Impact Evaluation of the - PDF document

1 Impact Evaluation of the “ent
1 Impact Evaluation of the “entreprenant status” in Cotonou Preliminary Report1 October 23, 2014 Executive Summary In April 2014, the Government of Benin launched the pilot phase of the entreprenant status, a simplified legal regime offered to small businesses that operate in the formal economy. During the pilot phase, planned to last for about a year, the Government partnered with the World Bank Group to test the impact on business registration decisions of three different versions of the entreprenant status, each including specific incentives to registration. At the end of the pilot phase, the Government will scale up the version of the entreprenant that resulted more attractive to businesses. For the pilot phase, a sample of 3,600 informal businesses was selected through a listing-baseline survey conducted in Cotonou in March 2014. In this sample, businesses are highly representative of the overall population of informal businesses of Cotonou, except for street vendors. On average, selected businesses are relatively small, have 1.2 employees, an average monthly profit around FCFA 43,000 (approximately USD 82), and were created more than one year ago. 60% of businesses are owned by a woman, 55% work in trade, and more than half pay taxes. The selected businesses were randomly allocated into three pilot groups and one control group. The first group of informal businesses was offered to register at GUFE using a new, simplified system, in addition to receiving information on the taxes to pay; the second group received the previous benefits plus business trainings and support with commercial bank services; the third group received all of the above, plus tax preparation support, and some form of protection in case the tax inspectors abused their power. The fourth group served as a comparison group. The services were delivered by CGA (Centres de Gestion Agréés), GUFE (Guichet Unique de Formalisation des Entreprises), Bank of Afr

ica, and Orabank. For each infor
ica, and Orabank. For each informal business selected for the pilot phase, a CGA advisor was sent a first time to explain the benefits available, and a second time to provide short personalized business training. Business owners then had to decide whether to register at GUFE as entreprenants. Those who chose to register could benefit from additional services, like business trainings and access to a bank account at better conditions. At the end of September 2014, about 1,800 first visits (77% of total) and 350 second visits (17% of total) were completed with success. A preliminary analysis of the GUFE registration data shows that, taking into account the delivery progress and other methodological caveats, registration of informal businesses increased by 10 to 12% as a result of the introduction of the entreprenant status. Formalization rates are very similar in all pilot groups, perhaps because businesses took some time to register at GUFE after the first visit. Formalization rates are higher for male business owners and for business operating outside Dantokpa market. Very few second visits were conducted to the second or 1 This note was prepared by Victor Pouliquen and Massimiliano Santini. It received inputs from Louis Akakpo, Theodore Anthonioz, Tonagnon Dadjo, David McKenzie, and Hamidou Sorgo. 2 third group, so there is not enough evidence to assess the full impact on formalization decisions from this second visit and other incentives offered to informal businesses. From interviews conducted with the businesses selected for the pilot phase, it seems that beneficiaries understand well the three packages of incentives and their potential advantages to their businesses. However, about a third of the beneficiaries from the second and the third groups found it still complicated to register at GUFE because they did not have the ID card, and the

LEPI card was not accepted. All im
LEPI card was not accepted. All implementing agencies (CGA, GUFE and the commercial banks) reported that the communication and cooperation between agencies could be improved. The pilot phase of the entreprenant program should be completed by mid-February 2015. Afterward, the team plans to conduct follow up surveys, in March 2015 and March 2016, to evaluate the full impact of the three version of the entreprenant status on formalization decisions and business performance. Once the evaluation is completed, the Government will scale up the version that best incentivize businesses to formalize and grow. 3 Table of Contents Executive Summary .................................................................................................................................... 1 1. Informality in Benin ........................................................................................................................... 5 2. Impact Evaluation of the entreprenant status ................................................................................... 5 3. Methodology ........................................................................................................................................ 7 4. Baseline survey .................................................................................................................................... 9 5. Implementation ................................................................................................................................. 14 5.1. Package A – Provision of information on (i) the new registration system and (ii) tax filing and payment (Implementation entity: CGA) ......................................................................................... 15 5.2. Package A - Regulatory simplification (Implementing entity: GUFE) ........................................ 16 5.3. Package B - Provision of business services and trainings (Implementing entity: CGA) ............

16 5.4. Package B - Support wit
16 5.4. Package B - Support with bank services (Implementation entities: CGA, Orabank and Bank of Africa) ................................................................................................................................................ 17 5.5. Package C – Provision of tax preparation support and tax mediation services (Implementing entity: CGA) ...................................................................................................................................... 17 6. Preliminary Results .......................................................................................................................... 18 7. Qualitative Feedback ........................................................................................................................ 23 8. Next Steps .......................................................................................................................................... 26 Annex 1: Details of CGA Implementation Protocol by group .............................................................. 27 Annex 2: Sectors of Dantokpa market surveyed .................................................................................... 29 Annex 3: Descriptive Statistics of program population by location ..................................................... 30 Annex 4: Balance Checks ......................................................................................................................... 32 Annex 5: Matching Program data to Administrative data on formalization ...................................... 33 Annex 6: Impact by subgroups ................................................................................................................ 35 4 Abbreviations and Acronyms CGA: Centres de Gestion Agrées GUFE: Guichet Unique de Formalisation des Entreprises IE: Impact Evaluation IFU: Identifiant Fiscal Unique INSAE: Institut National de la Statistique et de l’Analyse Economique IREEP: Institut de

Recherche Empirique en Economie Politiqu
Recherche Empirique en Economie Politique OHADA: Organisation pour l'Harmonisation en Afrique du Droit des Affaires TPU: Taxe Professionnelle Unique WBG: World Bank Group 5 1. Informality in Benin In Benin, the great part of the GDP comes from the informal sector, and the overwhelming majority of the Beninese works in the informal economy. In 2008, the informal sector value added to the GDP was 70.3% of the total, and it represented 95% of employment in Benin (INSAE, 2009)2. Agricultural activity was almost exclusively informal, and the economic activity in industry and services was largely informal too (63% and 75%). By converse, Benin’s formal economy is dominated by cotton, which is the main source of income for more than half of the farmers. Regional trade, in particular with Nigeria, is Benin’s main industry, but a large part of it remains informal. Oil products, in particular, are almost entirely smuggled from Nigeria. Transport, banking and insurance depend greatly on this informal cross-border trade too. However, the informal sector contributed to less than 3% of national fiscal revenues in 2005, according to INSAE.3 However, evidence of the impact of informal employment on poverty and the living standards is not univocal. For example, about 80% of households employed in the informal sector use gas lamp to light their houses, whereas about 64% of households in the formal sector use electricity. While informal jobs provide a safe valve for the unemployed, they do not provide the same standard of living of formal jobs. According to a small survey of informal businesses conducted by the WB in 20114, the productivity gap between informal and formal businesses is significant, with the gap being smaller for the large informal businesses. According to this survey, about 60% of small informal businesses complained about fiscal harassment: once they became known to the fiscal authorities, they reported being subjected to repeated audits and bribes. Understanding the main determinants of informality in Benin, and introduc

