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

A recent ILAPI research study in Ghana has revealed that only 28.2 percent of micro businesses successfully transition to medium scale operations. This means fewer than three out of every ten micro enterprises reached the medium enterprise stage in the survey. The study analyzed 600 businesses, including 347 micro-enterprises, 155 small enterprises, and 98 medium enterprises.

According to the research, 44.64 percent of micro businesses advanced to the small enterprise category. The transition from micro to small businesses typically takes around eight years, while the full transition from micro to medium can take between nine and 12 years. The low transition rates are attributed to various structural, financial, and regulatory obstacles.

ILAPI highlights that as businesses expand, they encounter additional layers of compliance, such as obtaining new licenses, registering for taxes, and acquiring approvals and permits. For instance, a small factory seeking to grow may face regulatory requirements from various agencies like the Food and Drugs Authority (FDA), Metropolitan, Municipal and District Assemblies (MMDAs), and the Ghana Standards Authority.

The regulatory burden discourages some businesses from expanding beyond micro or small scales, according to ILAPI. It suggests that reducing duplicative requirements could significantly boost the transition of micro businesses into medium-scale enterprises, ultimately increasing employment opportunities. The study points out that the most significant drop-off occurs between micro and small enterprises, where businesses face limited capital and increasing regulatory demands.