectors can grow in
tandem. In the cement block industry one suspects that large construction
firms buy the small firms' blocks to use in their building projects. How-
ever, the relationship between larger enterprises and machine repair shops,
car repair shops, and metal working firms is less clear. Exploration of
these relationships could well lead to identification of the areas in
which large and small industries are complementary, and the identification
of these complementarities would be extremely useful in planning any
industrial programs.
4.1.3. Export Demand. The export market represents another
important outlet for Haitian SSE goods. From table 16 we saw that sales
to tourists and exporters are made directly by only 6 percent of the firms
1See, for example, Watanabe 1974 and 1979.
interviewed. However, this modest aggregate figure masks the fact that
the export market is very important for certain of the small enterprises.
For example, wood sculpture and straw products depend heavily on the
export market. Sixty-five percent of the wood sculptors and twenty-three
percent of the producers of straw products sell directly to exporters and
tourists (table 19). In addition, 38 percent of the straw weavers and
26 percent of the wood sculptors sell to long distance traders and a large
percentage of these wood and straw items probably flow into the export
market. Considering the traders, exporters, and tourists it is clear that
the export market is of prime importance to the straw and wood sculpture
enterprises.
Export growth has the important advantage that it is not limited by
the rate of growth of the local market; in fact, growth in Haiti's indus-
trial sector in the past ten years has been paced largely by the growth of
export industries. The recent World Bank Mission to Haiti has stated,
"They (the export industries) played a dominating part in changing the
face of Haiti's manufacturing sector" (World Bank, 1978, p. 21). The
export of light manufactures (petite industries) has skyrocketed in recent
years as can be seen in table 20, and these light manufactures are made up
of two distinct groups: (1) small-scale industry exports, and (2) large-
scale,l primarily assembly type industries.
1That the assembly industries are large-scale is verified by the
observation that one-half of all firms in Haiti employing over 100 persons
are involved in assembly-type export industries. This calculation is
based on a report by the Institut Haitien de Statistique (IHS, 1978). In
addition, the recent World Bank Mission to Haiti indicates that the
average size of the assembly industries established between 1973 and 1977
is 89 workers (World Bank, 1978, p. 177).
TABLE 19
CURRENT MARKETS FOR SELECTED SMALL INDUSTRIES
Enterprise Local Local Sub- Outside
Type Consumers Traders contracting Traders Exporters Tourists Total*
Percent
Wood sculpture 46 21 21 26 44 21 179
Straw, sisal, and 72 21 13 38 17 6 167
bamboo products
Metal working 84 16 11 20 3 0 134
Tailoring 88 6 2 10 2 2 110
Carpentry 87 3 6 12 1 0 109
Car repair 89 4 13 4 0 0 110
Machine repair 91 6 20 6 0 0 123
SOURCE: Phase II survey.
*Entrepreneurs were allowed up to three answers which is why the total can exceed one
hundred.
TABLE 20
HAITIAN EXPORTS (IN GOURDES)1
Exports of Light Manufactures2
Major Assembly Industries (Large-Scale) SSE3
Total
Total Light Leather Electrical Straw & Sisal Wood Total % of Light
Exports Manufactures Baseballs Goods Assembly Underwear Baskets Handbags Articles SSE Hfg Exports
1975/76 587,668,875 155,460,631 68,221,098 11,732,440 11,330,379 6,222,850 4,038,709 1,768,790 4.113,986 19,689,849 12
1974/75 405.894,093 129,008,365 45.132,418 10.872,110 11,914,028 4,411,624 1,283,752 620,556 2,801,504 11,166.221 9
1973/74 356,665,755 92.245,102 26,193,000 11,112,000 5,347,000 981.000 214,000 40,000 3,524,000 11,200,000 12
1972/73 256,544,378 103,071.505 --- 4.895,000 2,842,000 249,000 10,000 10,000 2,282.000 9.159,000 9
1971/72 211,534,983 78,567,869 --- 3,668,000 2,954,000 515,000 --- 29,000 2,176,000 9,057,000 12
1970/71 241,144,820 NA 10,025,000 2,550.000 1,136,000 1,954,000 23,000 130,000 1,401,000 10,160.000
1969/70 202,583,382 NA 4,441,000 7,697,000 --- 3,435,000 9,000 2,000 1,535.000 8,120,000
1968/69 186,280,755 NA 2,008,000 4,961,000 --- --- 4,000 4,000 751,000 9,924,000
SOURCE: Le Commerce Exterieure d'Haiti. Department de Finances et des Affaires Economlques. Various issues.
1Five gourdes equal one U.S. dollar.
2Light manufactures Is a translation of "petite industries "
3SSE products included all straw articles, sisal (except for string and fishing nets), wood articles, decorative items, items of shell, necklaces,
and paintings.
We will examine first the exports from small-scale enterprises
using official export data published by the Haitian government. According
to these official trade statistics SSE exports have doubled since 1968
(table 20) and this large growth rate is primarily due to the rapid
increase in exports of straw and wood articles. These data, therefore,
corroborate the Phase II results which point to wood and straw articles
as the most important of the SSE exports.
Turning to the large-scale, assembly goods exports we see
spectacular increases over the past eight years. Baseball exports alone
rose from virtually nothing in 1968/69 to over 11 percent of total
Haitian exports in 1975/76. Electrical assembly, undergarments, and
leather goods have increased rapidly as well. Roughly 200 of these
large-scale export industries have been established since 1971 (World
Bank, 1978, p. 21). Their importance in Haiti is undeniable.
