Formal versus informal sector
In this section, we try to uncover how appealing it is for some SMEs to remain in the informal sector in order to avoid complexities and taxations typically associated with the formal sector. The following chart answers the question: “In general, there are few incentives to operate transparently and hence, it is easier to remain informal”.
Figure 2.7: “In general, I fnd that fnancial institutions are not interested in dealing with companies in my sector of activity”
Since only a third of the respondents (31,2%) agree on this statement and 43,9% disagree with it, we would deduct that remaining informal doesn't present many advantages for African SMEs except in a few cases.
The following chart tracks how much do African startups agree/disagree with the following statement: “I prefer to avoid regulations and the hassle of bureaucracy of the formal sector”.
Figure 2.8: “I prefer to avoid regulations and the hassle of bureaucracy of the formal sector”
Only 22,1 % of respondents think it is better to avoid the hassles and hurdles of the formal economy. This resonates with the fact that only 49 businesses (16,7%) from the 294 participating ones in this survey are part of the informal sector.
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