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World Bank, Washington, DC
Africa | Malawi
2019-02-01T17:30:18Z | 2019-02-01T17:30:18Z | 2019-01-28

The rate of informal firms is high in Sub-Saharan Africa, especially for those that are women-owned and in the poorest countries, despite a total of 107 business regulatory reforms recorded by Doing Business across 40 economies in the region. Through an experiment in Malawi, we established an effective and replicable design to offer informal firms support to formalize, costing much less than the typical private sector development intervention. The study shows that one of the primary barriers to registration for women-owned firms is transaction costs. When registration is madevirtually costless, an overwhelming number of women-owned firms (73 percent) choose to register. However, when offered the chance to engage in costless registration for taxes, almost no firms select to pursue this opt ion. Combining business registration with an information session at a bank including the offer of a business bank account leads to an increased use of formal financial services, and results in increases in women owned firms sales and profits of 28 percent and 20 percent respectively. On the other hand, business registration on its own is not as effective in improving access to financial services and does not result in enhanced sales and profits.


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