Action Line C7 E-business: Going digital, getting formal: how e-Business supports greater formalization of business in developing and least developed countries

Increasing the ratio of businesses operating in the formal sector has long been a policy objective of governments of developing and least developed countries.  The benefits for government are clear: a higher taxation base and the ability to understand, measure and contribute to the development of the private sector.  Micro, small and medium enterprises have resisted this pressure in many countries: aiming to avoid the administrative and fiscal burdens that come with being registered.

e-Business should increase the potential to bring small firms into the formal economy: in principle e-Commerce implies a higher degree of visibility on business transactions - it may be increasingly difficult to stay informal.  This may not always be the case – the use of Mobile money in Africa for instance supports continued flourishing of informal business.

But there should also be many benefits for firms to be formal and conduct e-Business – including opening new markets and reducing costs (of handling cash).

Our discussion considers how e-Business and business formalization are necessarily related, and how digitalization and e-Commerce can support the objectives of government and of entrepreneurs.

• Trends in e-Business and formalization of small enterprises
• Why does e-Commerce imply a need for greater formalism by small firms?
• What has been the experience of small firms making the transition to e-Business – what has this implied for their formalization?
• What is the benefit for small firms to work together in a formalized manner?  How can it help their success in e-Commerce?
• How can small firms be supported in their formalized approach to e-Business?