ing mechanisms to decrease the size of
ing mechanisms to decrease the size of the informal sector, are among the top priorities for the Government of Benin. 2. Impact Evaluation of the entreprenant status Following technical assistance provided by the WBG and other donors, OHADA member countries (Organisation pour l'Harmonisation en Afrique du Droit des Affaires) have adopted a revised General Commercial Law in December 2010, which came into effect in May 2011. The new law immediately applicable in all OHADA members introduced the legal framework for the entreprenant status, a simplified legal regime specifically designed for small entrepreneurs, whose intended objective is to facilitate the migration of businesses operating in the informal sector into the formal sector. However, the law did not explicit how the entreprenant status would practically function, nor the specific combination of incentives that it would include, allowing instead each country to fill in the vacuum through ad-hoc secondary legislation. Benin, as a member of OHADA, is the first OHADA country to roll out a pilot version of the entreprenant legal status, with support from the WBG. The entreprenant status can apply to a physical person running a small business, who practices any type of activity (civil, commercial, artisanal, agricultural), with a limited turnover, and who will incur in lower registration cost and time. Formalization with this new status is easy, free of charge and fast. Once the small business adopts the entreprenant status, the turnover threshold should not be exceeded for more 2 INSAE, 2009. “Comptes nationaux,” INSAE, Fotonou. 3 INSAE, 2005. “Questionnaire unifié du bienêtre de base (QUIBB) 2005,” INSAE, Fotonou. 4 N. Benjamin and A. A. Mbaye, “The Informal Sector in Francophone Africa. Firm Size, Productivity, and Institutions,” World Bank, 2012. 6 than two consecutive years. Otherwise, the business will lose entreprenant status and adopt the individual entreprise status. The WBG

has launched in October 2012 a rigoro
has launched in October 2012 a rigorous impact evaluation of different versions of the entreprenant status with the goal of assessing which one is more effective to formalization decisions and business performance5. The impact evaluation also assesses the cost-effectiveness of each version of the program and thus will allow the Government of Benin to take into account costs in its decision to scale up the program. It will include the cost of program implementation and the cost of increasing the capacity needed by the agencies in charge of offering the services that come with registering as an entreprenant. The entreprenant status was introduced concurrently by the new OHADA Commercial law in 17 West African states, so it is likely that the lessons learnt by the Government of Benin as a result of this impact evaluation will have broad policy relevance in other West African states, particularly on interventions focused on the informal sector. The impact evaluation tests three different versions of the entreprenant status, whose definitions follow discussions held with the Government and the private sector (formal and informal). Each version includes a combination of the following packages of incentives to formalization. Package A includes the following components:  Regulatory simplification: a streamlined business registration process, including a reduction in number of steps, time and cost to register;  Provision of information on the new registration system: information on the new system is given in-person to business owners;  Provision of tax information: information and clarifications on the tax regime applicable to the entreprenants. Package B includes the following components:  Services and training: services include support to entrepreneurs in the formalization process, help in drafting financial statements and business plans, support in bookkeeping; training include basic accounting and business management, initiation to legal and tax obligations;  Support with bank servi

ces: creation of a bank account (checki
ces: creation of a bank account (checking or saving) with a commercial bank. Package C includes the following components:  Provision tax mediation services: support on preparing tax declarations; provision of safeguards against arbitrary practices from the tax administration through mediation services between entreprenants and the tax authority. Drawing on common findings in the literature on business regulation6, the package A of incentives is based on the assumption that the entreprenant status will encourage formalization by making business registration and operations simpler, cheaper, and faster. For package B of incentives, the team hypothesizes that formalization alone may not be sufficient to improve business performances. Other services like business counselling, business training or access to bank services could be useful to newly formalized businesses. 5 For the purpose of the impact evaluation, a business formalizes when it registers at the Registre du Commerce et du Crédit Mobilier, RCCM. 6 See Bruhn, McKenzie, 2013 for a literature review. 7 Finally, package C of incentives is based on the idea that some informal businesses may think that formalization could increase the risks of harassment from inspectors, and the uncertainty coming from unclear tax systems. Tax mediation services provided by an organization outside the tax administration to defend the interests of the newly formalized tax payers could significantly contribute to formalization decisions. The first group of informal businesses receives package A of incentives (see previous section), the second group packages A and B of incentives, and the third group packages A, B and C. The fourth group serves as comparison group7. The impact evaluation addresses the following questions:  Do firms voluntarily move into the formal sector if the costs of formalization are highly reduced?  What is the optimal package of incentives to increase formalization?  To wha

t extent the fear of tax administration
t extent the fear of tax administration is an important barrier to formalization?  What is the effect of becoming formal on firm performance and access to credit? 3. Methodology This impact evaluation is a randomized control trial, as this method provides maximal internal validity. Indeed, the random allocation of informal businesses to treatment and control groups ensures that businesses in different groups have on average the same characteristics prior to program implementation (and are expected to have equivalent trajectories going forward). So the only difference between the control group and the three treatment groups is the type of program received (or no program received for the control group). The outcomes observed after the program implementation will therefore identify the effect of the program. An eligible population of 3,600 informal businesses was identified through a listing-baseline survey in Cotonou conducted in March 2014. Sampling criteria used during this survey are detailed below in section 4. These businesses were randomly allocated to three treatment groups and one control group. Businesses characteristics such as gender of the owner or sector of activity were used to stratify the randomization8. Figure 1 below summarizes the different packages of incentives. The key outcomes of interest are:  Formalization rate  Business performance (i.e. increased turnover, increased profits). Intermediary outcomes include:  Improved business skills  Improved accounting systems  Increased level of trust  Increased access to new markets  Increased level of advertising  Increased access to banking  Increased number of tax payments  Increased amount of taxes paid  Increased investment 7 See Figure 1 for more details on the identification strategy. 8 This method of stratification of the randomization is used to ensure that all groups are well balanced. It also improves the statistical power of the evaluation.

