(annex table 15). This is consistent with HEs selling mostly to households, rather than other businesses.

Start-up capital is a major problem for HEs. When asked in household surveys to report the most important problem they faced in starting their business, the most popular response was lack of capital (annex table 18). 87 percent of HE owners used their own or family capital to start their business. Even in countries such as Ghana, where household access to financial services is high, most start-up capital comes from home savings. This is not surprising, as with any small business banks need to see evidence of an ability to save and a willingness to invest own funds before taking the risk of making a loan. In addition, banks may wish to have key assets such as land, house, or business equipment pledged as collateral, which may deter formal borrowing. Microfinance approaches could solve some of these market gaps, but so far they are providing start-up capital for only 1.3 percent of all HEs. The use of formal credit (either from bank or micro finance institutions) for start-up is slightly higher in urban areas (3.2%) compared to rural areas (1.7%) and more common for those with completed secondary or above (5.5%) while there is no substantial difference across genders on average (annex tables 13-16).

Consistent with the 42 percent of HE owners reporting it as a secondary activity, only about half report that their business is open more than six months a year. The majority of urban HEs are operated year round, but the seasonality of rural HEs varies by country, with full time HE activity more common in the richer countries, except for Cameroon (annex table 4).

Although unlikely to be registered in national data bases, when required HEs do register with local authorities. In many countries, including Ghana and Tanzania, registration is optional, as it is legal to do business as a HE in one‟s own name without license or registration. In other countries, such as Rwanda, national legislation requires all HEs and MEs to register with local authorities, (World Bank and IPAR, 2011a). In Ghana, nationally representative data show an increasing tendency of HEs to register in the capital city (40 percent), but not outside (only 13 percent). MEs in Ghana are more likely to register in both areas – hence scale of enterprise matters. In Rwanda and Uganda, focus group surveys revealed that 61 and 58 percent of NFEs were registered with local authorities. These surveys are not nationally representative and are likely to be biased toward registration as the NFE interviewed were more likely to be urban and operating in markets than HEs at large.

A requirement to pay taxes and fees to local authorities is a common reason for registration. 61 and 55 percent of focus group respondents reported paying fees or taxes in Uganda and Rwanda, respectively. The reported taxes vary substantially from 30 to 50 percent of revenues in Uganda, 19 percent in rural Tanzania and 6 percent in Rwanda (Fox and Pimhidzai (2011), Kweka and Fox (2011) and World Bank (2011a)). In Uganda, the high rate of taxation was partially triggered by the need for revenue for local authority budgets after other sources were gradually abolished (Fox and Pimhidzai, 2012). In R. Congo, municipal authorities have the right to impose ten different taxes, including a fee for authorization to open an HE in a fixed location and annual poll taxes (on both the owner and the shop, called census taxes). A security fee is also imposed even though the security is rarely provided. HEs report that they often are not given a receipt for payment of taxes and fees to local governments. Some HEs that reported in the surveys not to be registered did report paying taxes and fees. This indicates _that the common usage of „registration‟ as an indicator of the relationship between the enterprise and government can be quite misleading_ . Rather than being the dichotomous relationship implied by criteria such as ones proposed by the ILO (2011), the enterprise‟s relationship with the state is more complex, and can differ by level of government and by sector (e.g. health, trade and industry, justice and security, etc.).

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