Business Environment Effect on Formalization Willingness and Registration Decision of SMEs in Ivory Coast

Abstract

This paper analyses the effects of the business environment on the formalisation provision and the decision to register small and medium enterprises (SMEs) in Ivory Coast, based on informal sector survey data collected in the cities of Abidjan, San-Pedro and Daloa. The study is based on descriptive analyses and estimation of a Probit model with selection. The analysis reveals that procedural complexity, information asymmetry and geographical location are the factors that significantly determine both the formalisation disposition and the decision to register businesses. It appears that, in addition to the business environment, subcontracting and the size of SMEs explain the decision to register them, while the possession of a business plan, access to infrastructures and markets are the determinants of formalisation. Thus, it appears that, in an integrated approach, the strengthening of tax incentives for SMEs operating in low-profit localities, the formalisation of subcontracting relationships, the dematerialization of procedures and the popularisation of reforms are proving to be a guarantee of the formalisation of informal activities.