8 Long-term impact indicators
8 Long-term impact indicators are:  Increased employment  Better standards of living These outcomes will be measured through in-person interviews with business owners. The first survey of the selected sample of businesses was conducted in March/April 2014 prior to program implementation. A first follow up survey will be done in March 2015, and a final survey in March 2016 and will measure short and medium term impact 1 year and 2 years after the pilot phase started. The survey instruments are designed to measure all those outcomes and to understand the underlying mechanisms of impact. Administrative data on formalization from the GUFE are collected every month and matched with the baseline survey data. These data allow looking at the impact on formalization every month. Data on program implementation are also collected to better understand the quality of services delivered. These include detailed monitoring data from CGA and qualitative surveys to understand success and/or failure in the various treatment groups. Finally, in order to conduct a cost effectiveness analysis, data on program costs are also collected. Figure 1: Impact Evaluation design First group 1200 informal businesses Samples of informal businesses Control group -Regulatory simplification -Provision of tax filing and payment information Package A + Second group Package B Package A + -Regulatory simplification -Provision of tax filing and payment information Third group Package B Package A -Regulatory simplification -Provision of tax filing and payment information Package C -Provision of tax preparation support -Tax mediation services -Provision of business services and trainings -Support with banks services -Provision of business services and trainings -Support with banks services 300 informal businesses 900 informal businesses 1200 informal businesses + 9 The impact evaluation of the entreprenant status was

designed to measure both short-ter
designed to measure both short-term and medium-term effects of the program. For this reason, the impact evaluation is expected to be completed by mid-2016. Main steps of the impact evaluation are detailed in Figure 2 below. Figure 2: Impact Evaluation timeline 4. Baseline survey The listing-baseline survey was designed to address three main goals:  Representativeness of all informal businesses operating in Cotonou;  Definition of eligible population;  Collection of baseline data on important firm characteristics. The impact evaluation targets informal businesses in all Cotonou, including Dantokpa market. Since conditions are different in Dantokpa and in the rest of Cotonou, two different sampling methods were used:  Sampling framework for Dantokpa market: the team used a detailed map of the market made by SOGEMA (Société de Gestion des Marchés Autonomes), the public company managing markets in Benin. This map allowed the team to divide geographically the market in small areas, and to randomly select areas where 50% of the businesses were surveyed (with fixed location)9.  Sampling framework for other neighborhoods of Cotonou: The team obtained detailed maps of each of the 144 neighborhoods in Cotonou, which allowed the identification of ilots (blocks), i.e. the official administrative unit below the neighborhoods. The team used this administrative unit as a reference for the survey sampling, and information given by the tax administration (and confirmed by the survey company) in order to categorize neighborhoods as high or low firm density areas. The team then randomly sampled 38% of ilots in high density neighborhoods and 10% of the ilots in low density neighborhoods. In each ilot, 68% of businesses were surveyed on average. 9 Few areas in the market were excluded from the survey because most businesses in these areas are very small and wou

ld probably not be interested by the pr
ld probably not be interested by the program (see Annex 2 for the map of areas surveyed in Dantokpa). Feb-Mar: Midline survey April: Second preliminary report Feb-Mar: Endline survey June: Final report April 29th: Program Launch 2014 2015 2016 March-April: Listing survey October: First preliminary report 10 In each ilot, all businesses with a fixed location were eligible to the survey with the following exceptions: international or nationwide companies (like banks), public companies, and professionals (like doctors or lawyers). The survey took place on March 4th-April 12th, 2014. It was carried out by IREEP (Institut de Recherche Empirique en Economie Politique) and closely monitored by the World Bank Group. On the 1,170 ilots sampled for the project outside the market and 558 sidewalks sampled in the market:  1,164 ilots (99.5%) and 558 (100%) sidewalks were successfully visited by surveyors;  1 ilot was excluded from the project because the businesses in that block were having a problem with local administration and refused to answer surveyors’ questions;  5 ilots were not found on the ground by the surveyors. These ilots did not exist anymore, or the maps used for the sampling were not up to date. Overall, 19,246 businesses were listed by surveyors. Among those businesses, 9,938 were randomly selected to be surveyed. Among the selected:  7,945 (80%) businesses were successfully surveyed;  1,000 (10%) businesses refused to be surveyed;  995 (10%) businesses were dropped because the business owner was not available or not reached after 4 attempts. Outside the market, 16,193 businesses were listed by surveyors. Among those, 8,266 businesses were randomly selected to be surveyed. Among the selected:  6,644 (80%) businesses were surveyed successfully;  741 (9%) businesses refused to be surveyed;  881 (10%) businesses were dropped because the business owner was not available or not reached after 4 at

tempts. Inside the market, 3,053 b
tempts. Inside the market, 3,053 businesses were listed by surveyors. Among those, 1,672 businesses were randomly selected to be surveyed. Among the selected:  1,299 (78%) businesses were surveyed successfully;  259 (15%) businesses refused to be surveyed;  114 (7%) businesses were dropped out because the business owner was not available or not reached after 4 attempts. The completion rates achieved are considered highly satisfactory. Indeed, sensitive questions were asked in the survey, like on the amount of profit, sales and taxes paid: the refusal rate could have been considerably higher. The team decided to survey only business owners or managers in charge of day-to-day decisions, since the program would target only business owners. Figure 3 below summarizes the sampling strategy and the completion rates of the listing survey. Among the 7,945 surveys successfully completed, the team randomly selected 3,600 informal businesses whom to offer the entreprenant status in its three pilot versions. Overall, the selection aimed at identifying businesses with high potential for growth, in addition to following these criteria:  Exclude businesses already formal;  Remove businesses that would probably not cooperate in the future, or that would probably be difficult to find; 11  Trim the database from (a) businesses very close to formalization who would have formalized anyway, and (b) businesses very far from formalization which would not be interested in the entreprenant status;  Remove businesses that would most probably not be interested (in particular, businesses that already have access to loan from commercial banks);  Reduce the variation of the main outcomes of interest (profit and sales) by excluding businesses with very high or very low levels of profit or sales;  Insure the best external validity of the project. Figure 3: Sampling strategy and Survey completion rates Table 1 below provides descriptive statistics on busi

ness characteristics for the whole popul
ness characteristics for the whole population of informal businesses surveyed, for businesses selected to receive an offer to register as entreprenant (“selected sample”), and for businesses already registered at GUFE (“already formal”). The sample is composed by relatively small businesses with 1.2 employees on average. The great majority of businesses were created over a year before being surveyed (86%), 55% of businesses are involved with trade activities, 26% work in services, and 16% are craftsmen. 63% of businesses sampled for the study are owned by women. This reflects the high share of female owners in Dantokpa market (See tables A1 and A2 in Annex 3 for descriptive statistics of business owners operating inside and outside the Dantopka market). Around 30% of businesses owners never went to school, and less than 20% of the businesses were keeping some type of accounting. Interestingly, the majority of businesses paid some form of tax (54%), but the great majority complained about not knowing in advance the amount of taxes owed to the tax authority (74%). All medium and small businesses in Cotonou19,246 businesses listed: -16,193 outside the market-1,299 in Dantokpa9,938 businesses sampled for the survey:-8,266 outside the market-1,672 in Dantokpa7,945 businesses surveyed: -6,644 outside the market -1,301 in Dantokpa 3,600 businesses selected for the project: -2,818 outside the market -782 in Dantokpa Study Population 12 Formal businesses have on average 3.2 employees against 1.1 employee for informal businesses, and their average monthly profits is around FCFA 210,000 compared to FCFA 43,000 for informal businesses. Formal businesses also have more access to the banking system: 80% of them owns a bank account, whereas only 20% of informal businesses does. The selected sample is highly representative of the overall population of informal businesses in Cotonou. In fact, Table 1 shows that the sample selected for the study and the overall sample of infor