It is important to realize, though, that the assembly goods exports
have benefited from substantial amounts of assistance which was not avail-
able to the SSE sector. For example, the assembly goods industries enjoy
considerable financial support from U.S. investors. Over 40 percent of
the large-scale export firms are either partially or wholly owned by U.S.
investors (Commercial Office, U.S. Embassy, 1978, p. 1). Furthermore, the
large-scale exporters enjoy enormous tax and tariff exemptions which the
SSE do not. As an illustration, the price a small entrepreneur pays for
a sewing machine includes a 30 percent tariff duty (10.6 percent under
GATT). The prices for saws, files, and other hand tools used by wood
sculptors include a 1.1 gourde per kilo import duty (.9 GATT). In
1Republique d'Haiti.
contrast to the small enterprises, many of the large-scale assembly
industries receive complete exemption from import duties on their equip-
ment and raw materials. Thus the small enterprises are at a considerable
cost disadvantage in many areas.
The substantial increases in SSE exports have been achieved without
the benefit of any public intervention or outside support. Not only have
they received no outside support, the SSE have operated under price handi-
caps due to input prices which are inflated by tariff duties. Given the
fact that small industry exports have doubled in the past ten years
despite these unfavorable conditions, there may well exist room for a major
boost to SSEs through tariff adjustment and export promotion.
4.1.4. Conclusion. There are three principal sources of demand for
the products of Haitian small enterprises consumer demand in Haiti
(local demand and consumer demand in other localities), subcontracting
demand by larger firms, and export demand. Most small enterprises depend
heavily on consumer demand within Haiti. However, firms with additional
market outlets either subcontracting or export markets tend to fare
better than those enterprises whose markets are limited solely to local
consumers. Of the five industries in which subcontracting and export
demand were the most readily available, four were classified as growth
industries. Clearly, demand plays a crucial role in fostering the
growth of small enterprises.
Having reviewed the demand for SSE products we turn to take an
in-depth look at the supply side and the various inputs which can constrain
the development of small enterprises. We look first at capital and credit
and then move on to raw materials, and managerial and skilled labor inputs.
4.2. Capital Constraints
In discussing the issue of capital constraints we will examine
several related topics: fixed capital, working capital, and credit.
Entrepreneurs perceive all three to be major problems. When asked to list
their most important problem, 40 percent of the entrepreneurs listed cash
(working capital) as their most pressing concern, while 20 percent men-
tioned machinery and tools (fixed capital), and 8 percent considered
credit to be their major concern (table 21). All three potential problems,
fixed capital, working capital, and credit, are of major concern in
Haitian small enterprises.
TABLE 21
ENTREPRENEURS' PERCEPTIONS OF CAPITAL CONSTRAINTS
Percent of Entrepreneurs Listing:
Most Important
Problem Problem
Cash 48 56
Machinery and tools 20 63
Credit 8 28
SOURCE: Phase II survey.
The distinction made between working capital and fixed capital is
very important. Entrepreneurs indicate cash (working capital) to be their
most important problem, and their actions underline that concern. Of the
entrepreneurs who borrowed money last year, 87 percent used the borrowed
funds to purchase raw materials, a short-term expenditure of working
capital. Only 13 percent of those who borrowed spent the funds on fixed
capital goods such as machinery and equipment. Working capital is clearly
an important problem; when the entrepreneurs had to go outside of their
business for financial support, the support they received was in the form
of short-term working capital.
The working capital problem is of prime importance in small
enterprises; it is very difficult, however, to identify the ultimate
cause of working capital shortages. Working capital shortages are often
symptoms of more basic underlying problems. For example, a raw material
supply problem can easily manifest itself as a working capital shortage.
Consider a small town where raw material delivery occurs only once every
three months. The small entrepreneur is required to tie up large amounts
of cash in procuring his three-month supply of raw materials. He is short
of cash for other short-term expenses, and thus, what is really a problem
of raw material supply, surfaces as a working capital problem. Similarly,
unsteady demand can cause working capital shortages. During a period of
slack demand an entrepreneur must still pay fixed costs, and maintain some
stock of raw materials and perhaps a stock of finished goods without the
inflow of revenue from the sale of his product. In such cases insufficient
demand can manifest itself as a working capital problem. In similar
fashion management problems, credit shortages, and a host of other problems
can cause working capital shortages.
Before attempting to sort out these commingled effects and before
evaluating the severity of each type of capital constraint it will be
necessary to look briefly at the current capital structure of Haiti's small
enterprises. In reviewing the capital composition of the small enterprises
we will look first at the current demand for capital among small enter-
prises. We then turn to sources available for supplying those capital
needs. We conclude the capital section by attempting to assess the
severity of the three types of capital constraints.
4.2.1. Demand for Capital
4.2.1.1. Initial Capital. The first demand faced by new
firms is initial capital. The initial capital requirements for equipment
and raw materials range between $6,243 for milling operations and $109 for
candy makers (table 22). The major small industries such as tailoring and
carpentry require $480 each on average.
4.2.1.2. Subsequent Investment. Once in business additional
demands for capital arise for purposes of replacement and expansion.
Table 23 displays data concerning these ongoing expenditures in machinery
and tools. From these data for the years 1974 to 1978 it is evident that
fixed capital expenditures vary considerably from year to year and from
enterprise to enterprise. Table 23 is useful for giving an idea of the
order of magnitude of annual equipment expenditures in small enterprises.
The carpenters interviewed spend an average of $56 per year on machinery
and tools. For tailors, that same figure is $103; for car repair shops
an average of $248 is spent annually on tools and machinery.
4.2.1.3. Current Capital Stock. The initial capital and
subsequent investments determine the current size of the capital stock
of small enterprises. Currently those capital stocks range between
$24,0001 per firm among essential oil producers, and $900 per firm for
1These figures are obtained by reflecting original purchase prices
to 1978 dollars.
