Estimates from the Fin-Scope Malawi SMME Survey (2012) suggest that 97% of businesses in the country are not registered as formal businesses. Unfortunately, there is very little information about informal enterprises since they are typically not covered or adequately represented in firm-level enterprise surveys. There is also much to learn about the relationship between formality and performance, in particular if certain types of entrepreneurs - such as female entrepreneurs - are better placed to gain than others.
Malawi's government is interested in evaluating whether or not formality improves enterprise performance and, at the same time, exploring potential reasons for high informality. If registration does have a positive impact, that information can be used to raise awareness among firms and incentivize registration. If, however, the estimated costs of becoming formal outweigh the estimated benefits or if some of the hypothesized benefits do not materialize, then the government may want to address other constraints to enterprise performance. This research project applies a randomized controlled trial in order to estimate the impact of business registration for small-to-medium enterprises in Malawi. It will also assess the complementary value of increasing access to financial services for these entrepreneurs as a means of separating enterprise from household responsibilities.
This impact evaluation will allow for estimating the impact of both treatments and to better understand the nature of small and medium enterprises in the informal sector of developing countries. It will also assess the importance of informality as a constraint to business formation and expansion, access to finance, and overall productivity. In a period of growing investment climate reforms, the results of this study will be of interest to a range of policy makers in developing countries.
- Rethinking the Role of the State in Finance, World Bank, 2013
- Closing the Credit Gap for Formal and Informal Micro, Small, and Medium Enterprises, IFC, 2013
- Making it easier for women in Malawi to formalize their firms and access financial services (English), The World Bank, Apr 2016
- Short-Term Impacts of Formalization Assistance and a Bank Information Session on Business Registration in Malawi, Working paper