An Assessment of Informal Sector’s Business Registration Patterns: Nature and Size among Micro, Small and Medium Enterprises in Lusaka

Abstract

The informal economy is an integral part of a larger economic landscape. Micro Small and Medium Enterprises (MSMEs) informality is attributed to government regulation, a lack of finance, and a lack of access to land, so they do not see the need to formalize. The primary goal of the study was to assess the informal sector’s business registration patterns: nature and size among MSMEs in Lusaka. The study’s objectives were: to describe the size and nature of businesses in the informal sector not registered with PACRA, to assess the efficacy of the policy framework designed by the Ministry of Small and Medium Enterprises to stir the growth of entrepreneurship in Zambia and to determine the business registration patterns and reason (s) why some of those MSME’s have registered their businesses. A descriptive study was conducted with a sample size of 153. The sampling techniques used were purposive and snowball methods. A structured questionnaire was used to collect data and the questionnaire return rate was 82%. The study findings were that out of the 125 respondents, 58% were registered with PACRA and only 42% were not. The high number of MSMEs’ reflect the size of informality. Most businesses that were not registered mainly operated in non-specialized wholesale and retail trade. The study findings also revealed that the Ministry of Medium and Small-Scale Enterprise Development had not completed the process of finalizing policy frameworks aimed at strengthening the growth of entrepreneurship in Zambia. The other study findings were that most MSME’s registered their businesses mainly because it was a legal requirement. This was attributed to increased public awareness as a result of the passage of the Business Regulatory Act No. 3 of 2014. Lastly, the study was also able to identify a significant trend in the registration pattern of MSME's in Lusaka. There has been an increase in the number of registrations in the transport sector, while the wholesale and retail trade, agriculture, fishing and construction continue to top the trends. MSME registration helps to access business support services, meeting legal requirements, and promoting business growth. The MCTI should use the findings of this study to map formally registered businesses, track their growth, and enroll them in business accelerator programs.