Why Educated Owners Run Informal Businesses Better in the Central African Republic

The World Bank study finds that informal businesses in the Central African Republic run by more-educated owners are significantly more likely to adopt basic but effective business practices, such as market research, planning, and record keeping. Using rigorous methods, it shows this link is causal, highlighting education as a key lever for improving productivity and resilience in fragile, informal economies.

Produced by researchers at the World Bank’s Development Economics Global Indicators Group, using data collected by the World Bank’s Enterprise Analysis Unit, a study explores how education shapes the way informal businesses operate in the Central African Republic. In a country where nearly half of economic activity occurs outside the formal sector, informal enterprises play a central role in livelihoods, poverty reduction, and economic survival. Yet little is known about how these firms are managed or what encourages them to adopt better ways of doing business. The paper addresses this gap by examining whether more-educated business owners are more likely to employ basic yet effective business practices, such as market research, record-keeping, or setting sales targets.

The Reality of Informal Businesses in the Central African Republic

The Central African Republic provides a stark setting for this analysis. It is one of the poorest countries in the world, marked by repeated conflict, weak infrastructure, limited access to electricity, and very low education levels. Informality dominates the economy, and most informal businesses are tiny, often run by a single owner with no employees. Using a unique city-representative survey of more than 1,100 unregistered businesses in Bangui and Berberati, the study shows that only about half of these firms use even one of nine basic business practices captured in the data. Most adopt fewer than two. Practices related to understanding customers and competitors are the most common, while keeping written records or planning future sales are much rarer. Even so, firms that use these practices tend to earn higher profits and generate more value per worker, suggesting that how a business is run makes a real difference.

Education as a Key Driver of Better Practices

At the heart of the paper is the role of education. Business owners are divided into those with no schooling or only primary education and those who reached secondary or higher education. This distinction is crucial in a country where adult literacy is extremely low. The findings are clear and consistent: informal businesses run by more-educated owners are significantly more likely to adopt good business practices. In simple terms, having at least some secondary education raises the chance that a business will use at least one good practice by around 10 to 14 percentage points. Educated owners also tend to adopt a larger number of practices overall. These differences are large, given the low starting point and suggest that education shapes how entrepreneurs think, plan, and organize their work.

Proving the Link Goes Beyond Correlation

The authors are careful to show that education is not just standing in for other advantages, such as coming from a better-off family or living in a larger city. They use several rigorous methods to strengthen the case for causality, carefully comparing educated and less-educated owners who look similar in other respects. The most striking approach draws on history. During the late 1990s, the HIV/AIDS epidemic in the Central African Republic caused school closures and teacher shortages, sharply reducing education for children who were at secondary-school age at the time. By using exposure to this period as a source of random variation in education, the study shows that lower schooling caused by the epidemic led to fewer business practices years later. This provides strong evidence that education itself, not hidden factors, drives better business behavior.

What Else Shapes Business Practices

Education is not the only factor that matters. Businesses in manufacturing are more likely to adopt good practices than those in retail, and firms based in the capital city, Bangui, perform better than those in Berberati. Access to electricity strongly supports the use of better practices, and larger firms or those run by more experienced owners are also more likely to adopt them. At the same time, the effects of conflict are visible. Businesses started during the Civil War years are less likely to use good practices, showing how instability leaves long-lasting scars. Gender gaps persist as well, with women-owned businesses generally adopting fewer practices. One hopeful finding is that business associations can partly compensate for low education, helping less-educated owners learn and adopt better ways of working.

Lessons for Policy and Development

The study sends a clear message: even in fragile and low-income settings, education matters for how informal businesses operate. Improving access to secondary education can have long-term benefits for productivity and incomes through better business practices. Where education levels are already low, training programs and support for business associations can help fill the gap. By focusing attention on everyday business decisions in the informal sector, the paper highlights a powerful but often overlooked link between human capital and economic development in some of the world’s most challenging environments.