Addressing (in)formality: The perspective of baobab entrepreneurs

Despite decades of efforts, informality remains widespread in emerging markets and developing economies, partly due to continued reliance on macro-level, one-size-fits-all approaches to (in)formality that fail to account for its heterogeneous nature, context-specificity, and the perspectives of entrepreneurs. This paper adopts micro-level, context-sensitive approach to examine the determinants of firm informality and potential policy measures, drawing on the perspectives of entrepreneurs in Malawi's highly informal baobab industry, an important forest-product value chain. Using Q methodology, a mixed-method approach suited to assess subjective viewpoints, we identify five perceived drivers of informality: high cost of formality, uncertainty about formalisation benefits, weak regulatory enforcement, livelihood insecurity (survival imperatives), and low economic development. Policy measures perceived to address (in)formality include reducing the cost of formality, improving awareness of the perceived value of formalisation, enhancing human capital, increasing employment opportunities, and providing targeted incentives for formalisation. The findings demonstrate that entrepreneurs' behaviour toward (in)formality is shaped by interconnected micro and macro level perceptual, administrative, and structural factors. Addressing (in)formality effectively requires a multidimensional, multilevel approach that is sensitive to contextual realities and grounded in entrepreneurs' lived experiences.