TABLE 22
INITIAL CAPITAL BY ENTERPRISE TYPE
(In 1978 Dollars)
Average Initial Expenditure Per
Enterprise Enterprise for Equipment
Type and Raw Materials
Milling (sugar and grain) $6,243
Printing 4,865
Ice making 4,169
Oils and essential oils 3,606
Beverage manufacture 2,076
Bakery 2,076
Heavy wood products 1,747
(boats and truck bodies)
Car repair 1,525
Cement block making 1,513
Wood sculpture 1,235
Cloth making, nets 1,119
Machine repair 815
Metal working 734
Shoe repair 492
Tailoring 480
Carpentry 479
Goldsmithing 474
Pastry shops 431
Tire repair 305
Mattress making 299
Straw products 291
Leather working 235
Candy making 109
SOURCE: Phase II survey.
TABLE 23
GROSS ANNUAL INVESTMENT IN MACHINERY AND TOOLS
(In 1978 Dollars)
Average Expenditure Per Firm
Enterprise 1974-
Type 1974 1975 1976 1977 1978 1978
Tailoring $ 52 $121 $184 $ 59 $101 $103
Carpentry 54 15 118 25 68 56
Metal working 179 98 37 63 273 130
Goldsmithing 5 38 220 15 25 61
Shoe repair 129 27 145 14 32 69
Leatherwork 2 6 20 5 9 8
Straw products 3 0 19 16 20 12
Wood sculpture 84 33 38 168 110 87
Cement block making 127 233 4 817 261 288
Bakery 512 17 226 33 224 202
Beverage manufacture 0 0 620 576 263 292
Candy making 3 1 6 2 31 9
Grain milling 299 1071 373 3 101 369
Car repair 408 183 258 50 340 248
Machine repair 66 35 62 46 121 66
Tire repair 43 0 16 10 11 16
SOURCE: Phase II survey.
tire repair shops (table 24). Carpenters and tailors surveyed had capital
stocks of $3,300 and $2,500 respectively.
Current capital stock can be broken down into its constituent parts
in order to give a rough feel for the magnitude of fixed versus working
capital requirements in small enterprises. The required breakdown of the
capital stock is displayed in table 24.1 It must be emphasized that these
stock figures represent only a snapshot of the capital stock that was pre-
sent the day each firm was interviewed. These figures may not be truly
representative since raw materials and the inventory of finished goods in
particular fluctuate dramatically throughout the year. As a second quali-
fication it should be noted that we do not have data on cash on hand which
is another important component of working capital. Keeping these qualifi-
cations in mind, table 24 can provide a crude indication of the magnitude
of working capital versus fixed capital requirements in small firms. For
example, it appears that essential oil plants require relatively large
amounts of working capital they average over $35,000 per firm in raw
materials and inventory of finished goods. This amounts to 47 percent of
their total capital. On the other hand, candy makers average only $51
worth of raw materials and finished goods which means that these components
of their working capital come to 8 percent of the total capital stock.
Tailors possess about $700 worth of raw materials and finished good
inventories and these come to 9 percent of their total capital stock.
1As was mentioned previously, in this breakdown machinery figures
are much more accurate than those for buildings, raw materials, and in-
ventory of finished goods. This is because we took a complete inventory
of machinery and tools while the entrepreneurs gave only lump-sum
estimates for values of their buildings, raw materials, and finished
good inventories.
TABLE 24
CURRENT CAPITAL INVESTMENT PER FIRM
(Original Cost Reflated to 1978 Dollars)
Inventory Of
Enterprise Raw Finished
Type Machinery Building Materials Goods Total
Printing $10,383 $15,000 $ 3,340 $ 169 $28,892
Grain milling 7,346 5,868 312 492 14,019
Heavy wood products 3,998 0 681 140 4,819
Ice making 12,245 8,800 430 140 21,615
Machine repair 903 7,614 245 96 8,858
Car repair 2,362 1,362 1,315 209 5,248
Cement block making 2,687 2,348 1,213 3,914 10,162
Goldsmithing 607 1,180 438 187 2,412
Essential oils 15,312 23,667 23,909 11,215 73,803
Beverage manufacture 2,489 5,987 6,051 3,459 17,987
Shoe repair 815 1,280 98 2,453 2,437
Bakery 3,570 3,918 1,755 1,257 10,500
Carpentry 511 2,076 346 369 3,302
Tailoring 791 6,006 274 412 7,484
Metal working 1,018 3,077 293 218 4,606
Cloth, net making 1,247 400 79 71 1,797
Leather working 164 781 55 83 1,083
Pastry shops 881 11,474 148 21 12,524
Tire repair 583 0 70 214 866
Wood sculpture 807 258 2,937 3,937 7,939
Mattress making 166 1,789 261 81 2,296
Candy making 72 512 26 25 635
Straw products 72 343 619 506 1,540
SOURCE: Phase II survey.
4.2.1.4. Methods of Decreasing the Demand for Capital.
The demands for capital, particularly current fixed capital requirements,
can be altered in a number of ways. First of all an entrepreneur can
reduce his capital requirements by not investing in a building. This is
an important option; 30 percent of the enterprises interviewed work with-
out purchasing or even renting permanent building quarters. They operate
their businesses outside on sidewalks and on verandas. It should be
remembered, though, that this option is utilized more in some industries
than in others (table 12). Printers, for example, would have a hard
time operating out of doors whereas in tire repair, where noxious gases
are emitted from melting rubber, working outside of a building may even be
preferable to working inside. Therefore the feasibility of lowering
initial capital costs through no investment in a building should be
examined on an industry-by-industry basis.
