BENEFITS OF MOVING FROM INFORMAL TO FORMAL BUSINESS OPERATIONS.

 BENEFITS OF MOVING FROM INFORMAL TO FORMAL BUSINESS OPERATIONS.

Not all informal enterprises are bad for the economy. Informal activity has moved from being a survival activity but also comprise stable and dynamic growing businesses, hence the need for the informal enterprises to be incentivized and encouraged to register and contribute to the national economy formality contributes to job creation and hence, contributes toward fighting national unemployment problems.

Currently, in Zimbabwe, the informal sector is the main employer. The official unemployment rate is not known.

The discrepancy can be aligned with the fact that most of the employment activity is in the unrecorded informal sector.

The formalization will facilitate keeping track of accurate statistics. Formality also broadens the tax base, and in certain instances, may lower the tax rates

In addition to the direct benefits of increased income to the economy through taxation, switching from informal to formal can also enhance a firm’s profits. Evidence shows that firms that commence unregistered and then register tend to outperform those registered from the onset. But not forgetting that formalization leads to an increase in firms’ profits and value-added.

If Zimbabwe improves the efficiency of its institutions, then it is possible formalizing the unregistered enterprises can assist the country in its recovery process.

We also identify that financial inclusion is another reason for the need to formalize because it plays a fundamental role in development. Because of the lack of favorable banking services, most of the informal MSEs in Zimbabwe experience a lack of access to other formal financial services such as social and business security insurance services, as a result, their potential for growth is limited because they cannot engage in more risky strategies without protection.

Formalization allows SMEs to take more risky growth strategies under the cover of liability institutions that can protect them from loss when faced with business failure.

Through formalization, traders have access to better information, which promotes deal-making and increased investment

Stronger networks are found in the formal sector and there are higher chances of getting new jobs than in the informal sector. Skills and education will be more emphasized when formalized. Another important feature of formality is that the rule of law exists. Traders can freely conduct their business knowing they are protected by the law and their interests will always be protected.

The workers will be subject to worker regulations like entitlement to sick leave and the incidences of child labor will be better regulated.

#formalizeyourbusiness #businessregistration #maltechafrica #companyregistrations #zimsabusiness #protectyourbusiness #maltechadvice

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