Impact Evaluation of Business License Simplification in Peru : An Independent Assessment of an International Finance Corporation-Supported Project

This evaluation assesses the impact of International Finance Corporation's (IFC's) Business License Simplification Project in the municipality of Lima, Peru. It reviews two previous evaluations sponsored by IFC and adds new evidence. Under the project, IFC's Foreign Investment Advisory Services (FIAS) worked with the municipality of Lima to reform the administrative process for obtaining a business license in Cercado de Lima, one of 44 districts that comprise metropolitan Lima. According to the municipality, 64 percent of the businesses in this district lacked a business license in 2005, and most of them were microenterprises. The project was implemented from January 2005 to March 2007. The present evaluation conducted an independent review of both previous studies, collected additional data, verified the previous findings, and placed the findings in the context of related studies and evaluations. The goal was to take stock of the results, collect and use other evidence, and draw lessons for future IFC and World Bank operations. This chapter describes and compares the divergent evidence on which procedures were simplified by the license reform and by how much. A second chapter reviews existing evaluations and previous relevant findings from other countries; a third replicates and extends the regression evidence on the impact of license reform on critical business outcomes, such as revenues and employment. The fourth chapter, a cost-benefit assessment of the desirability of the whole program, reviews what the behavior of businesses and their own testimony reveals about the benefits of registration. The final chapter takes into account the findings reviewed in previous chapters, as well as new evidence in this study, and offers policy implications and recommendations for IFC.