A second way of minimizing capital requirements is through the use
of rented buildings and equipment. Fifty-two percent of the firms inter-
viewed, in fact, availed themselves of this option and rented their
building quarters. Machinery rental appears to be much less common; only
6 percent of the enterprises in our study rented their equipment. It is
not evident from this survey whether the small amount of machine rental is
due to lack of demand or lack of a supply of rentable machines. Additional
study1 in this area would be of considerable value because, if supply of
the rental machines is posing the constraint, a policy intervention might
be of assistance in breaking that particular bottleneck. In any case it is
1See, for example, Vancil, 1963 and Terborgh, 1967.
clear that renting, particularly the rental of buildings, is an important
means of lowering the capital costs of entry into business.
Another form of rental is the rental of workshop space and equipment
which is carried out through the jobber arrangement. A jobber, it will be
recalled, is a worker with skills but no shop or equipment. He receives
contracts to repair or produce a certain good and when he receives the
contract arranges with someone who is currently in business to rent the
use of his shop and tools for the time it takes to complete his work.
Of the workforce surveyed 2.2 percent consisted of jobbers. This figure
rose slightly in Port-au-Prince where 3.1 percent of the small enterprise
employment consisted of jobbers. The jobbers comprise, therefore, a
modest segment of the SSE sector. This particular arrangement, though,
does offer the lowest capital barriers to entry in small business.
A final option which allows an entrepreneur to decrease capital
needs is that of choosing among different methods of production and
selecting the one which requires the least amount of capital. We have
seen previously (table 13) that there exists a wide variety of possible
capital/labor combinations within many industries. Taking account of the
price of equipment and labor, the productivity difference among different
techniques, and the profit range which is acceptable to the entrepreneur,
the businessperson may be allowed some latitude in the method of production
he/she chooses. Where the latitude exists, a potential entrepreneur may
lFor an analysis of choice of technique which covers various
industries in Sierra Leone see Byerlee, et. al., 1979.
select the technique with the lowest capital requirement and thus
minimize that barrier to entry.1
4.2.2. Sources of Capital. Given the various determinants of the
demand for capital it is important to identify the sources which are
available for supplying the needed capital. Table 25 provides a convenient
summary of sources of capital for both initial capital and ongoing
investment expenditures.
4.2.2.1. Personal Savings. Personal savings provided the
start-up capital for most small enterprises surveyed. In fact, 72 percent
of the initial capital was provided from the personal savings of the
entrepreneurs (table 25). Those savings were primarily generated in agri-
culture in the rural areas while in the large urban areas the majority of
the entrepreneurs saved money from earnings in other businesses.
1The preceding discussion has addressed macro-level techniques for
decreasing capital requirements. There also exists an important micro-
level method of affecting the value of capital utilized in small
businesses tariff adjustment. Import tariffs are imposed on most
capital equipment used by Haitian small enterprises, and these tariffs
automatically increase the barriers to entry and expansion by artificially
raising the local purchase price of equipment. Examining the case of the
tailors we find that hand and motorized sewing machines coming into Haiti
face a 30 percent tariff (10.6 percent under GATT). On scissors, needles
for the sewing machines, and replacement parts import duties of 30 percent
are levied. For carpenters, handsaws, files, pliers, hammers, and punches
all face a 1.1 gourde per kilo import duty (.9 gde in GATT) (Republique
d'Haiti, p. 157).
While small firm enterprises in Haiti face artificially high barriers
to entry due to the imposition of tariffs, many large firms are exempted
from the tariff duties on their capital goods. The exemption status of
firms is a complex issue. Schwartz (1977, p. 15) cites the example of the
export industries in which the granting of tariff exemptions is not de-
cided in a uniform matter but rather on a case-by-case basis. Because of
this complication it is difficult to pinpoint the magnitude of the dis-
crimination between small and large enterprises. Research into this
question would shed important light on the degree to which the present
tariff structure discriminates against small firms.
TABLE 25
SOURCES AND USES OF CAPITAL
Initial Purchase Of Subsequent Investment
Equipment and in Equipment and
Raw Materials and Tools, 1978
Percent Of Percent Of Percent of Percent Of
Source Enterprises Capital Enterprises Capital
Personal savings 62.0 72.0
95.0 81.0
Gifts (family and 23.0 12.0
friends)
Borrowed funds 8.0 12.0 5.0 19.0
(Family) (2.4) (2.7) (0.4) (0.4)
(Friends) (3.7) (4.0) (2.0) (8.7)
(Moneylender) (0.8) (2.4) (1.7) (1.3)
(Bank) (0.8) (2.8) (0.9) (8.1)
(Caisse Populaire) (0.3) (0.1) (0.0) (0.0)
Other 7.0 4.0 0.0 0.0
Total 100.0 100.0 100.0 100.0
SOURCE: Phase II survey.
4.2.2.2. Family and Friends. The second most important
source of start-up capital was family and friends. Gifts from these two
sources accounted for 12 percent of the initial investment capital in the
firms visited. Family members and friends also granted loans to
prospective entrepreneurs.
In addition to being an important source of start-up capital these
two sources family and friends, and personal savings are of crucial
importance in providing money for ongoing investments. Last year 90 per-
cent of the equipment purchased by the small entrepreneurs interviewed
was purchased with funds supplied by personal savings, and family and
friends. Of that 90 percent, 9 percent came in the form of loans from
family members and friends. Thus for both recurring expenditures and for
start-up capital, personal savings, and family members and friends offer
a large share of financing required by small businesses.
4.2.2.3. Moneylenders. Although substantially behind
personal sources and family and friends, moneylenders offer a third source
of capital for new firms. The moneylenders provided 2.4 percent of the
start-up capital in the firms surveyed. However, the moneylenders are
slightly more important in financing ongoing expenditures for existing
firms; they provided 8 percent of the funds for equipment purchases in
1978. Moneylenders are important in all locality sizes although they are
marginally more important in the smallest rural areas (table 26).
