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Minister cautions entrepreneurs on informality

BE Editor 1st Jul, 2024 Industry Business Edge Reporter
Minister cautions entrepreneurs on informality

Minister Bahati speaks to the organisers and representatives of sponsors of the symposium at Hotel Africana in Kampala.


Entrepreneurs have been urged to formalize their business ventures if they are to benefit from financial services providers and expand their businesses.

Speaking at the Micro, Small, and Medium Enterprises (MSMEs) symposium in Kampala recently, David Bahati, the minister for Trade, Industry, and Cooperatives, identified informality as one of the critical barriers hindering MSME growth, in addition to lack of capital and inadequate innovation.

“Not formalizing is actually a significant barrier to business growth. I therefore, urge businesses to embrace formal registration to unlock growth opportunities and regulatory benefits,” he said, adding that the misconceptions surrounding formalization, particularly the fear of taxes, should not deter entrepreneurs from registering their businesses formally.

  • The symposium, held under theme; ‘Breaking Barriers for MSME Acceleration,’ was organized by the Nation Media Group in collaboration with the Federation of Small and Medium Scale Enterprises, and gathered over 400 MSMEs for an interaction between different stakeholders, including regulators, tax administrators, financiers, and market operators.

Many entrepreneurs are reluctant to formalize their businesses because of the expenses involved including registration fees, legal costs, and compliance requirements. Others choose informality to avoid or minimize regulatory oversight, especially in industries with complex or burdensome regulatory frameworks.

The various speakers highlighted the urgent need to support MSMEs given the important role they play in driving sustainable development.

  • Okot Benson Otema, the head of retail banking at Diamond Trust Bank, one of the sponsors of the symposium, echoed Bahati’s call for entrepreneurs to formalize their businesses.
Minister cautions entrepreneurs on informality Representatives of various government agencies engage in a panel discussion at the symposium.

He highlighted the disadvantages of informal business structures, which he said are seen as high-risk businesses by financial institutions, leading to high costs of capital.

"One of the reasons why businesses don’t benefit from banks is because they are so informal. Banks consider many factors in pricing the loan, and informality is one of the biggest ones. No one can trust an informal customer,” he said.

Bahati called on MSMEs to adopt strategic financial practices and leverage on quality certification to enhance competitiveness in local, regional and international markets.

Sylvia Kirabo, the Principal Public Relations Officer at Uganda National Bureau of Standards (UNBS), encouraged MSMEs, particularly in small-scale manufacturing, to obtain the UNBS quality mark (Q mark) to enhance market competitiveness.

  • Kirabo outlined the straightforward certification process facilitated by the Uganda Registration Services Bureau (URSB), stressing that formal business registration is a prerequisite for obtaining the Q mark.
  • "When you get that quality mark, the market for your goods expands because you supply to all the big supermarkets and can even explore export opportunities," she said, adding that there this significant growth and market penetration potential associated with quality certification.

Susan Nsibirwa, the Monitor Publications Managing Director, said the event was intended to be a call to action for all stakeholders to collectively strive to provide MSMEs with the necessary tools and solutions to support their growth.

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