Legal and Administrative Constraints to Small and Medium Sized Enterprises in Cameroon

Abstract

101 SME (Small and Medium-sized Enterprise) operators were interviewed in a sample survey in Douala, Cameroon, to elicit the legal and administrative constraints to the creation and functioning of SMEs in Cameroon. The fulfilment of business entry requirements entails transactions costs which are by far more than the legal costs. For example, while the direct cost for a one-man business is 1,6000 francs, the sole proprietors who were interviewed reported an average expenditure of 107, 550 (672.19% of this amount) to fulfil the requirements. A bar operator spent on average 55,562 francs for a "licence" which should be obtained free from the Sub Prefect to the locality. A sole proprietor spent 20.88 days, general commerce 10.64 days while a bar operator spent 18.28 days to fulfil pre-entry requirements. A sole proprietor who succeeds to raise the minimal starting capital of 500,000 francs must raise an additional 371,781.4 francs (74.36% of the starting capital) for pre-entry requirements. If pre-entry taxes are included, the amount goes up to 1,091,196.5 francs (218.2% for the sole proprietor and 3,003,790.4 francs (600.8%) for incorporated SMEs. legal and administrative requirements thus form a major barrier to the creation of SMEs in this country.


African Journal of Finance and Management Vol.8(1) 1999: 42-53