The registration door is open. Why are entrepreneurs still standing outside?

The paradox

The door is getting wider, yet many still stand outside

On 7 July the Ministry of Economy and Industry launched company registration through its online portal. A few days later the minister issued a circular saying the commercial register should be granted the first time as soon as the basic papers are submitted, without waiting for approvals and licences. According to the ministry's figures, more than 10,000 registrations were made in the first half of the year, from single-owner registers to companies of every type, and initial registration on the platform takes five working days when the papers are complete.

These are real steps, and I am not writing this to play them down. But when I look at our own community, I see a different picture.

At the launch evening of EntreStations on 24 September, we asked the audience direct questions about their businesses through their phones. Here is what the 25 people who answered the registration question said:

What matters more than the share is the view behind it. We showed them the statement "Registering your company early can hurt you more than it helps", and 76% agreed.

Some would read this as fear of the state, or a wish to avoid taxes. But the answers from the same evening do not support that reading:

These people are not against paperwork. They write contracts and ask for them. They only delay the paper that ties them to the state. And a third of them do not even know how to register a trademark. That gap is worth understanding before we judge it.

What other countries found

Is it enough to make registration easy?

World Bank researchers tested this question with field experiments, and their answer surprises anyone who thinks the procedures are the only obstacle.

Sri Lanka: even free registration barely moved anyone

Between 2008 and 2011, researchers from the World Bank and two universities split owners of small unregistered businesses into groups. The first group got a full explanation of how to register, and full repayment of the fees. The result: almost no effect. When owners were offered a payment equal to half a month to a full month of their profits if they registered, about one in five did. When the payment rose to two months of profits, nearly half did.

And what happened to those who registered? Average profits went up, but because of a few businesses that grew fast. Most saw no change in income. But those who registered reported more trust in the state, mainly in local government. A reminder that trust runs both ways.

Benin: a simple, free legal status

In 2014 Benin launched a simple, free legal status for small business owners called the entreprenant. Information alone moved almost no one. The fullest package that came with it, with training, help to open a bank account and a go-between with the tax office, raised registration by only 16 points. The researchers found no clear effect of registering on business performance.

This same idea, a simple and temporary registration for new businesses, is something many in our community ask for under the name temporary register. Benin's experience does not say it is a bad idea. It says it is not enough on its own.

Our region

According to the International Labour Organization, 68.6% of work in the Arab States is informal. So we are not an exception. We are part of a wide pattern.

One of the researchers behind these experiments summed up what he learned over the years: most informal firms stay informal unless they are strongly pushed or paid to register. In other words, business owners do the maths. When the cost of registering is clearer than the benefit, they wait.

What it means

What does this mean?