【正文】 00,000 ($25 to 2020).6 Legal systems characterized by low regulatory burden, shareholder and creditor rights protection, and efficient bankruptcy processes are associated with incorporated businesses and increased access to On the other hand, inadequate legal protection is associated with limited business incorporation, low joint entrepreneurial activity, and higher financing obstacles. These impediments are what De Soto refers to as the mystery of legal failure. He argues that although nearly every developing and former munist nation has a formal property system, most citizens cannot gain access to it and their only alternative is to retreat with their assets into the extra legal sector where they can live and do business. Policy makers concerned with integration of the informal sector into the formal and improving access to credit for informal sector micro enterprises should consider a business registration system that is simple, cost effective and decentralized. The licensing process through local government authorities can be used to create a registration and business identification mechanism that can identify the business and its location. The majority of micro enterprises are engaged in retail trade, such as a shop selling merchandise such as groceries, household items, clothes, motor vehicle spare parts or books. Some respondents reported other business activities including agriculture (beekeeping, milk production), processing (honey, herbal medicines), small scale production (timber and furniture), and services (hair dressing, restaurants selling food and beverages). However, these respondents were few pared to those who reported engaging in retail business. This finding can be attributed to two factors. The first is that the majority of micro enterprises are established with startup capital from personal savings or contributions from friends and family members and since such retail businesses do not require a lot of capital, it not surprising that they are the majority. Employment by Micro Enterprises The number of employees of a business is one of the factors used to classify micro, small and medium enterprises. Although no standard definition specifies a minimum or maximum number of employees for these categories, micro enterprises are on the lower end of the scale regarding capacity to employ. The data show that the majority of microenterprises in Uganda employ between one and five persons, indicating that the businesses are largely a source of selfemployment rather than of large scale job creation. They are also the largest source of nonagricultural self employment. This means that with the increasing adverse effects of climate change on agriculture, increasing population pressure on land and swelling ruralurban migration, micro enterprises of this nature will continue to rise. The result is an expanding informal sector that has no capacity to create jobs, contribute to the national economy and transform economically. Size is another indicator used to classify businesses as micro, small, medium and large scale enterprises. However, like the employment variable, size is not consistently defined. In the European Union, business enterprises that have assets not exceeding two million Euros are classified as micro enterprises, while those with assets not exceeding ten million Euros are small enterprises, and a medium enterprise has assets not exceeding 34 million The data show that the majority of micro enterprises in Uganda have assets not exceeding Ugshs. 5 million ($2,500). This finding is indicative of the manner in which these businesses are set up — as small, informally established, sole proprietorship businesses initially financed with little startup capital, usually from informal sources. Because most micro enterprises neither keep financial records nor are audited, respondents were simply asked to estimate the value of their businesses as a going concern. There were slightly more micro enterprises owned by men than by women. This trend was the same in the different regions of the country. Only 68 micro enterprises were jointly owned, and, in most cases, the coowners were either spouses or siblings. The low level of joint enterprise is not only typical of micro enterprises but also of other forms of business enterprises as well. This is may be due to i nadequate legal protection for shareholders. The current Companies Act was enacted in 1948 and is out of date with current corporate governance standards. The majority of micro enterprise owners do not own any substantial assets that can be used as collateral for a loan. A few were able to obtain credit from microfinance institutions that provide credit using collateral substitutes such as group loans, forced savings and small contingent loans. However, for other reasons discussed below, access to micro credit remains a challenge for micro enterprises. Other Determinants of Financing Decisions of Micro Enterprises in Uganda Apart from the path dependence factors discussed above, there are other several factors influence the financing decisions of micro enterprises, including the choice of using formal or informal credit, borrowing from microfinance lenders or mercial banks, and accessing credit individually or through group lending. The latter decision, for example, may be influenced by the credit history of the borrower and the availability of collateral. If a business has neither a prior relationship with a financial institution nor substantial collateral, it may find obtaining credit difficult and instead do so through group lending. Although micro enterprises are easy to establish and usually obtain startup capital from personal resources, access to formal credit is critical for subsequent growth. Below, I discuss the findin