Ghana’s regulatory system is absorbing scarce capital from micro, small, and medium-sized enterprises (MSMEs) through registration fees, permits, licenses, and complex compliance procedures. This situation potentially weakens the very businesses policymakers expect to drive investment, employment, and economic transformation. A 2026 study by the Institute for Liberty and Policy Innovation (ILAPI) found that overlapping institutional mandates, excessive documentation, unclear procedures, inconsistent enforcement, and lengthy approval processes are increasing the cost of operating formally.
The research surveyed 600 MSMEs in manufacturing, information and communications technology, and tourism between September 2024 and July 2025. The scale of the problem extends well beyond the companies surveyed. ILAPI estimates that MSMEs account for about 92% of businesses in Ghana and contribute nearly 70% of gross domestic product (GDP). This makes the regulatory conditions under which they operate important to the wider economy.
This regulatory burden complicates Ghana's broader economic narrative. While the nation experiences improving macroeconomic conditions, including lower inflation and currency stability, these benefits are undermined by daily operational challenges. The high cost of compliance acts as a significant barrier to formalization, which is crucial for expanding the tax base and fostering sustainable economic growth. It also diverts capital that could otherwise be invested in productive assets, hindering job creation and overall economic development.
Stephen Dansu, Senior Research and Policy Analyst at ILAPI, stated, “The regulatory burden discouraged formalisation, restricted business expansion, and diverted scarce capital from productive investment.” The financial costs identified by the study may appear modest from a large corporate perspective. However, they are considerably more significant for enterprises established with only a few thousand cedis.
Businesses surveyed spent an average of GHS 1,030 on registration. Permits issued by Metropolitan, Municipal, and District Assemblies cost an average GHS 1,275. Licensing expenses averaged GHS 1,600, with some respondents reporting payments of as much as GHS 3,000. For a small manufacturer, trader, or technology start-up, these costs compete directly with inventory, equipment, salaries, and working capital. A regulatory payment is therefore not merely an administrative expense; it represents capital that cannot simultaneously be invested in expanding the business.
This distinction matters because Ghanaian SMEs already face significant financing constraints. Businesses that struggle to secure affordable bank credit are particularly sensitive to upfront compliance expenses. The cumulative cost of registration, permits, licensing, and certification becomes an additional barrier to expansion. ILAPI noted the effect was particularly severe for micro and start-up enterprises. These businesses have smaller financial buffers and less administrative capacity to navigate multiple regulatory institutions.
Ghana wants more enterprises to formalize so they can access finance, employ workers formally, comply with standards, and contribute to domestic revenue mobilization. Yet, if the cost and complexity of entering the formal system are too high, entrepreneurs may make the economically rational decision to remain outside it. That creates what could become a formalization trap. Authorities seek to broaden the tax and regulatory base, but the structure designed to bring businesses into that base simultaneously raises the cost of participation.
The implications extend into public finance. Ghana’s efforts to strengthen domestic revenue mobilization ultimately depend on growing the number and profitability of formal businesses. This means regulatory reform could increase compliance more effectively over time than simply adding new charges to enterprises already inside the system. The findings also complicate the debate around Ghana’s improving macroeconomic conditions. Lower inflation, currency stability, and declining interest rates can create a better environment for investment. However, businesses experience economic policy not only through national indicators but through the institutions they interact with every day.
A company may welcome lower inflation and still postpone expansion because obtaining permits takes too long. Multiple agencies may demand similar documentation, or licensing costs may consume the capital needed to purchase machinery. Regulatory reform therefore offers government a potentially powerful way to improve the business environment without relying primarily on expensive tax incentives. Reducing duplicated approvals, publishing clear requirements, and simplifying licensing processes may require institutional coordination rather than large fiscal expenditure. For government, the return could come through higher business formation, investment, and ultimately a broader tax base. ILAPI is consequently calling for a comprehensive review of Ghana’s regulatory framework to eliminate duplication and harmonize processes.