Each country has its protocols for registering new firms, and different regions of the globe record different relative volumes of their new businesses that are formally registered. Developing countries have lower businesses registered compared to the developed countries. A large informal sector characterizes most developing countries. Inadequate capital to register businesses is a major hindrance to the registration of businesses. The following are different regions around the world with the proportion of the firm that are formally registered with the authorities.
Countries in the Sub-Saharan African region are home to growing economies and their share of officially registered businesses among total businesses stands at 82.9%. Most countries in Sub-Saharan Africa have a large informal sector. A substantial part of the population in this region live in poverty and resort to informal businesses which do not require a great deal of financial capital or bureaucratic processes to start up. Some entrepreneurs also opt for the informal channels since it is cheaper, both in the capital and labor. The thriving informal sector hampers registration of businesses in Sub-Saharan Africa. Registering businesses in most Sub-Saharan countries is associated with intricate bureaucratic processes. The low adoption rate of information and computer technology (ICT) by governments across the Sub-Sahara makes the registration process a lengthy procedure involving many different public departments. High tax rates also discourage potential entrepreneurs. Inadequate capital also encourages the growth of informal businesses. It takes an average of 27.4 days to get a business registered and start operations in the region. The minimum capital required to register business averages 95.6% of income per capita.
The Caribbean region has a 86.0% share of formally registered firms among its new businesses. In most Caribbean countries, procedures to register and operate a business are less than 10. Dominica and St. Lucia have the lowest procedures at six procedures, while Suriname and Haiti have 13 and 12 procedures respectively. Puerto Rico boasts the lowest days needed to register and operate a business taking only six days while it takes 105 days Haiti to formally register a business firm. Countries in the Caribbean have plenty of businesses in the informal sector. Factors that hinder business registration include high tax rates, bureaucratic registration procedures and inadequate capital to formalize business activities.
Countries in Latin America have a complex interplay within and between their informal and formal sectors. Countries in the region have attempted to reform their legislation to make it easier for businesses to be registered formally. Changes made, however, seem to be lagging behind in their enforcement. Entrepreneurs are discouraged by the registration barriers in registering and resort to carrying out business through informal channels. Procedures to start a business are as low as 6 in Mexico and Nicaragua and as many as 17 in Venezuela. The days which an entrepreneur takes to operate a legal business are different across Latin America countries. For example, it takes only nine days in Panama while it takes 60 days in Costa Rica. The region has an average of 43.6 days for entrepreneurs to start business operations. The region has an average capital of 3.8% of income per capita required when starting a business.
Countries in South Asia have been instituting reforms to attract entrepreneurs to officially register their firms and join the formal sector. The days it takes to register a business in South Asia have reduced over time to 30 days in most countries. Countries in the region except Maldives have done away with the minimum capital required to register a business making it easier for potential entrepreneurs to formally register their business firms. South Asia has 86.8% share in the formal registration rates of new businesses.
New Technologies Increase Business Registration Efficiency
Formal registration rates seen in other regions of the world include the Middle East at 87.0%, North Africa and the Maghreb at 87.4%, East Asia and the Pacific at 89.2%, Central Europe and the Baltic States at 97.9%, Eastern Europe and Central Asia at 98.0%, and Western Europe at 98.5%. The growth of ICT has aided many countries to simplify registration of new businesses. Developing countries have been steadily adapting the use of ICT coupled with other reforms to improve formal registration rates of new businesses.
Formal Registration Rates Of New Businesses Around The Globe
|Rank||Region||Share of New Companies Formally Registered with Authorities|
|6||North Africa and Maghreb||87.4%|
|7||East Asia and the Pacific||89.2%|
|8||Central Europe and Baltic States||97.9%|
|9||Eastern Europe and Central Asia||98.0%|
About the Author
Benjamin Elisha Sawe holds a Bachelor of Arts in Economics and Statistics and an MBA in Strategic Management. He is a frequent World Atlas contributor.
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