4.2.2.4. Formal Credit. Moneylenders, personal savings,
and support from family and friends represent the informal sources of
financing available to small firms. The banks and caisses populaire
represent formal sources of credit. Together the banks and caisses
TABLE 26
SOURCE OF LOANS OBTAINED IN 1978, BY LOCALITY SIZE1
(Percent of Loans)
Commer-
Locality cial Caisse Money
Size Family Friends Bank Populaire Lender Landlord Other Total
Percent
Under 1,000 25 75 0 .0 25 0 0 100
1,000 2,000 14 57 7 7.0 14 0 0 100
2,000 5,000 25 50 5 5.0 5 10 0 100
5,000 20,000 14 59 4 0.0 14 6 6 100
20,000 100,000 17 52 19 0.0 15 3 1 100
Average for all 17 55 12 1.4 14 4 2 100
enterprises surveyed
SOURCE: Phase II survey.
1Data pertain to firms established in earlier years; loans were for capital expansion or
working purposes, not initial establishment.
populaire provided 3 percent of the initial capital to the firms surveyed.
In terms of ongoing investment they provided 8.1 percent of the equipment
investment in 1978. The caisses populaire appear to be more important in
the rural areas whereas the banks tend to finance a larger percentage of
businesses in the larger towns (table 26).
4.2.2.5. Terms of Credit. Credit is an important source
of financing capital expenditures in small firms and in completing our
look at sources of capital in small firms it is important to be aware of
the terms under which small entrepreneurs can borrow these funds. The
terms of credit granted to small entrepreneurs vary considerably depending
on the source. The loans from family members and friends are generally
very flexible in duration and often carry no interest.
Moneylenders are also extremely flexible in their timing so
flexible that in several cases it was impossible to compute an interest
rate on moneylender loans; the repayment period could not be clearly
specified. Among those loans for which it was possible to calculate the
interest rate, the rate varied between 40 percent and 240 percent per
year. These loans were generally of short duration ranging between one
month and a year, and the loans rarely required collateral. The size of
the loans granted by the moneylenders was most commonly in the $50 to
$300 range although some were granted for as little as $25. At the other
extreme one moneylender loan was offered for $6,000 over 5 years. The
moneylenders do charge much higher interest rates than the banks, but
they offer greater flexibility to their customers both in timing and
magnitude of their loans.
The banks and caisses populaire charge much lower interest rates
than do the moneylenders. The banks charge between 12 and 15 percent on
their loans, but they have high collateral requirements. The small
entrepreneur who had borrowed from banks typically left a title to land,
house, or some other building as collateral for the bank loan. The
bank loans are generally larger in magnitude and of longer duration than
those offered by the moneylenders. Bank loans were typically in the
$2,000 to $10,000 range with their repayment term between 5 months and
several years. The smallest bank loan encountered was a $200 loan over
6 months; the largest was $50,000 over 2.5 years. Banks do offer the
lowest credit rates outside of family gifts and loans, but the collateral
and other requirements imposed by the banks make it difficult for most of
the small enterprises to qualify.
4.2.3. Evaluation of Capital Constraints
4.2.3.1. Barriers to the Formal Credit Market. A major
barrier to using formal financial markets is the inaccessability of
formal institutions in many of the rural areas in which the SSE operate.
Ninety-four percent of the entrepreneurs interviewed had never applied for
a loan from a formal credit institution. The large majority of them had
never applied because there existed no local office or credit bureau and
they had no contact with or knowledge of any formal credit institution.
Another problem with formal credit markets is that the processing
time required by formal credit institutions is often too long for small
entrepreneurs to wait. Lengthy processing time is particularly trouble-
some for small enterprises as short-term working capital loans represent
the major portion of their credit needs. Of the firms which have applied
for formal loans but have not received them, half have failed to obtain
the loans because they have not yet received word back from the lending
institution. Several of the entrepreneurs indicated they had given up
on the loan applications because they had gone so long without hearing
from the banks. The length of processing time for the entrepreneurs who
did receive formal loans is listed in table 27. From that table ie can
see that half of the loans were processed within two months of the date
of application, but the other half took three months or more. A three
delay may be acceptable to an entrepreneur looking to purchase a new
piece of equipment but, as we saw, the bulk of the small enterprise credit
goes for short-term purchases of raw materials. For these entrepreneurs
a three-month delay may well be too long.
TABLE 27
PROCESSING TIME FOR LOANS FROM BANKS AND CAISSE POPULAIRE
Processing Time Number of
In Months Loans
1 18
2 4
3 11
6 5
8 2
12 1
15 1
22 1
SOURCE: Phase II survey.
Collateral requirements represent a third barrier to many small
entrepreneurs. Thirty percent of the small businesses surveyed are not
housed in any permanent building and without a building or piece of land
to offer as collateral many of the small entrepreneurs have no hope of
obtaining credit from the formal sector. Roughly half of the entrepre-
neurs who were denied credit from the banks did not receive the loans
because they failed to meet the banks' collateral requirements.
4.2.3.2. Interest Rate and the Demand for Credit. While
lack of institutions, lengthy processing time, and high collateral
requirements pose serious obstacles to small entrepreneurs, the interest
rates do not. It was noted earlier that the 12 to 15 percent interest
rates of the banks are substantially below those charged by the money-
lenders. In attempting any sort of loan program for small industries
determination of the interest rate to be charged is a crucial issue.
Table 28 attempts to give some feel for the demand for credit at various
interest rates. Two simple rates were selected; 10 percent was chosen
as a round number very close to the official bank rate and 50 percent was
taken as a rough estimate of interest rates in the informal sector. Given
these two interest rates, entrepreneurs were asked how much they would be
interested in borrowing at each rate. At 10 percent the average loan
requested was $2,410 while the 50 percent rate yielded an average response
of $250. The number of loans requested also dropped at the higher interest
rate but it dropped only half as much as the loan amounts. The figures for
credit demand have been extrapolated to all of Haiti living in localities
over 1,000 in population and the results are listed in table 28. From
these extrapolations it is estimated that the total amount of credit
TABLE 28
ESTIMATES OF POTENTIAL DEMAND FOR CREDIT IN ALL
LOCALITIES OVER 1,000 IN POPULATION
10 Percent 50 Percent
Interest Rate Interest Rate
Amt. Credit Amt Credit
Number of Requested Number of Requested.