mal businesses are very similar. In pa
mal businesses are very similar. In particular, the share of female owners, the average age of the owners, the amount of monthly profits, and the average number of employees are very close in both samples. Tables A1 and A2 in annex show separately results for inside and outside Dantokpa market. The 3,600 informal businesses selected were then randomly allocated into three treatment and one control groups.10 In order to check that all groups were similar prior to program implementation, we ran statistical tests to compare averages of relevant business characteristics across groups. Results of these comparisons are presented in Annex 4. They show that businesses in each group have similar characteristics and can be considered as comparable. 10 The randomization was done with stratification on firms characteristics. The following variables were used: business located in Dantokpa, gender of the owner, sector of activity, amount of profits, amount of sales and number of employees. 13 14 5. Implementation The three packages of incentives described in section 2 are delivered by the following institutions:  FGA (“Centres de Gestion Agréés”), two non-profit organizations based in Cotonou whose mission is to provide small and medium enterprises with business management, accounting, and tax consulting services. 14 advisors, one hotline assistant, and one supervisor were hired at CGA, with WBG support, to implement the program;  GUFE (“Guichet Unique de Formalisation des Entreprises”), the one-stop shop for business formalization based in Cotonou. Two additional staffs were hired to work on entreprenants formalization with WBG support;  Two commercial banks, BoA and Orabank. The offer to register at GUFE as entreprenant is delivered to each business owner according to four steps: 1. Visit 1. A CGA advisor conduct a first visit to each busin

ess to explain the benefits of becomi
ess to explain the benefits of becoming an entreprenant, specific by group, and to distribute informational leaflets. If a business owner is not present on the day of the visit, the CGA advisor attempts to call the owner on the phone. If the owner cannot be reached, the CGA advisor makes a final attempt by trying the visit three times in different moments of the day. 2. Visit 2. For businesses in group 2 and 3, the same CGA advisor comes back, approximately two weeks after the first visit, and provides 1-2 hours of personalized training. Formalizing is not mandatory to be eligible to this second visit. In group 3, the CGA advisor devotes additional time in reviewing the procedures to calculate the taxes to pay, and the option of receiving tax mediation help, if necessary. 3. Formalization decision. After having learnt the potential benefits of formalization, business owners decide whether to register as entreprenants at GUFE. 4. Provision of additional benefits. Businesses in group 2 and 3 can also register to CGA, and receive counselling and business training (group sessions). Businesses in group 3 can benefit from tax mediation services with CGA, if needed. Finally, businesses can open a bank account with specific conditions at BoA or Orabank. Figure 4 below shows the implementation steps for each group, while the following paragraphs offer an in-depth description of all steps. 15 Figure 4: Program implementation 5.1. Package A – Provision of information on (i) the new registration system and (ii) tax filing and payment (Implementation entity: CGA) CGA advisors visit each business selected and explain the benefits of becoming an entreprenant. Different leaflets are given and explained to business owners: one leaflet describes the entreprenant status, its advantages and requirements, one leaflet explains the registration process at GUFE, and one leaflet explains the tax regime applicable to entreprenants. In fact, four

different tax regimes may apply to VI
different tax regimes may apply to VISIT 1 - Done by a CGA advisor - Explain and promote the entreprenant status - Deliver program leaflets - Explain other benefits specific to group 3 VISIT 1 - Done by a CGA advisor - Explain and promote the entreprenant status - Deliver program leaflets - Explain other benefits specific to group 2 VISIT 1 - Done by a CGA advisor - Explain and promote the entreprenant status - Deliver program leaflets STEP 1 VISIT 2 - Done by same CGA advisor - Deliver a 1-2h personalized business training -Re-explain program benefits specific to group 3 - Some time spent on tax- mediation VISIT 2 - Done by same CGA advisor - Deliver a 1-2h personalized business training -Re-explain program benefits specific to group 2 STEP 2 STEP 3 FIRM OWNERS HAVE TO DECIDE WHETHER OR NOT TO FORMALIZE ADDITIONAL BENEFITS TO FORMAL FIRMS - Access to CGA counselling - Access to CGA group trainings - Access to bank account at specific conditions - Access to tax mediation services with CGA. STEP 4 ADDITIONAL BENEFITS TO FORMAL FIRMS - Access to CGA counselling - Access to CGA group trainings - Access to bank account at specific conditions GROUP 1 GROUP 2 GROUP 3 16 entreprenants in Cotonou, depending on the economic activity, and they all have different tax bases. The third leaflet specifically reviews how to calculate the tax owed in each regime11. One regime, likely the most commonly applicable to entreprenants in within the Cotonou jurisdiction, is the Taxe Professionnelle Unique (TPU), which is calculated based on the rental value of the business premises. In the majority of cases, taxpayers do not have a lease contract, which is the only official and opposable proof of rental value. As a result, the law provides for the tax administration to be responsible for assessing the rental value. This assessment leaves a door open for discretion, and it cannot be explained or cl

arified using the informational leafl
arified using the informational leaflet only. For a large majority of businesses formalizing with the entreprenant status, the way taxes are calculated does not change. 5.2. Package A - Regulatory simplification (Implementing entity: GUFE) The informal businesses that decide to formalize will submit an application to obtain the entreprenant card at the GUFE. As per an inter-ministerial decree, the Government has removed all direct costs of formalization and the entreprenant card is free. The process of formalization at GUFE includes the following steps:  The entrepreneur files at GUFE the declaration form, duly completed and signed, as well as the required documents: - Copy of the identity card or passport; - Copy of the extract of birth certificate; - The “extrait de casier judiciaire”. In the absence of this document, the business can sign an affidavit attesting that the applicant has not been banned by any Court to engage in commercial activities. The affidavit will be available at the GUFE; - Photo ID.  GUFE officials validate the declaration and the supporting documents, process the registration with the Company Registry (Registre du Commerce et du Crédit Mobilier, RCCM) and the Tax authority (DGID), and share information with the Department of Labor (Direction Générale du Travail).  The procedure will conclude when the entrepreneur goes back to the GUFE, less than a day later, to receive the entreprenant card and an acknowledgment statement containing the RCCM and IFU numbers. 5.3. Package B - Provision of business services and trainings (Implementing entity: CGA) CGA advisors may help the entreprenant with the formalization process at GUFE, including filling in the declarations and preparing all the required accompanying documents. See Annex 1 for a description of the protocol followed by CGA advisors. CGA advisors deliver the business trainings and services via a dedicated “entreprenant Unit,” using modules customized and developed with WBG s

