The global rate of informal firms is high, especially for those that are women-owned and in the poorest countries. One assumption to explain this is that people do not want to register their firms, and another is that if only they registered, it would lead to great benefits for their businesses.
Through an experiment in Malawi, the research team piloted interventions that can encourage firms to formalize. The three layers of interventions were: costless registration to obtain a Business Registration Certificate (BRC), assistance in obtaining a Tax Payers Identification Number on top of BRC, and information sessions on business and household financial management in addition to the two previous interventions.
The study finds that all three treatments had extremely large impacts on take-up of business registration, with 75 percent of those offered assistance receiving a business registration certificate. This is in stark contrast to 8 percent of control group firms obtaining registration. Among the three treatment groups, the BRC alone intervention yielded 52 percentage point increase in business registration while the BRC + bank information session treatment yielded 64 percentage point increase. In terms of economic impact, registration alone had no effect on firm outcomes, but combining registration and bank information session had an impact of 20% on firm sales and 15% on profits.