TITLE:
Investigation of Factors Which Hinder SMEs’ Formalization in Chilenge Market of Lusaka District
AUTHORS:
Hastings Chijikwa, Anastasia Mulenga
KEYWORDS:
Formalisation, Small and Medium Enterprises, Informality, Lusaka District
JOURNAL NAME:
Open Journal of Business and Management,
Vol.11 No.1,
January
19,
2023
ABSTRACT: The aim of the study
was to investigate factors which hinder SMEs’ formalization in Chilenge Market
of Lusaka District and research objectives were to identify factors that
promote SMEs to operate in the informal economy; to analyze the competitive advantage that formal SMEs have over informal SMEs; and to find out if the legal environment supports informal SMEs’
transition to the formal economy. The study employed a descriptive research
design with a sample size of 595 SMEs who were operating from Chilenje Market
in Lusaka. Quantitative data were collected by using
the questionnaire and were analyzed by using
SPSS. The study concluded that the level of education for enterprise owners;
awareness of government services; awareness of government services and the
procedures involved in accessing government support; cost of formalisation for registered businesses; levels
of satisfaction for government services;
and laws and policies on enterprise formalisation were directly linked
to enterprise owner’s decisions to either formalise their businesses or not.
The study recommends that the government should consider offering business training
for owners of SMEs for them to be able to make well informed decisions that can
improve and lead to business growth. The study further recommends that the
government should provide incentives to financial institutions that provide
affordable credit for SMEs and start-up businesses; coming with up a communication strategy so as to improve communication of
government support and services for SMEs; and proper implementation of laws and
policies that that are meant to support SMEs and facilitate graduation of SMEs
from informal to the formal economy.