Tips of the week # 1 – Benefits of Business Registration
Registering a business in Malawi can be difficult and it costs K61,000, a prohibitively high sum of money. Additionally, taxes can account for up to 30% of company revenue in Malawi. However, registration is an important step in establishing formality and unlocking pathways to growth. Obtaining a Business Registration Certificate (BRC) and Taxpayer Identification Number (TPIN) allows you to do the following:
- Open a bank account for your business
- Establish a credit history and apply for a business loan
- Register land under the business name
- Receive an export license
- Avoid harassment from government officials
- Apply for public and private tenders
- Apply to be a member of the Malawian Chamber of Commerce
It is important to note that registration by itself does not guarantee increased sales and revenue and general financial success. Indeed, a study using randomized control trials (RCTs) by the World Bank on business registration in Lilongwe and Blantyre demonstrated this point. The study used the following treatments: (1) Costless business registration (2) Costless business and taxpayer registration (3) Costless registration combined with bank information and financial literacy sessions sponsored by NBS (ex. how to use a bank account, illustrating issues businesses face etc).
Only businesses with the third treatment (registration & information), exhibited a statistically significant improvement in profits and sales in the long-term. This group also was more likely to have used financial products such as loans, insurance, and bank accounts. Therefore, registering your business should act as a stepping stone and be part of an ongoing process of establishing successful financial and legal practices.
World Bank. “Business Registration Impact Evaluation in Malawi.” July, 24, 2017. Francisco Campos, Markus Goldstein, and David Mckenzie. http://pubdocs.worldbank.org/en/504711518539160506/OW4-1312-BRIE-Malawi-Final-Report.pdf