Only three in 10 micro businesses reach medium scale – ILAPI research

A recent study by the Institute for Liberty and Policy Innovation (ILAPI) in Ghana reveals that only 28.2% of micro enterprises managed to fully transition from micro to medium scale. This means that fewer than three out of every ten micro businesses reached medium enterprise status, according to the findings. The study examined 600 businesses, including 347 micro-enterprises, 155 small enterprises, and 98 medium enterprises.

The transition rate was calculated by comparing the number of medium enterprises to the micro enterprise pool.

The research also uncovered that 44.64% of micro businesses shifted to small enterprises. On average, the transition from micro to small enterprises took about eight years, while the full transition from micro to medium scale could take between nine and 12 years. The ILAPI attributed the low transition rates to various structural, financial, and regulatory barriers.

These businesses faced additional layers of compliance, such as new licences, tax registrations, approvals, and permits. For instance, a small factory aiming to expand may have to satisfy requirements from agencies like the Food and Drugs Authority (FDA), Metropolitan, Municipal, and District Assemblies (MMDAs), and the Ghana Standards Authority.

ILAPI emphasized that the regulatory burden deterred some businesses from expanding beyond micro or small scale, thus discouraging the transition to medium-scale enterprises. The report suggests that reducing duplicative requirements could significantly boost the transition of micro businesses into medium-scale ones and ultimately increase employment opportunities.

The study pointed out that the most significant drop-off occurred between micro and small enterprises, where businesses encountered limited capital and increasing regulatory requirements.