Despite the significant role that small enterprises play in economic development; they face numerous challenges. This research aims to address these challenges by examining the institutional structure that supports small and medium enterprises. The study seeks to identify any shortcomings in the current system and propose solutions to overcome them. Additionally, the research analyzes the current state of the small enterprise sector in North Sinai and identifies the key institutions that support it. Furthermore, the study aims to identify the major challenges faced by small enterprises. The findings of the research highlight the social benefits of small enterprises, such as their contribution to reducing unemployment rates. These enterprises employ a significant percentage of the global workforce, ranging from 40% to 80%, depending on the country's economy. Moreover, small projects and companies constitute 90% of the total number of projects worldwide. These enterprises also cater to the needs of local communities by providing products and services that directly impact individuals' lives. Additionally, they offer local alternatives to imported goods. Small projects also foster social harmony by creating opportunities for young and creative individuals to implement their ideas. Furthermore, these projects increase individuals' average income and contribute to economic growth by generating financial surpluses. However, small enterprises face various challenges. Government regulations, including control, supervision, and monitoring, pose significant obstacles. Financing is another major challenge for these enterprises. Moreover, marketing difficulties often lead to the failure of many small projects.