Zambia's Minister of Small and Medium Enterprise Development, Elias Mubanga has highlighted significant growth challenges for the country’s SMEs due to a lack of formal business registration.
He pointed out that many businesses, which form a substantial part of Zambia's economy, face obstacles to expansion because their informal status limits access to financing and critical growth resources.
Mubanga added that formalising SMEs is essential for building the visibility and credibility needed to secure loans and investments.
Most financial institutions require formal registration to extend financing, and without it, SMEs are limited in expanding operations, adopting new technology, or growing their workforce. This lack of formalisation keeps many SMEs at a basic subsistence level, reducing their potential to significantly impact Zambia's GDP.
In addition, the absence of formal registration prevents many Zambian SMEs from accessing government and international funding opportunities, which typically require businesses to meet standards like tax compliance and financial record-keeping.
Without these formalities, informal SMEs are at a disadvantage compared to registered entities, limiting their growth potential and access to essential resources.
SMEs are vital to Zambia’s economy, significantly contributing to employment and income generation, Lusaka Times reports.
While they make up a large share of businesses, their impact on GDP is held back by obstacles such as limited financial access, weak market connections, and lack of formalisation.
Minister Mubanga added that without formal status, SMEs struggle to access broader markets and funding, restricting their ability to drive GDP growth effectively.
Consequently, Mubanga has urged for a strong policy framework to motivate SMEs to formalise their operations. Formal registration would enable these businesses to access government programs aimed at supporting small business growth, as well as essential training and mentorship opportunities.
Such resources would enhance SMEs’ operational and financial management skills, making them more competitive and sustainable over time.
Furthermore, Mubanga recognised the progress made by the government in simplifying business registration through initiatives like the Zambia Business Regulatory Review Agency.
However, he stressed the need for further efforts to encourage and inform business owners about the advantages of formalising. By simplifying registration and offering incentives, the government seeks to create a more supportive environment for SMEs, aiming to boost economic diversification and resilience.