Chamber for Small and Medium Businesses Association says the country’s business registration process is expensive and cumbersome, forcing many small business to shun the process.
The chamber’s executive secretary James Chiutsi said in an interview on Monday in the context of a Malawi Priorities Policy Brief by the National Planning Commission (NPC).
The brief indicates that if half of local SMEs register their businesses, the sector’s revenue can grow by three percent of the gross domestic product (GDP) or K267 billion.
He said for a business to get formal recognition, it has to register with the registrar of businesses and the council.
“If you add other logistics, it is a significant sum. Apart from that, you are also required to register with the Public Procurement and Disposal of Assets Authority and Ministry of Trade if you want to get government business,” said Chiutsi.
The brief further indicates that formalisation of businesses increases financial inclusion that can support them to improve their business practices, get more productive, grow and benefit from economies of scale.
Reads the brief in part: “Though business registration on its own does little to increase performance or even formalisation rates, when it is combined with complementary services such as increased access to advertising, credit, insurance or government assistance programmes, there is a significant increase in both.”
A recent Finscope SME Survey indicated that out of the country’s 1.6 million SMEs in 2019, 89 percent were neither registered nor licensed.
According to the Business Registration (Amendment) Regulation (2020), registration of business names or partnerships costs K10 000 while company registration costs K75 000.
In its recent country analysis for Malawi, the World Bank observed that many SMEs do not see the value of formalisation, adding that the potential benefits such as being able to open a business account or obtain a loan, are often difficult to access.
The bank observed that two out of every five SMEs are started by an entrepreneur under the age of 35 with four out of five entrepreneurs using their personal savings to start their business and fewer than 40 percent of such firms survive for six years or more.