The Office of the Registrar of Companies (ORC) has been encouraged to enhance direct logistical assistance to Micro, Small, and Medium Enterprises (MSMEs) in Ghana.
That was found to be the most effective intervention to inspire and motivate MSMEs to formally register their businesses instead of given them waivers on registration fees.
This was the outcome of a new study by the University of Ghana Business School (UGBS) and the International Growth Centre (IGC) conducted in collaboration with the Office of the Registrar of Companies, involving nearly 3,000 MSMEs in Accra.
The study, which focused on three randomised interventions for businesses – direct logistical support fee waivers, and education, noted that assisting with filling out of forms, queuing, submitting documents, and delivering the final certificate, was the most effective support required by MSMEs in the formalisation process.
It noted that receiving direct logistical support could increase registration rates by 7.2 per cent, in contrast, simply waiving the registration fee or educating owners on the benefits of formalisation did not have a statistically significant impact on registration rates.
“Our findings clearly show that the main barrier to formalisation is not the financial cost of registration, but the transaction cost – the time, distance, and complexity of the process itself,” said Professor Patrick Asuming, lead Researcher of the study said.
Prof Asuming, who is also a Development Economist, in an interview with the Ghana News Agency indicated physical presence at the ORC, queuing and even understanding which forms to fill were the major constraints most businesses faced.
He also cited the ‘fear’ of taxation as an underlying reason for the reluctance of many MSMEs to formalise, as there was widespread perception that registering automatically put a business on the tax radar, leading to future financial burdens, especially at the early stages of the business.
“The fear of taxes is a powerful deterrent, overshadowing the potential benefits of formalisation. This is true even though, in many cases, formalising simply allows small businesses to benefit from the tax laws, not be afraid of them, and for the government to get tax income,” he stated.
Prof. Asuming recommended decentralisation and digitalisation to bring registration services closer to businesses through mobile units and fully online processes to reduce travel and waiting times.
However, the report also cautioned that the process must remain inclusive, with physical offices or support staff available for those who are not digitally literate.
He also recommended to the ORC to explore separating business registration from tax registration to alleviate the primary fear of business owners by working closely with the Ministry of Finance and the Ghana Revenue Authority to design new policies that would make the process more user-friendly.
Dr. Henri Telli, Senior Country Economist, IGC Ghana, also speaking with GNA, underscored the need for human-assisted options, while digitalising the registration processes to ensure inclusivity for all entrepreneurs.
“If you really want to formalise everybody, then we have to do a lot, and the process must be inclusive. We shouldn’t put everything online, because some people obviously are not navigating around the online system,” Dr. Telli said.
He noted that many individuals in Ghana hesitated to register their businesses due to fear that doing so would immediately attract scrutiny or penalties from tax authorities, which limited their access to support and contribute to economic distress.
The IGC Ghana Senior Country Economist explained that formalising businesses through registration could unlock access to government support, improve productivity, and ultimately lead to more stable employment.
“Institutions like the Registrar of Companies, Ghana Revenue Authority, and Ghana Investment Authority must educate the public, dispel fears, and provide direct support to encourage formalisation,” he said.