How Libya’s Small Businesses and Trade Networks Are Sustaining Stability

After years of conflict, political division, and economic instability, Libya is being encouraged to look beyond oil and focus on a different engine of recovery: its private sector. A new policy note by the African Development Bank Group, prepared with support from institutions including Interpeace, the United Nations Development Programme, the World Bank, the OECD, and several Libyan research bodies, argues that small businesses, local traders, and entrepreneurs could play a major role in rebuilding the country and strengthening peace.

The report says Libya’s private sector has shown remarkable resilience despite weak governance, damaged infrastructure, inflation, and insecurity. Informal businesses and micro, small, and medium enterprises have continued to provide jobs, maintain supply chains, and connect communities even while state institutions struggled to function. Researchers describe these businesses as an important stabilising force in a country still deeply affected by years of conflict.

Informal Trade Keeps the Economy Moving

According to the report, much of Libya’s economy now operates informally. Small traders, transport operators, delivery workers, and family businesses help sustain daily life across the country. Informal economic activity accounts for more than one-third of Libya’s GDP. At the same time, formal small businesses contribute only a limited share due to limited access to finance and weak institutional support.

Economic activity remains concentrated in northern cities such as Tripoli, while eastern and southern regions continue to suffer from underinvestment. Fezzan, in southern Libya, is one of the country’s most neglected regions, relying heavily on informal trade and agriculture.

Yet despite political fragmentation, trade routes between Libya’s regions continue to function. Agricultural products, livestock, fuel, and essential goods still move between the south, east, and west through informal and tribal commercial networks. The report argues these economic ties help maintain social stability by keeping communities connected even when political dialogue breaks down.

Weak Institutions Continue to Hold Back Investment

The study highlights serious structural problems that continue to discourage investment. Libya’s regulatory system is fragmented, with overlapping government agencies and outdated laws creating uncertainty for businesses. The long-delayed Public-Private Partnership law has still not been fully implemented, limiting opportunities for large-scale infrastructure projects and foreign investment.

Access to finance is another major challenge. Libya’s banking sector remains dominated by state-owned banks, while formal credit for small businesses is extremely limited. Entrepreneurs often rely on informal financing systems because strict lending conditions and high collateral requirements make borrowing difficult.

Foreign direct investment has also remained weak since the conflict began in 2011. Investors continue to be discouraged by insecurity, currency instability, and unclear regulations. At the same time, the report says Libya’s diaspora community represents a major untapped source of investment, skills, and international business connections.

Renewable Energy Could Transform Libya’s Economy

One of the report’s strongest messages is that renewable energy could become a game-changer for Libya. Despite its huge oil wealth, the country suffers from frequent power shortages, damaged electricity infrastructure, and unequal access to energy services.

Libya has some of the highest solar energy potential in the world, especially in southern regions such as Murzuq and Al-Kufrah. Coastal areas also possess strong wind energy potential. Researchers say renewable energy investments could reduce Libya’s dependence on oil, improve electricity access, and create thousands of jobs.

Decentralised solar systems and mini-grids are seen as especially important for remote and underserved communities. However, the report warns that weak technical capacity, regulatory uncertainty, and the absence of modern investment frameworks continue to slow progress in the sector.

Agriculture and Fisheries Seen as Peace-Building Sectors

The report identifies agribusiness and fisheries as two additional sectors capable of generating jobs and strengthening regional cooperation. Southern Libya’s agricultural areas have strong potential in date production, tomato processing, and livestock trade, while fisheries along the Mediterranean coast could revitalise local economies from western to eastern Libya.

Researchers believe investments in these sectors would not only improve livelihoods but also strengthen economic ties between Libya’s divided regions. By creating employment opportunities, especially for young people and women, these industries could help reduce social tensions and support long-term stability.

The report concludes that Libya’s private sector is far more than an economic actor. In a country still struggling with conflict and institutional weakness, businesses, markets, and local trade networks have become some of the few remaining systems holding communities together. According to the African Development Bank, supporting these sectors through targeted investment and institutional reform could help Libya move closer to peace, recovery, and inclusive growth.