What Drives Informality of Micro and Small Cameroonian Businesses?

The objective of this paper is to econometrically estimate the determinants of business informality in Cameroon. The data are from the second Survey on Employment and the Informal Sector (EESI 2) carried out in 2010 on 3560 Cameroonian micro and small enterprises. From six probit models, we find that gender, age and educational level of the entrepreneur, size and level of capital of the company, access to infrastructure, the fact that the activity is in contact with the administrative bodies and administrative red tape have an influence on the formalisation of small production units in Cameroon. Whether we take into account only the sub-sample of companies that are willing to pay or already pay taxes or the sub-sample of those which are registered or willing to be registered, we show that only the educational level of the entrepreneur, the level of capital of the company, access to infrastructure and administrative red tape have a significant effect on the formalisation of businesses. These results allow us to address the most interesting economic policy issues such as the reasons for non-registration of companies apart from tax evasion.