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The majority of micro and small enterprises (MSE) in Egypt make up part of the informal sector. Given their economic and social importance, our cross-section analysis evaluates the impact of the informality of 5000 MSEs in Egypt on their performance in 2003. A Probit model with instrumental variables produces results that show that the MSE regulations positively influence their performance. The extent of this influence is determined by the characteristics of the human and financial capital of each MSE, which testifies to the advantages of the formal sector that allows for the strengthening of these capitals.