Beyond the license: capital, kinship, and the limits of formalization in Somali household enterprises

Résumé fourni par la source

This study examines the profitability of non-agricultural household enterprises in Somalia, challenging the assumption that business formalization drives growth in fragile states. Using 2022 Somalia Integrated Household Budget Survey (SIHBS) data from 800 enterprises, the study employs OLS regression with sector fixed effects to assess the impact of legal registration, working capital, and labor composition on profitability in a context of weak institutions and market constraints. Findings show no significant link between legal registration and profitability when controlling for business structure, input expenditure, labor composition, age, location, and sector. Profitability is more tied to input expenditure and family labor, though input expenditure is cautiously interpreted as higher profits may enable more spending. The results align with the view that liquidity constraints and kinship-based labor influence enterprise performance, without establishing causality. In the absence of public goods like credit access and infrastructure, legal registration offers limited value to Somali enterprises. Policy should prioritize practical support for capability, financial inclusion, and resilience over registration. Future research should use longitudinal or experimental designs to clarify causal links between formalization, capital access, labor organization, and growth in fragile economies.

Ce résumé expose les affirmations des auteurs. BNTIC ne l’interprète pas comme une validation indépendante des résultats.