How does Business Environment Affect MSME Density? – An Introduction to MSME Database

The main finding of this study by Mallika Shakya is that there is indeed a bias against the MSMEs regarding business enabling environment and this is consistent across regions and wealth. The country income bias is pronounced in the combination of positive differential in time and costs of doing business and the negative differential in the number of MSMEs. A regional bias is pronounced in the fact that the region with the highest Doing Business costs is also the region with lowest number of MSMEs and vice versa. The analysis also finds that the prevalence of informality is asymmetric to the MSME density inferring that countries with good business enabling environment tended to have larger number of registered MSMEs and a smaller degree of informality, and vice versa. Although there is little data available, number of MSMEs seem to increase with the frequency and intensity of business environment reforms undertaken.