This project aimed at licensing and formalizing “informal” Syrian businesses in Gaziantep. It also strengthened awareness among Syrian refugee business owners on the Turkish business environment and legal regulations. The project ensured Syrian businesses’ sustainability and development, and improved Syrian refugee integration in the Turkish host community, easing tensions and problems deriving from their participation in the informal economy.

Lead Authority or Organization:  Syrian Economic Forum

Area: Gaziantep, Turkey

Beneficiaries: Syrian informal business owners residing in Gaziantep  

Timeline: November 2016 – February 2017 

Human Resources: 9 permanent staff

Funding Amount: €650,000

Sources of Funding: German Ministry of Economic Cooperation and Development (BMZ)

Context and Challenge

Gaziantep is hosting approximately 325,000 Syrian refugees, with 291,000 living outside refugee camps under temporary protection. Most of them work to secure their livelihoods, and some of them have created their own businesses.

According to a survey conducted by the Syrian Economic Forum—which included more than 1,170 trade points—the vast majority of Syrian-owned businesses in Gaziantep are unregistered and operate in the informal market. Syrian business owners lack funding and procedural knowledge to formalize. For example, the cost of registering a small shop in Gaziantep is more than $3,000, which is beyond the capital availability of many owners. Furthermore, difficulties in understanding regulations and procedures due to language barriers means these businesses face many obstacles to their growth. Their informal nature is also reflected in a higher vulnerability in the Turkish society and legal system.
 

Actions and Reported Results

The Rukhsati project formalized unregistered Syrian businesses in Gaziantep through:

• Project creation. Identification of project objectives, definition of the methodology, implementation, monitoring and evaluation tools.
• Data collection and analysis. A market survey of Syrian businesses through field visits by Syrian Economic Forum’s staff and an ad-hoc questionnaire to assess business needs.
• Identification and selection of beneficiaries. Small and medium-sized businesses in key sectors that can provide more jobs and need support. Beneficiaries were selected alongside the criteria defined by the Syrian Economic Forum and the donor.
• An introductory seminar on project objectives and procedures to formalize businesses. All selected beneficiaries participated.
• Setup of a Support Unit, which included Arabic and Turkish speaking staff, accountants, and legal consultants. It aimed to register informal Syrian businesses in official records, provide technical assistance to business owners and train them on the Turkish legal and business environment, guide them and help them comply with regulations and laws.
• Licensing assistance process. A number of documents were requested of beneficiaries and delivered to the Turkish authorities who monitor the licensing process.
• Payment of all fees by the Support Unit to complete the licensing process.

Reported Results

• Improved public revenues. With the registration of 217 informal Syrian businesses (accounting for 20% of licensed businesses in Gaziantep) and ensuring their business continuity, the project helped local administrations improve their 53 Local Economic Development in Host Communities revenues through taxes paid by Syrian businesses. Every registered company has to pay a lump sum of $150 per month per employed worker as social insurance tax, and 20% of its profits as income tax. In addition, all beneficiaries pay their due taxes for an average of 148 Turkish Liras, (equivalent to $40 per month).
• Increased refugee socio-economic inclusion and sustained livelihoods. The issuance of 96 work permits for Syrians who were previously working informally contributed to the economic stability for 331 employees and their families. By formalizing their working conditions, the project also managed to protect the legal rights of Syrian refugee business owners and employees.

Evidence and Beneficiary Feedback

At the end of the project, Syrian Economic Forum’s Monitoring and Evaluation Department conducted two surveys on a random sample of beneficiaries. The two surveys included samples of 50 and 122 beneficiaries. These surveys found that:

• 96% of beneficiaries increased their capital turnover after their business was licensed.
• 50% of beneficiaries plan to increase their number of employees during the coming year and are optimistic about the growth of their businesses.
• 72% of beneficiaries have seen an increase in customers since licensing.

Lessons Learned

Challenges and Risks

• Taxation. 57% of beneficiaries expressed that taxation is one of the biggest challenges to ensure the continuity of their businesses.
• Work permits. 71% of beneficiaries showed constraints in obtaining work permits due to local laws allowing the employment of foreigners on the condition of the employment of a quota of locals. This challenge was mainly felt by businesses focused on arts and crafts whose production is mastered by Syrians only, as they must rely on Syrian employees for the expansion of their businesses.
• Lack of financial inclusion. Some beneficiaries faced difficulties in opening a bank account and accessing financial services for their businesses.
• Other challenges: limited freedom of travel due to temporary protection status, language barriers, and lack of understanding of Turkish regulations.

Key Ingredients of Success

Cooperation with Turkish authorities (represented by the Municipality of Gaziantep, the Chamber of Commerce and Industry, and the Gaziantep Crafts Association), was the main ingredient of success.

Innovative Aspects

For the first time, a knowledge framework for licensing and registration procedures of Syrian investments in Turkey was developed, consistent with governmental laws and procedures.

Scaling-up

• Develop sound selection criteria to identify project beneficiaries. Some selected businesses did not fully meet the selection criteria, resulting in the failure of their businesses due to financial difficulties and inability to pay taxes after the registration process.
• Organize more workshops to explain the rights of beneficiaries and their obligations resulting from the licensing process.
• Clarify the role of legal accountants to beneficiaries, which represents the link between businesses and the Turkish government.

Collaborations

• The Chambers of Commerce of Gaziantep and Istanbul provided data about registered Syrian businesses.
• The Municipality of Gaziantep in cooperation with the Syrian Economic Forum facilitated the procedures for business registration.
• Chamber of Industry of Gaziantep
• Turkish Crafts Association for Small Businesses

This post is part of a series of case-studies published in the CMI 2018 Refugees' Compendium and featuring host communities experiences in hosting refugees with relation to local economic development. The information in-here was provided by focal points in the relevant institutions, NGOs, local governments, etc

Read the story on the compendium