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The development of the formal sector is often hindered by regulatory barriers, including excessive bureaucracy, complex tax systems, and strict labor laws that can deter entrepreneurship. Additionally, access to finance remains a significant challenge, as many small and medium enterprises struggle to secure loans due to lack of credit history or collateral. Furthermore, a lack of infrastructure, such as reliable transportation and communication networks, can impede business operations and growth. Lastly, cultural attitudes towards informal employment may discourage workers from transitioning to formal roles.

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