BizCLIR: Starting a Business
Starting a Business
Starting a business can be an intimidating challenge in many countries. Not only is amassing the minimum capital required a daunting task, but entrepreneurs often have to sift through a jungle of bureaucratic hurdles and unnecessary measures before being legally allowed to start a company. Ultimately, fewer hurdles and costs in starting a business is good for economic development and the overall business climate. However, in many developing countries the size of informal economy is large, and a lengthy registration process is the first hurdle that entrepreneurs face when considering formalizing their business. These same hurdles affect large investors as well, but affect small start-up companies disproportionately.
The World Bank Doing Business indicators focus on four important benchmarks associated with the cost of entry: number of procedures; number of days; cost (percentage of income per capita); and minimum capital ( percentage of income per capita).
The BizCLIR methodology digs deeper to try to understand what is driving these costs. A team of experts interview stakeholders in government, the private sector, and civil society to understand what it is like to start a business in each BizCLIR country. They consider areas such as company law, corporate governance, foreign direct investment, and competition. These areas are evaluated using indicators divided among the four pillars:
- Legal/Regulatory Framework
- Implementing Institutions
- Supporting Institutions
- Social Dynamics
Taking this systematic approach allows observers to consider the entire business environment. For example, if the number of days to start a business is high, we can understand if the requirements in the company law are too cumbersome; the business registry lacks capacity; supporting players like notaries or lawyers are too expensive; or perhaps the social dynamics in the country is biased against women. This qualitative look at a business environment offers a complete picture to complement high-level benchmarks and helps to diagnose the problem and where to start to solve it.
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