Size of Loan Borrowers ($) Borrowers ($)
Under $200 855 $ 85,000 353 $ 35,000
$200 $999 2,732 1,616,000 551 328,000
$1,000 $1,999 1,121 1,681,000 209 313,000
$2,000 $2,999 716 1,790,000 47 117,000
$3,000 $3,999 248 868,000 33 115,000
$4,000 $4,999 179 805,000 14 63,000
$5,000 $9,999 424 3,180,000 44 330,000
Over $10,000 463 4,630,000 52 520,000
Total 6,738 14,665,000 1,303 1,821,000
SOURCE: Phase II survey.
requested at a 10 percent rate of interest is $14 million and at 50 percent
the total was for $1.8 million. It must be immediately noted that these
figures are only very crude indicators of credit demand and the 10 percent
figure surely represents an upper limit on the total credit demand in
localities over 1,000 in population. The answers given to this question
are not expected to be very accurate and even if they were, demand for
credit and ability to qualify for loans are two very different matters.
These figures on the demand for credit must be treated with extreme caution.
Rather than estimating the aggregate demand for credit, table 28 is
probably most useful in giving some feel for the numbers and the size
distribution of loans that might be potentially requested by small enter-
prises. Table 28 indicates that large numbers of loans in the $200 to
$3,000 range might be expected. This corresponds closely to the size of
loans actually contracted in 1978. The vast majority of the loans granted
in 1978 were in the $100 to $3,000 range. In the granting of large
numbers of rather small loans a potential credit program would want to
carefully consider the overhead costs involved in processing the loans.
In concluding this evaluation of credit constraints we emphasize
that several barriers combine to prevent the small firms from having access
to formal credit markets. Formal institutions are physically inaccessable
to many small enterprises, particularly those in rural areas. Where the
formal institutions exist, collateral requirements, processing time, and
loan sizes particularly considering the small size requirements for
working capital loans are not well suited to the needs of the small
enterprises. Flexible credit is available in the informal market but the
interest rates are extremely high. The fragmentation of the credit
market disadvantages the small firms vis-a-vis the large firms. These
larger firms do have access to formal credit channels where interest
rates are extremely low. The small enterprises continue to experience
credit problems even though they are willing to pay higher rates of
interest to borrow funds in formal credit markets.
4.2.3.3. Fixed Capital Constraints. Large numbers of
entrepreneurs in all localities and industries complained of shortages of
machinery and tools. This is not surprising as it is very normal for
small entrepreneurs to complain of equipment shortages even when they have
no need for additional fixed capital.l It is essential, therefore, to
carefully evaluate requests for fixed capital.
Several kinds of information are required before an informed
judgment can be made as to whether or not fixed capital is in short supply.
That information includes: (1) the capacity utilization of current equip-
ment, (2) measures of technical and economic efficiency or current and
alternative techniques of production, and (3) information on whether or
not new kinds of machines offer potential for the production of more
saleable goods.
Measurement of excess capacity is particularly useful in assessing
the need for additional machinery,2 and in seasonal businesses such as
those surveyed, flow data are needed to make reliable estimates of annual
rates of capacity utilization. We did, however, make crude calculations
1See Harper, 1977.
21t should be noted that there is an economic rationale for a
certain amount of excess capacity. See Winston, 1974 for a discussion
of this issue.
based on our single interview. These rough calculations pointed to
substantial amounts of excess capacity at the time of the interview; how-
ever, it must be remembered that our interview took place in January and
February, periods which 44 percent of the entrepreneurs considered to be
their lowest season. It is not surprising to find excess capacity in the
low season. More detailed flow information will be required to determine
capacity utilization during other seasons of the year.
In addition to capacity estimates, information concerning the
technical and economic efficiency1 of various types of equipment would be
useful in evaluating the desirability of additional machinery. A techni-
cally efficient technique of production is one which produces a maximum
amount of output with a given set of inputs. Economic efficiency refers
to techniques which maximize output with respect to the scarce factor of
production which in developing countries usually is capital. Measures
of both kinds of efficiency are particularly useful2 in evaluating the
kinds of machinery that it would be desirable to encourage in machine
rental or credit programs.
A third kind of information which is useful for diagnosing fixed
capital shortages would be a determination of whether or not new kinds of
machines will increase the saleability of the output. For example, it is
possible that an embroidery attachment would enhance the marketability of
a tailor's products. Newer vintages of machines may also produce items
1For a good discussion of technical efficiency see: C. Peter Timmer,
1970.
2For a good, practical example of the use of such information see:
C. Peter Timmer, 1973.
which are more highly sought by consumers than are those items produced
with the current equipment.
Some of the information required for assessing fixed capital
shortages can be studied on an industry-wide basis. For example, exami-
nation of demand conditions and the efficiency of different techniques of
production falls in this category. On the other hand, information on
capacity utilization is specific to individual firms and these estimates
will have to be made on a case-by-case basis.
To obtain the above kinds of information capacity estimates,
demand appraisals, and information on technical and economic efficiency -
additional study will be required, but the information gathered would be
of great value in policy design and implementation. Information on capa-
city utilization of capital stock is, of course, useful in credit programs
as part of an assessment of a firm's need for new equipment. Consideration
of possible demand increases due to the acquisition of new equipment can
also play a role in deciding whether or not to make a loan or rent a new
kind of machine. Data on the technical and economic efficiency of various
techniques of production allows those involved in credit or machine rental
programs to evaluate the potential profitability and likely employment
generation effects of different machinery packages they might provide.