upport. Following the first visit to
upport. Following the first visit to each business, CGA advisors organize a second visit to deliver a 1-2 hours personalized training session. In addition to the business training, the purpose of this visit is to incentivize and nudge business owners to participate to the entreprenant program. 11 The four tax regimes are the “Taxe Professionnelle Unique” (TPU), the “Taxe Unique sur les Transports Routiers” (TUTR), the “Régime du forfait des revendeurs de tissus et divers”, and the “Régime du bénéfice réel simplifié”. 17 Once the informal business registers at GUFE and receives the entreprenant card, it agrees with the CGA advisors on additional specific trainings that it may need according to its business needs. The advisory services and trainings will be carried out on a one-on-one basis with the businesses at their workplaces and during group sessions organized at CGA. They may include:  Basic accounting (cash book, billing, pro-forma preparation, using and analyzing financial statements);  Basic of micro-enterprise management (working with budget, controlling cost, cash flow management, stock management);  Initiation to legal and tax obligations;  Financial education and awareness (products and services offered by commercial credit and microfinance institutions—where and how to obtain financial services, requirements for creating a bank account);  Basic of business plan development (preparation of bankable proposals, new business, expanding business);  Initiation to activity structuring and growing strategy (including small business development and strengthening, access to market, dealing/negotiation with suppliers). Once the business owner completes a certain number of training sessions with CGA, he/she will receive an official diploma, and a sticker acknowledging that he/she received the training. 5.4. Package B - Support with bank services (Implementation entities: CGA, Orab

ank and Bank of Africa) In addition
ank and Bank of Africa) In addition to registration simplification, provision of information on the entreprenant status, and provision of training and services, businesses in groups 2 and 3 also receive support from CGA in opening a bank account. This support is not mandatory and the entreprenant may decide to open a bank account autonomously. The bank account is directly linked to the entreprenant activity and it is not a personal account. The banks partners of the IE (Orabank and Bank of Africa) designed a specific product for the entreprenant, with dedicated services and simplified access conditions, including:  Debit card  Bank account consultation with mobile phone  Cash transfers  SMS-banking  Internet Banking  Mobile money CGA advisors assist the entreprenant in presenting the information needed to open a bank account and give the necessary training to the entrepreneur on how to use the account. 5.5. Package C – Provision of tax preparation support and tax mediation services (Implementing entity: CGA) The CGA tax advisors provide (a) tax preparation support and (b) protection in case tax inspectors abuse their power when assessing and collecting taxes owed. The advisors are assigned to those businesses who formalize under the third group, and they support them in preparing the tax forms (including returns and supporting documentation). The advisors will also leave 18 their contact information in case the entreprenant have any complaints about future tax payments and inspections. Advisors will take action when an entreprenant asks for help in interacting with the tax administration, and they will serve as intermediary between the tax administration and the entreprenant in order to provide solutions that satisfy both parties, in case of complaints. Conceptually, this intervention links some of the tax revenues paid by businesses to the services offered by the CGA tax advisor. In the optimal scenario, these services are perc

eived by entreprenants as a “bene
eived by entreprenants as a “benefit” they receive by paying taxes. 6. Preliminary Results The entreprenant status was launched on April 29th, 2014. This report shows preliminary results after 5 months of program implementation. As of September 30th, 2014, 1,849 visits 1 (77% of total) have been attempted by the CGA and 1,775 completed with success. Visits 1 were considered as not completed successfully when the CGA advisor was not able to meet the business owner after three attempts, or if the business did not exist anymore. The percentages of visit 1 attempted is slightly different across groups due to logistical constrains (less CGA advisors were allocated to group 1, and visits are taking more time for businesses in group 3 compared to businesses in group 2). As of September 30th, 2014, 353 visits 2 were conducted to businesses in groups 2 and 3 (17% of total), with an average of 1.1 months between the first and the second visit. The time is longer than the 2 weeks initially planned. The main reasons are that during the first months of the implementation, CGA advisors focused more on visit 1, and that making appointments with businesses for visit 2 was taking more time than expected. As of September 30th, 2014, 128 (6% of total in groups 2 and 3) businesses registered to the CGA, and only 46 (2% of total in groups 2 and 3) already participated in a group training session at CGA. Business owners in group 2 and 3 who decided to register as entreprenant formalized also have the possibility to open a bank account at BoA or Orabank. As of August 31st, 2014, 0.6% of the businesses in group 2, and 0.9% in group 3, opened a bank account. Table 2 below describes the implementation progress by group until September 30th, 2014. 19 During the visit 1, CGA advisors collected some information on business owners’ reaction to the program. Table 3 below describes the main answers from bus

iness owners during visits 1. Overa
iness owners during visits 1. Overall, a large majority of business owners said that they were interested in becoming entreprenant. Among groups, 62% of businesses in group 1 said that they would formalize, this share increasing to 69% in group 2, and 78% in group 3. Significantly, over 90% of business owners in groups 2 and 3 (90% in group 2 and 96% in group 3) were interested in receiving a second visit with a personalized one-on-one training. 20 The main outcome analyzed in this preliminary report is the formalization rate. Other outcomes, like change in business behavior or in business performances, will be analyzed after the follow up surveys are completed. The measure of formalization is based on the database shared monthly by GUFE. This database includes the exhaustive list of all newly formalized businesses for all type of status. This list is then matched with the list of business owners who participated in the program. The difference between formalization rates in a given treatment group and the rate in the control group yields the impact of the program in that group. Two important features characterize this measure of formalization:  Formalization rate is captured for all types of formal legal status. In fact, this outcome should be measured in the exact same way across treatment and control groups. If the formalization rate were only referring to the entreprenant status, its impact estimate would probably be biased upward.12  Matching businesses in the GUFE database with businesses in the program database is not a perfect process. In order to match two businesses, the team uses variables such as business owner names, business address, gender of the owner, sector of activity; however, in some cases name spellings are quite different in both databases and most of the time addresses are not precise. For this reason, the team uses a conservative definition of a matc

h between the business names in the
h between the business names in the two databases as “two businesses with a close surname, and at least one close first name, the same sector of activity, and an address in the same neighborhood. Using this definition, the 12 Most businesses in the control group are not aware of the new entreprenant status, so they are probably more likely to choose another legal status if they wanted to formalize. If this is the case, looking only at formalization using the entreprenant status would overestimate the impact of the program. 21 likelihood that a business in the program database was considered as formal, whereas the business was in reality not formal, is very low. The opposite case (i.e. a business was considered as informal, whereas it is in reality formal) is however more likely, so the measure of formalization most probably underestimates the actual number of businesses which formalized in all groups. This does not imply that the measure of program impact is biased, but just that formalization rates in both treatment and control groups are underestimated by the same percentage. A detailed description of the matching process is provided in Annex 5. Using this measure of formalization, the team estimated the program impact in three ways: 1. Impact on formalization comparing treatment and control groups. Using this method, the team estimates the overall impact of the program after 5 months of implementation. However, this method does not take into account that not all beneficiaries in the treatment groups have received the program yet. In fact, between 68% and 82% of businesses, depending on the group, actually received at least visit 1. 2. Impact on formalization conditional on businesses receiving visit 1. The advantage of this method is that it allows the comparison among treatment groups. However, since businesses in the control group did not receive visit 1, the team

