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Piloting the Entreprenant Status: In search of a successful formalization model

Innovations in Investment Climate Reforms An Impact Evaluation Workshop Paris, November 2012. BENIN. Piloting the Entreprenant Status: In search of a successful formalization model. Impact Evaluation Concept Note. Context.

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Piloting the Entreprenant Status: In search of a successful formalization model

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  1. Innovations in Investment Climate Reforms An Impact Evaluation Workshop Paris, November 2012 BENIN Piloting the Entreprenant Status:In search of a successful formalization model Impact Evaluation Concept Note

  2. Context • New (OHADA) Entreprenant legal status aims at encouraging formalization by: • Making registration very simple and cheap; • Inviting member states to design their own package of incentives to encourage informal firms to adopt the new status • The objective of this Impact Evaluation (IE) is to support the Government of Benin identify a package of incentives (II) that works best in terms of impact on formalization and performance of newly formalized Entreprenant businesses. • The IE will focus on specific segments of the informal sector and reach informal entrepreneurs through partner institutions.

  3. What is new and special about this project? • Compared to recent formalization pilots, this pilot will innovate in three ways : • The mix of incentives proposed: • Easy/cheap entry, information, ID card, basic book-keeping training. • Dedicated microfinance / banking products. • Increased predictability of tax obligations and (some) protection from arbitrary tax inspections. • It will target the intervention on 3 specific segments of the informal sector that are most likely to benefit from formalizing: high-end of informal entrepreneurs, as identified through partner institutions (MFIs, handicraft associations, market management organizations, …). Example: artisans, “agribusinesses”, shop owners in Cotonou main markets. • It will have a phased approach, where the government will progressively expand on the set of services proposed to Entreprenants and expand to other segments of the informal sector.

  4. Research questions Understand the impact on formalization rates, behavior and performance (in each of 2 to 3 segments targeted) of newly formalized entrepreneurs that are offered: • Treatment [A]: simplification/cost reduction of registration process and providing a rich set of information/training to newly registered Entreprenants (registration process, tax guide, existing benefits/services, knowledge of rights and legal status etc.) + a picture ID card to reinforce the sense of legalized status + basic training on book keeping + preferential access to lower-price CGA services. • [A] + Treatment [B]: eligibility to dedicated “Entreprenant”microfiance and banking products (lower interest? longer maturity? larger loan amount?) • [A] + Treatment [C]: offer visibility/predictability and assurance on future tax obligations and a sense of “protection” against abuse from tax inspections – SMS hotline, free hotline number to report that business was inspected, “macarons”, certificate of payment, “gold card” at end of year 2, RBI, etc. • [A] + [B] + [C] , if sample size permits. + a control group

  5. IE Design • Use the lists of entrepreneurs obtained from partners to build sample frame • Randomize assignment at the level of the entrepreneur • stratify the assignment by segment (x 3) • in each treatment arm x segment (x 12): [1,000;2,000] – control can be smaller • total sample: [12,000 ; 21,000] • To maximize take up, team is considering implementation options • door-to-door; plays to spread the information

  6. Sampling and Data • Sampling frame • Database from the ministry of trade & industry • information on entrepreneurs that hold a temporary authorization (card): informal • Data from other partners (MFIs, banks, associations of professionals, SOGEMA) • Baseline: survey the full sample • Baseline will further inform the intervention design (and enable targeting the high-end) • Determinants of registration • Registration data: know which treatment worked best • Follow-up • Decide which treatment arm(s) to follow based on the success of the registration drive >> if no registration, no impact! • Indicators: renewal rate; access to credit; investment decisions; accounting practices; exposure to additional inspections • Qualitative survey to understand success / failure in the various treatment arms (on smaller sample)

  7. Next steps • Identify baseline data to perform the sampling: • Clients from the MFIs (PADME, ORA Bank, ASMAB) • Database from the Ministry of Trade and Industry (provisional authorizations) • Lists from the SOGEMA • Member lists from handicraft associations • Etc. • Action Plan: • Mission to identify and consult with potential partners (GUF, CGA, DGI, MFIs, etc.) • Preparation of a pre-survey to identify targeted sectors, the needs and sampling sources • Resolution of pending implementation questions (costs GUF, CGA), MFI partners and banks, clarification on the tax system, etc. • Action plan for the implementation of the 3 treatment groups (A,B,C) • Prepare the IE strategy and protocol (Concept Note)

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