Leveraging Digital Financial Solutions to Promote Formal Business Participation
This paper explores economic informality and how it relates to digital financial inclusion. It focuses specifically on the potential role that digital financial services–including those accessed through mobile phones and the internet can play in en...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/486541556177550649/Leveraging-Digital-Financial-Solutions-to-Promote-Formal-Business-Participation http://hdl.handle.net/10986/31654 |
| Summary: | This paper explores economic informality
and how it relates to digital financial inclusion. It
focuses specifically on the potential role that digital
financial services–including those accessed through mobile
phones and the internet can play in encouraging businesses
to formalize their operations. The data show wide variations
in the extent of informality as well as the financial
inclusion of informal business owners. The paper finds that
digital financial services can make it easier for informal
firms to register and operate as a formal business, while
also creating synergies between individual reform efforts.
For example, companies that use a digital payroll system can
easily make pension contributions when online platforms are
available. Digital financial transactions also make it
easier for governments to enforce laws and regulations,
including tax collection. However, there are several
important caveats. It is not clear that formalizing small
transactions is an effective way to increase tax collection.
As the digital economy grows and countries seek to curb
informality, policymakers should tailor their programs to
the needs and realities of different groups of enterprises. |
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