cannot obtain the impact of the pro
cannot obtain the impact of the program with respect to the control group. But, formalization rate in the control group was very low (as we will see below) so, for the purpose of this report, the team can make the assumption of a formalization rate virtually equal to zero. With this assumption, the formalization rate observed in treatment groups for businesses which already received visit 1 is equal to the impact of the program (or a to a slightly overestimated impact of the program). 3. Impact on formalization of receiving visit 1. It consists of re-weighting the difference in formalization rates between treatment and control groups to take into account the share of businesses in each treatment group which actually received visit 1. Formally, it is given by the following formula:13 �݉݌ܽܿݐ �݊ ݃ݎ݋ݑ݌ �=(% ܾݑݏ�݊݁ݏݏ݁ݏ ݂݋ݎ݈݉ܽ���݊݃ �݊ ݃ݎ݋ݑ݌ �)−(% ܾݑݏ�݊݁ݏݏ݁ݏ ݂݋ݎ݈݉ܽ���݊݃ �݊ ܿ݋݊ݐݎ݋݈ ݃ݎ݋ݑ݌)% ݋݂ ܾݑݏ�݊݁ݏݏ݁ݏ ݐℎܽݐ ݎ݁ܿ݁�ݒ݁݀ ݒ�ݏ�ݐ 1 �݊ ݃ݎ݋ݑ݌ � Using the first method, data were only available until July 31st, 2014, and results are incomplete.14 After 3 months of program implementation, around 5% of businesses had already formalized in all treatment groups. Almost all of them chose the entreprenant status to formalize. The number of businesses that formalized in the control group between May and July 2014 using any status was very low (0.3%). This means that, in our study population, very few businesses formalized in the absence of the program. Methods 2 and 3, which take into account the implementation progress, yield similar results, and show an important increase in the estimated impact. Formalization rates range fro

m 10 to 12%, and are very close in all
m 10 to 12%, and are very close in all groups receiving the program, although the rate is slightly higher for businesses in group 3. These results are preliminary and several caveats must be taken into account:  The program is still being implemented and completion rates of several important aspects of the program are low. This is especially true for group 2 and 3, since less than 20% of businesses in group 2 and 14% of businesses in group 3 have received visit 2. 13 This method is called the Treatment on the Treated (TOT) estimate in the impact evaluation literature. 14 After July 31st, 2014, information on business owner names were not available in the GUFE database. 22  Some important aspect of the program may need additional time to take up. It could be the case for group trainings with the CGA and for the bank services.  Businesses in group 2 and 3 are probably taking more time to formalize. Section 7 below suggests that some businesses may be waiting for visit 2 before deciding to formalize. Also, using program data on formalization, we can derive the time laps between receiving visit 1 and formalizing. In group 1, less than 5% of businesses formalized more than one month after receiving the visit 1. In group 2 and 3, 20% of businesses waited at least 1 month.  When looking at the results using method two, but only on the firms that received visit 1 before the end of August (See Table 4 below), impact on formalization is higher in group 2 and 3. This is especially the case for group 3, which shows a 14% formalization rate. This seems to validate the hypothesis of businesses needing additional time to make their decision. Preliminary results are detailed in Table 4 below. Using data collected during the baseline-listing survey, the team analyzed the impact of the program on different sub-populations. Some important results can be inferred (See graphs in Annex 6): (1) Male busines

s owners formalized more than femal
s owners formalized more than female business owner: slightly above 15% for businesses owned by women in all groups, compared to 8% for those owned by men; (2) In all groups, formalization rates were lower in Dantokpa market than outside the market (around 5% in the market versus 12% outside the market); (3) Businesses operating in the trade sector had lower formalization rates than in other sectors. This result is probably highly correlated with the previous result on Dantokpa market since almost all businesses operating in the market are traders; (4) Formalization rates among businesses in the bottom of the distribution of baseline profits are only slightly lower to those in the top of the distribution. 23 However, these preliminary results must only be tentatively interpreted, since formalization may take more time, in particular for sub-groups. For example, it is possible that fewer women have ID cards and therefore need more time to first get an ID card before formalizing. 7. Qualitative Feedback A large majority of interviews were conducted outside Dantokpa market. In fact, since businesses in the market are so close to each other, the team chose to limit interviews there because they could have generated questions from business owners, change their behavior, and bias the impact evaluation. For these reason, results presented below are only applicable to businesses operating outside the market. Qualitative information was collected in parallel to program implementation. This work was particularly important during the first month following program roll out, and 3 months later. The main these qualitative works were: (i) Check whether the program was properly implemented and the study design respected; (ii) Assess program understanding by beneficiaries; (iii) Understand whether beneficiaries were interested in the program and its perceived benefits; (iv) Get feedback from implementing partners on program delivery; (v) Assess whether businesses not selected to receive the program we

re aware of the program. Following
re aware of the program. Following these goals, different types of qualitative works were conducted:  Semi-structured qualitative interviews with program participants few days or weeks after they received visit 1 or visit 2 (22 interviews completed mainly on businesses in group 2 and 3);  Field visits with CGA advisors during visit 1 or visit 2 (29 visits);  Semi-structured qualitative interviews with informal businesses not selected for the program (61 interviews completed);  One focus group with all CGA advisors and the CGA supervisor;  One focus group with GUFE staffs in charge of the entreprenant status;  One focus group with BoA and Orabank staffs in charge of entreprenant accounts;  Regular communication between the CGA supervisor and the impact evaluation team. Here below are the main results obtained from the qualitative assessments. (i) Check whether the program was properly implemented and the study design respected Overall, the study design was respected and the program properly implemented. Only few minor mistakes in program implementation were found and they were all corrected quickly after being discovered. For example, once the program started, it was not clear that GUFE staff was supposed to offer help to business owners in filling the declaration form. This was clarified during the first weeks following program rollout. CGA advisors were intensively trained before program rollout, received constant monitoring, and were offered frequent training sessions to improve their performances. Also, CGA advisors were assigned to clusters of businesses that belonged to the same group. With regard to the formalization process at GUFE, it is taking less than 24 hours, as planned, and the protocol as described in section 5.2 is respected. 24 Finally, with respect to opening a bank account at Orabank or BoA, the program is working properly. However, it took a few months for both banks to be ready for the program. In particular, BoA had problems with the so

