Challenges Facing Women in Formalization of Micro, Small and Medium Enterprises: A Case of Kinondoni Municipal, Dar Es Salaam, Tanzania.
- December 30, 2020
- Posted by: RSIS Team
- Categories: Economics, IJRISS
International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue XII, December 2020 | ISSN 2454–6186
Jimson Joseph Chumbula
Department of Economics and Social Studies, Ardhi University, P.O. Box 35176, Dar Es Salaam, Tanzania.
Abstract: It is estimated that two billion (61 per cent) of the global employed population earn their living in the informal economy. Women’s enterprises are largely informal enterprises; it is common knowledge that women are dominant members of the informal economy and are less present as owners of formal enterprises. Women play a key role in the private sector and micro, small and medium enterprises (MSMEs) in Tanzania. Most WOEs in Tanzania are concentrated in informal, micro, low growth, and low profit activities, where entry barriers are low but price competition is intense. This happens while the government of Tanzania has expressed commitment to support women’s entrepreneurship through a number of policy pronouncement as well as specific support programs to empower their businesses. Therefore this study intended to investigate challenges making women to continue doing informal business in Tanzania regardless of the commitment of the government and a number of negative effects associated with this choice. Data collection was carried out through individual survey and focus groups discussions. Likert scale type questions were used to measure women attitude on business registration. Results indicate that low awareness among business women on registration matters, high registration fee, high tax for the registered enterprises, long time spent in registration process hinders women to go for it. The study concludes that the number of women who registered their enterprises at Kinondoni district is low. The paper recommends that government and other stakeholders in business should ensure that they raise awareness to all women in business on the importance of registering enterprises. The registration fee and business tax should be affordable to enable all willing business women to register their enterprises.
Key words: Challenges; Women; Enterprise formalization; Micro, Small and Medium Enterprises
I. INTRODUCTION
It is estimated that two billion (61 per cent) of the global employed population earn their living in the informal economy (ILO, 2018). The significance of Informal sector (IFS) activities is gradually emerging worldwide (Darbi & Knott, 2016), as a tool to reducing poverty (Chidoko & Makuyana, 2012), which has been noted as a key challenge to humanity (Sutter et al., 2019). It shows that informality exists in countries at all levels of socio-economic development. Although it is more prevalent in developing countries than developed countries, informality encompasses a wide range of jobs and economic activities with no work-based social protection: from street vending, home-based work in global and domestic value chains, waste-picking and domestic work to short-term contract work. Evidence shows that most informal workers do not work informally by choice but in the absence of other means of livelihood. Informal workers face multiple problems and are usually poorer and more vulnerable than workers in the formal employment (ILO, 2018). It is widely accepted that a large informal economy has all kinds of negative economic effects, at macro level as well as micro level. Among the effects are like: poor labour conditions, a poor tax basis, poor coverage of social protection and a negative influence on macro-economic growth. Hence, many policies and programmes across the world try to reduce the size of the informal economy, amongst others through all kinds of policies and programmes to stimulate the formalization of informal enterprises. At the end of the first decennium of this century, the size of the informal economy was showing a negative trend, but it is still considerable with an unweighted average value of 33% of official GDP (Schneider et al, 2010).
In many studies, the lack of compliance with government regulations is seen as the main
defining characteristic of informal enterprises. Informal enterprises are defined as enterprises that do not comply with government regulations (ILO, 2014); informal enterprises are enterprises that are not registered with local and/or national authorities (Fajnzylber et al., 2011); informal enterprises are enterprises that do not pay (all) taxes and/or social contributions (Fajnzylber et al., 2011); informal enterprises are enterprises that are not registered for relevant municipal licenses and with the tax department (Bruhn and McKenzie, 2013b); enterprises are classified as informal if: they are unincorporated and they are either unregistered and/or small (ILO, 2011). Informal enterprises are often associated with subsistence entrepreneurship (Bruhn and McKenzie, 2013b) or necessity-based entrepreneurship (De Kok et al., 2013). The primary objective is often just to generate employment and incomes to the persons concerned, without a motivation to strive for growth or create a large enterprise (ILO, 2012).