Efficiency considerations will also be important in allowing policy makers
to compare actual techniques of production with those not currently in use
and to determine whether or not they can make an important contribution to
the economy by playing an information disseminating role. Similarly,
policies aimed at encouraging shifts in production techniques by tariff or
other price manipulations will want indication of the magnitude of the
price change necessary to effect a desired shift. They would also find
useful an ex ante indication of the likely effects in terms of employment
and output of their policy intervention. Finally, a knowledge of average
productivity and profit rates in an industry is extremely valuable in
evaluating the need for management assistance and in indicating the
direction in which possible operating improvements can be made. Thus in
numerous areas demand, capacity, and efficiency considerations can provide
invaluable information for policy makers.
4.2.3.4. Working Capital Shortages. As was mentioned
previously, working capital shortages can be the manifestation of numerous
underlying problems demand, raw material supplies, credit shortages,
mismanagement, and so forth. Statistical tests1 were performed in an
attempt to correlate working capital shortages with each of those possible
underlying causes. The results of these tests indicate that those entre-
preneurs keeping records are less likely to experience working capital
problems than are those who do not. Lack of managerial skills may, there-
fore, be contributing to working capital shortages. Credit availability,
demand, and raw materials also appear to be correlated with working capital
problems. The exact nature of working capital shortages, however, is very
subtle. It varies substantially from locality to locality and from firm
to firm, and it is at the individual firm level that working capital
shortages are best diagnosed. Many programs of assistance will be dealing
with individual firms either granting credit, loaning machinery, or
A chi-squared test and linear discriminant function were used.
offering management assistance and a determination of sources of
working capital is best made for individual firms at that time.
4.2.4. Conclusion. Shortages of working capital, fixed capital,
and credit are of major concern to small entrepreneurs. Credit shortages
appear to be related to the fragmentation of the credit market. A diagno-
sis of fixed capital shortages requires additional information on capacity
utilization in individual firms, the efficiency of various techniques of
production, and the demand for output produced by those different techni-
ques. Working capital shortages appear to be related to management, credit,
demand, and raw material problems. Specific problems of this nature, how-
ever, need to be evaluated at the firm level. Since many programs will be
dealing with individual firms the determination of specific working capital
requirements is best made on an individual basis at that time.
4.3. Raw Materials
The supply of raw materials is of moderate concern for small firms
in Haiti. Thirty-five percent of the entrepreneurs listed raw material
supply as a problem; six percent indicated it to be their most important
problem. When entrepreneurs were asked what types of nonfinancial assist-
ance they needed most their single most frequent response was "make raw
materials available." Fifty-eight percent of the entrepreneurs surveyed
made this request.
Shortages of raw materials can arise for several reasons. Raw
materials can be in short supply due to bad transportation and marketing
networks. Shortages may also occur when imported raw materials are not
available in sufficient quantities or when the supply of imported raw
materials is sporadic. Both of these explanations for raw material
shortages result from bottlenecks in the raw material supply network.
It is possible, though, for raw materials to be a problem for small enter-
prises even in the absence of supply bottlenecks. Shortages of working
capital can impede raw material procurement. Thus if working capital is
in short supply due to mismanagement, lack of steady demand, or for any
number of reasons, raw material procurement can still be a problem even
where the necessary raw materials are available locally. Thus raw material
problems can be related to supply bottlenecks or they can be related to
working capital shortages. Each of these sources of raw material problems
seems to exist in Haitian small enterprises.
4.3.1. Bottlenecks in the Supply of Raw Materials. Transportation
difficulties appear to be an important factor influencing the severity of
the raw material problem. Most of the enterprises experiencing larger
than average raw material problems are those which are the least accessible
by road Hinche, Belladere, Mirebalais, Port-de-Paix, Anse Rouge, and
Gros Morne (table 29). In these areas it would appear that the raw
material deficiency is related to transport difficulties.
Another consideration which is of major importance in examining raw
material problems is whether or not an industry uses large amounts of
imported raw materials. In fact, industries in which the majority of the
firms use at least some imported raw materials are those industries which
complain the most about raw material shortages. Goldsmiths, watch repair
shops, metal working shops, car repair shops, and carpenters are examples
of such industries in which imported raw materials and raw material com-
plaints appear to be correlated (table 30). For goldsmiths the import of
their basic raw material poses an obvious constraint to their operations.
TABLE 29
PROPORTION OF ENTREPRENEURS REPORTING RAW
MATERIALS AS A PROBLEM, BY LOCALITY
Locality Percent
Hinche 62
Belladere 57
Mirebalais 50
Port-de-Paix 44
Acul-du-Nord 44
Anse Rouge 43
Cap-Hatien 38
Leogane 37
Gros Morne 33
Lascahobas 33
Petite-Riviere-de-l'Artibonite 32
Gonaives 31
Saint-Marc 31
Jeremie 31
Port-au-Prince 30
Limbe 30
Cayes 29
Verettes 28
Jacmel 27
Trou-du-Nord 26
Plaisance 25
Carrefour 22
Les Poteaux 17
Estere 8
Camp Perrin 8
SOURCE: Phase II survey.
TABLE 30
PROPORTION OF ENTREPRENEURS REPORTING RAW MATERIAL SUPPLY AS A PROBLEM
Raw Over 50 Percent Of Raw
Materials Firms Use Some Materials the
Enterprise A Imported Raw Most Important
Type Problem Materials Problem
Goldsmithing 74 + 21
Watch repair 60 + 7
Cloth, net making 47 24
Pastry shops 14 + 0
Metal working 42 + 10
Straw products 39 7
Tire repair 39 + 0
Leather working 38 8
Machine repair 36 + 6
Printing shops 36 0
Cement block making 35 12
Car repair 35 2
Mattress making 33 0
Shoe repair 33 6
Carpentry 31 + 6
Wood products 30 7
Tailoring 29 + 4
Candy making 14 0
Bakery 10 0
Grain milling 3 0
Average for all 32 6
enterprises surveyed
SOURCE: Phase II survey.
