26 June 2012

Rwanda: Informal Businesses Face Closure

Government has threatened to close all unregistered businesses as it steps up efforts to make all business operations in the country formal to increase its tax revenue base.

The move is also aimed at enforcing the company law, which was passed in April 2009. This requires all companies to register with the registrar of companies at Rwanda Development Board (RDB).

"When the company act was passed, there was a grace period of two years, for those who were not registered to register and those registered through the old law to re-register," Kaliza Karuretwa, the Director General in charge of Investment Climate in the Ministry of Trade and Industry, said last week.

"Our job as government is to encourage these small businesses to register. The idea is to get them into formal businesses so that we can help them grow."

To implement the idea, the Ministry embarked on a sensitisation programme in order to help the business community understand the relevance of such laws in their daily operations.

The company law specifies the insolvency proceedings, partnerships/ venture agreements, access to credit from financial institutions among others.

Janvier Birahagwa, a businessman noted that most informal businesses are unaware of the law, adding that there was need for government to involve the business community.

"The law is very good because in one place, it helps us to especially have access to finance, carry out financial transactions and conduct business in general."

Since its inception, the number of registered businesses increased thus boosting the country's ranking in the World Bank's annual Doing Business Report.

The report ranked Rwanda as the top performer in the category of starting a business with two procedures and two days compared to an average of ten procedures in other EAC countries.

The chairman of the Private Sector Federation (PSF)-the umbrella arm of the business community in the country- Faustin Mbundu, says that the federation has embarked on wooing informal businesses to to formalise through training and streamlining of operations.

"It is in our interest that they (businesses) formalise and join associations so that they can grow bigger than their smaller units. So, what we are doing is to make the formal sector attractive to them (microbusinesses)," he said

In the recent budget, the government allocated a total of Rwf19 billion through the Ministry of Trade and Industry to support SME growth.

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