62. What mainly deter small and unincorporated businesses, including HEs, from applying for a license or getting registered are the cumbersome registration and licensing procedures that LGAs require, which involve visits to several government departments. The licensing regime is due to change following the enactment of the new Business Activity Registration Act (BARA) of 2009 that is provisionally planned to take effect from September 2010 (see Table 1.19). It is not clear how BARA can effectively address the challenges faced by small enterprises. More importantly, its provision of abolishing the itinerant trade license appears to be a lost opportunity to improve the _Machinga_ situation in large urban areas. The _Machinga-_ run enterprises will not disappear just because they do not qualify as a business under BARA.

63. In addition to business licensing or registration, LGAs have also been administering public microcredit programs. An example is the Youth Empowerment Fund, which was established in 1993 to provide youth with small capital to start a business. The central government provides the seed money, with contributions from the respective LGAs from their own revenues. Each district council is required to select two SACCOs to administer the fund. Many SACCOs, however, are found to be too small and suffer from weak operational capacity. For example, they receive more loan applications than they can accommodate. Moreover, SACCOs have not been brought under a clear financial regulatory regime, which makes working with a SACCO risky for an HE operator.

64. In summary, a change in the LGAs‟ regulation of and attitude towards HEs is necessary to resolve major issues concerning workplaces and the legality of HEs. Regulatory changes need to be accompanied by efforts at positive collaboration between the LGAs and the HEs themselves to find a compromise solution that facilitates rather than restricts HE operations. LGAs need to see HEs as a solution to their employment problems, as well as contributors and not temporary impediments to local economic development.

# **4.4 Operational Challenges and Livelihood Risks**

65. Boxes 4.3 to 4.7 list the many constraints HE operators grapple with in running their business. Apart from these difficulties, HEs, by their very nature of being a household business, are also vulnerable to both household as well as business risks. The most frequently cited in the literature, from the FGD study and from the recent FinScope survey (Table A1.17), is the risk of serious illness or death in the family. Faced with such shock, HEs often struggle to meet the immediate cost of treatment or burial by borrowing money from relatives and/or friends or drawing down their limited savings (Table A1.18), thereby depleting their working capital.

66. Rural HEs, in particular, are exposed to risks that stem from their overreliance on agricultural produce as a source of capital. In bad weather, low production reduces their farm earnings. In turn, their operations suffer, resulting in low turnover and further reduction in earnings. Even in times of favorable weather and good harvest, HEs are exposed to potential risks, such as instability in the market and/or prices of their products. Aggravating these risks is the perishability of some agricultural produce.

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