Ghana’s complex regulatory environment is preventing thousands of small businesses from formalising and expanding, threatening employment growth and weakening the country’s investment climate, according to a new study by the Institute for Liberty and Policy Innovation (ILAPI).
The policy think tank found that businesses face overlapping regulations, lengthy approval processes and costly compliance requirements that discourage entrepreneurs from entering the formal economy despite the critical role micro, small and medium-sized enterprises (MSMEs) play in Ghana’s economy.
“The MSMEs represent approximately 92% of all businesses and contribute nearly 70% to the GDP,” the report said, warning that the sector’s potential “remains largely untapped” because businesses continue to face “overlapping institutional mandates, excessive documentation requirements, opaque procedures, inconsistent enforcement, and prolonged registration and compliance timelines.”
The findings are based on a nationwide survey of 600 MSMEs conducted between September 2024 and July 2025 across the manufacturing, information and communications technology (ICT), and tourism sectors.
The analysis suggests that reducing bureaucratic barriers may prove as important as expanding access to finance for policymakers seeking to stimulate private-sector-led growth.
The study found that 40.8% of surveyed businesses waited more than one month to obtain a business entry certificate, while entrepreneurs frequently incurred additional costs navigating the registration process. Average registration costs reached GH¢1,030, with some businesses spending as much as GH¢2,000 to complete the process.
Beyond registration, businesses reported spending an average of GH¢1,275 to obtain operating permits from Metropolitan, Municipal and District Assemblies, while licences averaged more than GH¢1,600.
ILAPI argues these costs represent more than administrative inconvenience. Instead, they divert scarce capital away from business expansion and investment.
“These lengthy delays and high fees create barriers at the very first step of business formalization. They force entrepreneurs to allocate scarce resources to bureaucracy instead of productive investment,” the report said.
The study also points to institutional fragmentation as a major obstacle.
Manufacturing firms alone may need to comply with around 13 separate regulatory requirements, while tourism businesses require about 10 and ICT firms roughly six, often involving multiple agencies carrying out similar inspections and requesting overlapping documentation.
According to ILAPI, the duplication of responsibilities among agencies, including the Office of the Registrar of Companies, Food and Drugs Authority, Ghana Standards Authority, Environmental Protection Agency and local assemblies, significantly increases the cost of doing business.
“The duplication of binding regulations for the same or similar activities poses a challenge to business compliance and survival,” the report stated.
The consequences extend beyond individual businesses.
ILAPI argues that excessive compliance costs discourage formalisation, reduce government tax revenue and limit employment creation. The report estimates that if businesses devote around 30% of their capital or profits annually to regulatory compliance, hiring decisions are likely to suffer, particularly among start-ups with limited financial resources.
The analysis also links the country’s extensive informal economy to these regulatory burdens.
It notes that “an overwhelming 92.3% of businesses are informal,” arguing that many entrepreneurs deliberately avoid formal registration because of the time, cost and complexity involved. This creates a cycle in which informal businesses struggle to access credit and government support programmes while the government loses potential tax revenue.
Digitalisation has eased some aspects of business registration, but ILAPI found significant gaps across regulatory agencies.
Among ten major institutions assessed, only six met all three measures of digital accessibility, online information, downloadable application forms and published fee schedules, while several agencies still lacked basic online functionality.
The think tank argues Ghana’s challenge is less about institutional capacity than coordination.
“The problem is coordination, not capability,” it said, adding that duplicate permits, inspections and fees continue to inflate compliance costs without delivering corresponding improvements in public safety or consumer protection.
To address the problem, ILAPI recommends creating a unified digital business registration platform linking all major regulatory agencies, decentralising approval processes to local authorities and harmonising overlapping regulations to reduce duplication. It also proposes sector-specific one-stop shops for manufacturing, ICT and tourism businesses and greater interoperability between agencies to eliminate repeated filings.
The findings reinforce the economic case for regulatory reform beyond administrative efficiency, showing that lower compliance costs could free up capital for expansion, hiring and investment while encouraging more firms to formalise. For the government, streamlining regulation could broaden the tax base, improve investor confidence and strengthen the private sector’s contribution to the 24-hour economy agenda.
