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

A survey conducted by the Institute for Liberty and Policy Innovation (ILAPI) in Ghana found that only 28.2% of micro businesses successfully transitioned to medium scale. This means that fewer than three out of every ten micro enterprises in the study reached medium enterprise status. The study analyzed 600 businesses, including 347 micro-enterprises, 155 small enterprises, and 98 medium enterprises.

By comparing the number of medium enterprises to the total number of micro enterprises, ILAPI determined the full micro-to-medium transition rate to be 28.2%.

The research also revealed that 44.64% of micro businesses shifted to small enterprises. ILAPI noted that the transition from micro to small businesses took an average of about eight years, while the complete transition from micro to medium scale could take between nine and 12 years. The primary obstacles to this transition were structural, financial, and regulatory barriers. These included additional layers of compliance, such as obtaining new licenses, registering for taxes, and securing approvals and permits.

Regulatory hurdles proved particularly challenging for businesses looking to expand beyond micro or small scale. For instance, a small factory looking to grow may encounter requirements from various regulatory agencies, including the Food and Drugs Authority (FDA), Metropolitan, Municipal and District Assemblies (MMDAs), and the Ghana Standards Authority.

ILAPI stated that the heavy regulatory burden discouraged some businesses from expanding further, leading to a significant drop-off between micro and small enterprises. Reducing duplicative requirements could substantially improve the transition of micro businesses into medium-scale enterprises and, in turn, boost employment.