The human right to agency

On average outside the OECD, it takes 36 days, eight procedures, and fees adding up to over three times average annual income per capita just to register a business, according to the World Bank’s Doing Business 2010 Report. In India, average registration takes thirteen procedures, 30 days, and nine times annual income per capita – to say nothing of bribes. Fortunately, the human spirit’s resiliency isn’t keen on surrendering to such prohibitive barriers. Unregistered enterprises have long been ubiquitous in emerging markets such as India. It should come as no surprise then, that despite India’s accolades for growth and development, according to an International Labor Organization (ILO) report 93 percent of India’s workforce remains in the informal sector.

This is also the largest percentage of working population for any country in private, unregistered enterprises, said the UN agency Monday, based on 2004 data for India. The report was in collaboration with the World Trade Organisation (WTO).

“Trade contributed to growth and development worldwide. But this has not automatically translated in an improvement in the quality of employment,” said WTO Director-General Pascal Lamy, commenting on the findings of the report. Read the full story from the Times of India….

Many of these unregistered enterprises have some connection to microfinancing; if not started with a microloan, entrepreneurs value the fact that microcredit agents come to them regularly, as opposed to making frequent trips to a bank. Although microfinance has succeeded in helping poor households manage business as well as household finances, its tremendous growth hasn’t quite affected the informal standing of their enterprises. The same prohibitive barriers to registration remain, leaving what Lamy cites above as a poor quality of employment for the poor. Consequently, poverty persists.

While microfinance and the angel capital movement fulfill an important role in planting seeds of entrepreneurs in poor communities, they aren’t equipped to take them to the next level of development. For that, you have to work on the soil – the initial conditions that sustain poverty in the first place.

Prohibitive registration costs are one such condition, whose removal would allow poor entrepreneurs easier access to new customers, new investors, new technologies, and new business ideas. These and other opportunities represent the kind of soil entrepreneurs need to grow their businesses, creating better quality jobs in their communities and accumulating wealth where doing so is often deemed impossible or inappropriate.

That’s not to say every informal enterprise will register, even with lower costs; but it’s time for emerging market democracies (India is the world’s largest democracy period) to acknowledge the universal human right to be an agent of change, not just a recipient of it. Barriers to formal registration are more than a business issue, given that the poor own such a sweeping majority of the businesses they hold back. They are a human rights issue.

Published Date: October 13, 2009