In the repair industries watch, car, and machine repair which
require the import of many replacement parts, the relationship between
raw material constraints and imports is clear. Tailors use substantial
amounts of imported cloth and the carpenters require imported nails, bolts,
hinges, and so forth. On the other hand, agricultural processing indus-
tries, which do not require large amounts of imported raw materials, appear
relatively unconcerned about raw material problems. Grain millers and
candy makers express very little concern over raw material shortages.
Thus it would appear that the import composition of raw materials is a
major determinant of raw material problems.
In reviewing the relationship between imports and raw material
problems it is of interest to examine more closely certain import sub-
stituting industries because several large-scale industries have been
established in Haiti specifically to produce local raw materials and
thereby reduce import dependence. Bakeries, cement block making, and
metal working are three industries which find some of their inputs pro-
duced locally in these import-substituting industries. The bakers'
demand for flour appears to be well satisfied by the local flour mill.
Only 10 percent of the bakers surveyed listed raw materials as a problem,
and none considered raw materials to be their most important problem.
Cement block makers, on the other hand, seem to be less well
supplied by the local cement plant. Thirty-five percent of the cement
block makers complained of raw material shortages and 12 percent considered
raw materials to be their most important problem. This is difficult to
explain given the large amounts of excess capacity in the local cement
plant (World Bank, 1978, p. 21), and given the fact that substantial
amounts of cement are exported. It is possible that the large cement
plant has produced adequate quantities of cement but that working capi-
tal or transport problems have impeded the distribution of the cement to
small block makers. Further study will be required to resolve this issue.
The third import-substituting industry of interest is the steel
industry. Despite the construction of the steel plant in Port-au-Prince
the small metal working sector in Haiti still complains of substantial raw
material shortages, and they also remain heavily dependent on imported
inputs (table 30). The single steel plant in Haiti currently supplies only
half of the structural steel used in Haiti and other basic inputs to the
metal working sector remain in short supply (World Bank, 1978, p. 21).
According to the head instructor of the metal working school in Camp
Perrin, basic requirements of U-bars, I-bars, T-bars, plough shears, and
bolts are extremely difficult to procure, even in Port-au-Prince. The
metal industry suffers due to the fact that there currently exists no
foundry in Haiti. The one steel mill possesses an arc furnace, but it has
never been used because of the inadequate supply of electrical power. Thus
the import substituting industries in Haiti appear to have solved the raw
material problems of the local bakers, but for the cement block makers and
metal workers raw material supply problems continue.
4.3.2. Working Capital Shortages. Supply bottlenecks are important
in explaining raw material shortages but working capital shortages also
contribute to raw material problems of small enterprises. Of the small
businesses who borrowed money in 1978, fully 87 percent used the borrowed
funds to purchase raw materials. This means that 16 percent of all the
firms interviewed had to borrow money to purchase raw materials in 1978.
Had that working capital credit not been available raw material problems
would certainly have been aggravated. It is clear that shortages of
working capital and credit can contribute to problems of raw material pro-
curement. Thus working capital shortages as well as supply bottlenecks
currently contribute to raw material problems among Haitian small
enterprises.
4.3.3. Conclusion. When policy decisions have been made identifying
regions and specific industries on which to focus it will be useful to
trace individual products and determine which factors supply bottlenecks
or working capital shortages are relevant in explaining raw material
shortages in those regions and industries. In some cases the potential
for useful interventions may be easily diagnosed. For example, the cement
block industry is an industry in which there appears to be a raw material
problem despite the existence of excess capacity in the local cement
plant. In this instance the cause of the raw material problem might be
determined without much difficulty. The industry and regional rankings of
raw material problems (tables 29 and 30) are useful in providing direction
for any groups interested in further study of raw material shortages in
Haitian small enterprises.
Having reviewed raw material problems in small enterprises we turn
to look at management constraints in the operation of small businesses.
4.4. Managerial Personnel
Very few entrepreneurs considered management practices to be a
problem in the operation of their businesses. When asked what type of
nonfinancial assistance they would like most, only 4 percent requested
help in developing management skills.
The following brief exposition is designed to offer an
impressionistic view of certain aspects of current management practices in
Haitian small enterprises. The exposition is brief because it is diffi-
cult to obtain penetrating insights on management practices in a single
interview which covers as wide a range of topics as did ours. In the
following discussion four aspects of management training and practices are
discussed: education, record keeping, selling goods on credit, and use
of banks.
4.4.1. Formal Education. Eighty-seven percent of the entrepreneurs
interviewed have received some formal education and 56 percent of them
have completed their education through the sixth year, through middle 2
(table 31). If these figures are correctI it would imply a high level of
literacy as the average literacy rate for Haitian adults is only 20 percent
(World Bank, 1978, p. 110). High levels of literacy'are important as
they indicate that many small business managers may possess the basic
educational skills necessary for implementing new management and record
keeping practices.
4.4.2. Record Keeping. Half of the entrepreneurs interviewed keep
records of some sort. This figure is uniform throughout the country;
businesses located in the larger towns are not more apt to keep records
than entrepreneurs in the rural areas. The 50 percent of the firms who do
not keep records of any sort were asked why they do not. The majority of
them, 52 percent, responded that their business was not large enough to
justify keeping records. In those enterprises which do keep records, cash
1There may be a tendency to give inflated estimates of educational
background in order not to appear uneducated in front of the enumerators.
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