Business registration and firm performance: a case of maize traders in Malawi

ABSTRACT

Small businesses could spur economic growth. Most African small businesses are not formally registered, and informality leads to loss of government revenue. This article assesses the effect of business registration on firm performance in Malawi’s maize sub-sector. The study uses panel data of 172 traders from Malawi, and instrumental variable estimation on a systematically drawn sample. The results indicate that when registered, traders make four times less profits. Variables such as sex, exporters, information gathering and general trading had positive effects on business profitability. Unless the business environment is reformed in favour of small businesses it does not pay to register.

KEYWORDS:

• Environment (built and natural) – Agriculture, Food security
• Labour and livelihoods – Economics
• Methods
• Sub-Saharan Africa

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Henry Kankwamba is a Junior Researcher at the University of Bonn’s Center for Development Research (ZEF). His research interests are food and nutrition security, markets, agriculture, economic growth and development policy.

Lukas Kornher is a Senior Researcher at the University of Bonn’s Center for Development Research (ZEF). His research interests are food price volatility, markets, agricultural wage formation and economic growth policy.

Additional information

Funding

This work was supported by Deutscher Akademischer Austauschdienst; Foundation Fiat Panis PN 30800138 and German Academic Exchange Service DAAD P/14/01271.