ftware in charge of the entreprenant
ftware in charge of the entreprenant accounts during the first weeks of the program. As of today, all these problems have been solved. (ii) Assess program understanding by the beneficiaries Interviews with program participants several days or weeks after a visit from a CGA advisor revealed that program understanding was sufficient among beneficiaries. Only few business owners did not remembered very well the program or were confused. Overall, business owners better remembered program components that most interest them, and often forgot the others. This is not surprising given the program complexity, especially for groups 2 and 3. The access to banking component was well understood and around 80% of respondents in group 2 and 3 said that the program will allow them to open a bank account once they will be formal (although only 25% were able to cite BoA and Orabank). On the training aspect of the program, it seems that business owners are a bit confused about what the CGA advisors offer and under what conditions businesses are eligible to business trainings. This could be explained partly by the fact that the definition of business training is not the same for all the business owners and most of them are not considering the visit 2 as a business training. Also, business owners in group 3 probably understood better the fiscal aspect of the project and 60% of them were able to detail how taxes are working under the entreprenant status. This percentage was much smaller (25%) among businesses in group 2. In addition, it seems that the tax mediation was well understood by business owners in group 3, and 65% of them were able to detail it correctly, 20% just mentioned that there will not be issues with the tax administration, and only 15% did not understand it at all. Finally, most business owners were able to locate precisely the GUFE when they were asked about where formalization should be done. Few of them were confused and reported the location of CGA. (iii) Understand whether beneficiaries were interested in the program and the perceived effec

ts of the program Business owners i
ts of the program Business owners interviewed few days or weeks after a visit from a CGA advisor were very positive about the program. However, when asked about the utility of the program for their own business, about one third said that they did not think the program could be very useful for them. Most of these respondents own very small businesses and said that they were too small for the program. Some female business owners said that they were interested in the program, but that they had first to ask for their husband’s permission before they could formalize. Two thirds of beneficiaries who said that the program could interest them mentioned different reasons. About one third said that the program would mainly be useful because it gives access to business trainings. 15% said that formalization would increase the value of their business, and 20% were not very precise and mentioned multiple program components. Importantly, 30% of the respondents in both groups 2 and 3 said that it would be very difficult to formalize because they did not have any ID card, and the LEPI card (electoral card) is not accepted. If confirmed, this can be a major issue preventing the full impact of the program on formalization. 25 Some business surveyed between visit 1 and visit 2 said that they were waiting for the visit 2 to happen before formalizing. It could mean that businesses in groups 2 and 3 could take more time to formalize than businesses in group 1. (iv) Get feedback from implementing partners on program delivery Focus groups were hold with most people in charge of the program implementation, in particular with CGA advisors and the CGA supervisor, with some GUFE staff, and with some commercial banks staff. The main result from the focus group with CGA advisors and their supervisor is that, overall, the program is working well and beneficiaries are satisfied. Some other important points were mentioned, in particular:  Finding businesses’ location and finding time when owners are available were difficult. CGA advisors

often had to come back several times at
often had to come back several times at the same business before they could complete the first visit and explain all program components;  Lots of businesses were too small to be interested in the program;  Explaining the program and business trainings was difficult with illiterate business owners;  For the second visit with the personalized training, it was difficult to make appointments with businesses and they often did not respect their appointments;  Organizing group training with entreprenants who formalized and registered to CGA was difficult for logistical reasons;  Some business owners not paying taxes did not want to register because it would mean paying taxes;  Most CGA advisors said that business owners were not very interested by the tax aspect of the program. This may come as a result of the leaflet on taxes being not too easy to comprehend, or as a result of the tax regime itself being too complicated;  Some BoA and Orabank branches were not able to open bank accounts for entreprenants because of the absence of entreprenant account interface in their software systems. Discussions with GUFE highlighted that the formalization process is working properly, and that the GUFE team would be ready to register more businesses if needed. Few problems were also mentioned, including that, since the entreprenant card is free, it is difficult for the GUFE to recover its operating costs. Also, according to the GUFE, business owners who took the entreprenant card where very satisfied with the program. However, some of them signaled some concerns:  Whether the program will be extended after the two years of the pilot;  The entreprenant status allows to record only one activity;  Whether the fact that the card is only valid for two years will be a problem if they want to get a loan from a commercial bank. Representatives of BoA and Orabank were also positive about the project, but both noted that, as of August 31st, only 16 businesses opened an entreprenant account. Al

l implementing agencies (CGA, GUFE and c
l implementing agencies (CGA, GUFE and commercial banks) reported that the communication and cooperation between agencies could be improved. Regular meetings between them should be organized more frequently. 26 (v) Assess whether businesses not selected to receive the program were aware of the program A few months before the launch of the entreprenant program, new regulations simplified registration procedures and reduced costs for existing legal status like individual entrepreneurs and limited liability companies. Some TV shows discussed these new regulations, and the media coverage could have impacted behaviors of business owners in the control group. Following the program launching ceremony, at least one newspaper wrote about the entreprenant program.15 Out of 50 interviews made in the week following program rollout with business owners not selected for the program, only 4 of them said that they heard in a TV show that the government was launching new regulations targeting small entrepreneurs. None of them was very precise about what kind of reform. None of the 11 business owners interviewed three months after program rollout had heard of any program targeting small businesses and helping them to formalize. Most probably very few businesses not targeted by the program were aware of the new reforms on formalization, including the entreprenant status. Interviews with businesses not selected for the program but located near businesses targeted by the program indicated that there were not a sizeable number of externalities. Indeed, none of the business owners surveyed had ever heard of the entreprenant status or of any program related to formalization targeting small businesses. 8. Next Steps The first phase of the entreprenant program should be completed at the beginning of 2015. Specifically, CGA advisors plan to complete visits 1 by mid-January 2015 and visits 2 by mid-February 2015. Once completed, the impact estimates presented in the report will be updated and finalized. The team plans the recruit

ment and onboarding of 10 additional C
ment and onboarding of 10 additional CGA advisors by November 1st 2014. In the long term, it will also provide capacity building for the CGA management, including coaching and study tour. The team plans to conduct a midline survey in March 2015 and an endline survey in March 2016 to evaluate not just the impact of the entreprenant program on formalization, but also on business performance. The Government has planned to introduce the new micro and small enterprises tax regime on January 1st, 2015. The team will help the roll out of this regime by preparing and implementing a communication strategy, train the tax authority staff, develop and implement an ICT system to manage the small tax payers, and introduce an inventory of small tax payers to update the tax authority data base. 15 Fover page of “La Nation”, which published the article on April 30th 2014.. 27 Annex 1: Details of CGA Implementation Protocol by group When? Objectives Document to use or to give to the business owner Group 1 2 3 300 900 1200 Visit 1 Providing information on the new status and convincing the business owner of its benefits. - Explain benefits and explain that from a tax perspective this means no change - share GUFE forms and explain what they need to do. Offer to help to fill it out. - Leaflet on formalization at GUFE and on the tax system applicable to entreprenants. - show an example of entreprenant card - GUFE forms Yes Yes Yes Providing information on Package B -Share forms for each of the two partner banks. Offer to help them fill the information and explain benefits. - Leaflet on CGA full services -Show an example of CGA diploma and sticker - Leaflet on Banking services available to entreprenant. -Forms for each banks No Yes Yes Gathering information on business’s characteristics and needs in terms of business training - CGA business follow-up form

(to be filled during the visit) No
(to be filled during the visit) No Yes Yes Proposing a second visit for a 1-2 hours personalized training. Even if the business owner does not have the entreprenant card yet, he is eligible for this 2nd visit. No Yes Yes Providing information on Package C Explain the support they will receive from CGA advisors (fill tax return, be there in case inspector asks for more, etc.) - Leaflet on tax mediation and advising. No No Yes Right after visit 1 Entering information of the CGA business follow-up form in the monitoring file - CGA business follow-up form - CGA Monitoring file No Yes Yes Filling CGA advisors agenda, with next callback’s date - CGA adviser agenda No Yes Yes Callback 1 (1-2 weeks after visit1) Taking an appointment with the business for a second visit, enquiring whether they have registered with GUFE Prepare material for Visit 2 (including specific training material in function of the business owner needs). - CGA business follow-up form - CGA monitoring file - CGA adviser agenda -all material for visit 2 to prepare No Yes Yes 28 When? Objectives Document to use or to give to the business owner Group 1 2 3 300 900 1200 Visit 2 1-2 hours business training personalized to the business needs. - CGA toolkit/ manual on business training with micro-entrepreneurs No Yes Yes Providing information on the new status, and on package B of incentives. (same as above) - Leaflet on formalization at GUFE and on the tax system applicable to entreprenants - Leaflet on Banking services available to entreprenant - Leaflet on CGA full services No Yes Yes Providing information on Package C Explain tax obligations. Work with business owner on his or her own numbers to illustrate what they would need to pay. Leave simple tax declaration form and offer to fill it with them (and stamp it with CGA stamp). Explain follow-up support they would get in terms of tax filling/ protection/mediati

on. - Leaflet on tax mediation and
on. - Leaflet on tax mediation and advising. - Toolkit on taxes calculation - Renting values by neighborhoods (if available) No No Yes Right after visit 2 Entering information of the CGA business follow-up form in the monitoring file - CGA business follow-up form - CGA Monitoring file No Yes Yes Filling CGA advisors agenda, with next callback’s date - CGA adviser agenda No Yes Yes Callback 2 (1-2 weeks after visit 2) Checking if the business formalized with the entreprenant status - CGA business follow-up form - CGA Monitoring file No Yes Yes If the businesses did formalize: - Offering additional business training sessions with the CGA (9 courses) - Offering help if necessary for opening a bank account - CGA agenda for group training No Yes Yes If the businesses did formalize: - Offering tax counseling services - Offering a third visit if necessary on tax question - CGA adviser agenda No No Yes Group training - 9 sessions of group business training - CGA training toolkit - CGA official diploma and stickers - CGA business follow-up form No Yes Yes Right after a group training session -Fill the CGA business follow-up form for the businesses who attended the group training - CGA business follow-up form No Yes Yes Visit 3 If the business did formalize and asked for a visit: - the visit should focus on tax mediation services, and on how the CGA advisor could help the business if it have any problem with the tax administration - Leaflet on tax mediation and advising. - Toolkit on taxes calculation - Renting values by neighborhoods (if available) No No Yes 29 Annex 2: Sectors of Dantokpa market surveyed 30 Annex 3: Descriptive Statistics of program population by location 31 32 Annex 4: Balance Checks 33 Annex 5: Matching Program data to Administrative data on formalization This annex document describe

s the protocol to match businesses in
s the protocol to match businesses in the administrative database on formalization provided by the GUFE (around 550 businesses every month) with the program data (3600 informal businesses prior to the program starts). Information available: We had the following information in both databases:  Surname of the business owner. It can be written with different spellings in each database.  Between 1 and 5 first names. In GUFE data we usually have more than one first name. In the program data we only have one first name in most of the cases.  The business activity as described by the owner (no codes). The business activity is missing for 30% of businesses in the GUFE data.  Business addresses. In the GUFE data addresses were given by the business owner whereas in the program data, we are using « official » addresses used by the tax administration (there are 144 neighborhoods in Cotonou). In practice only neighborhoods can be matched. In GUFE data, they are few missing variables and some cases for which the neighborhood does not belong to the official list of neighborhoods.  Gender of the business owner. Definition of a match: We consider it to be a match if : (i) the surname, at least one first name, the activity and the neighborhood match or (ii) if surname and at least one first name match and either the activity or the neighborhood also match and the other is missing (or does not exist for the neighborhood). Method of matching: We used first the Stata command “reclinck” designed for fuzzy name matching. This command uses record linkage methods to generate matching scores. For this first step, we used tree variables: surname, first name and gender. As a second step, we looked manually (in an Excel file) to all matches and validate each match only if names, activity and neighborhood were consistent in both databases. The “reclink” command allows inputting different weights to matches on each of the three variables used (surname, first name and gender). In order not to rely on the weig

hts used, we reiterate the process with
hts used, we reiterate the process with different weights until no additional matches were found. Since it is possible that the first name in the program data corresponds to the second name in the GUFE data, we also reiterate the whole process for all combinations of first to fifth names. It is also possible that surname and first name were inverted in one of the two databases. So we also reiterate the process with other combination of surname and first names. Checking that the matching method is working: To assess whether our matching method is working efficiently, we used the following methods: 1. First we looked at whether we could find additional matches using a more usual method of matching. That is looking at the two lists (sorted by surnames) and trying to find each business of the GUFE data in the program database. So it means looking mainly at businesses with surnames starting with the same letters. We were not able to find any additional matches. 34 2. Second we looked at the proportion of business which formalized with the entreprenant status during the first 3 months after program launch. Indeed, most businesses which formalized with the entreprenant status should be also in the program data since (in theory they are the only businesses aware of this new status). So the proportion of businesses of this type matched is an indicator of the quality of our matching protocol. We matched 78% (119/153) of the newly registered entreprenants. 3. We then took the 34 businesses which formalized with the entreprenant status and were not matched with the program data and we tried harder to match these businesses. To do so we took the program data and looked at all the businesses in the same neighborhood as the unmatched businesses. We were able to find 6 new matches. These 6 matches are very imperfect matches with surnames somewhat different and first name sometimes different. For two cases, the match was not done with our main method because the surname is missing in the program data. 35 Annex 6: Impact