Informal Sector and Informal Economy
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Govt to segment informal sector - NewsDay

Govt to segment informal sector - NewsDay | Informal Sector and Informal Economy |
GOVERNMENT will next year segment the informal sector into small and medium enterprises as it moves a gear up to formalise the sector.
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UgandaRevenueAuthori sur Twitter

UgandaRevenueAuthori sur Twitter | Informal Sector and Informal Economy |
@URA_CG :The banking sector mobilizes revenue from informal sector & we commend you for this effort #BankersMeet
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Dumping of e-waste in the informal sector

Dumping of e-waste in the informal sector | Informal Sector and Informal Economy |
Few pictures now will tell you d story of dumping #ewaste in d informal sector #JoGiv #impinv #recycle #GoGreen RT
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National Debate UG sur Twitter

National Debate UG sur Twitter | Informal Sector and Informal Economy |
Sebastian Bp Cypriano, Kihangire says Youth unprotected in job opportunities in the informal sector #SchoolsDebate14
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Informal Sector Economics

Informal Sector Economics | Informal Sector and Informal Economy |
Colin C Williams added an answer:
What topics are you currently researching in relation to the informal economy?
The aim behind this question is to encourage us to share the research topics/subjects/questions we are currently working on in order to (1) identify if there is any overlap/common themes between us and (2) to determine whether what you are researching is also applicable in other countries.

On my part, and to start this topic, I am currently interested in policy approaches for tackling the informal economy. To do this, I am evaluating critically three competing theoretical standpoints. These are firstly, the modernisation thesis that the size f the informal economy is simply a product of the level of modoernisation of economies, secondly, the neo-liberal thesis that the informal economy is a direct result of high taxes, state corruption and burdensome regulations and controls, and therefore that economies should pursue tax reductions, de-regulation and minimal state intervention to prevent the undeclared economy from growing, and thirdly, the political economy thesis that the informal economy is a by-product of too little intervention in work and welfare regimes and that state interventions in the labour market and social protection is required. To do this, I am comparing cross-national variations in the extent and nature of the informal economy with cross-national variations in various indicators that are proxies of the above (e.g., tax rates, corruption, social protection expenditure).

Please share your current research interests. There are well over 1000 of us with an interest in 'informal sector economics' and I am sure that many of us are researching common themes/topics/questions but do not know that we are doing so. [more]
Colin C Williams · The University of Sheffield

Dear Upananda

The relevance of institutional theory is central to understanding the informal economy and also contextualising the issues that you noted earlier. Such problems result in an asymmetry between the formal and informal institutions in a society which is the driving force behind the decision to operate in the informal economy.

Colin C Williams added an answer:
What are the key issues to consider when developing common measures to compare the success of different policy measures?
I am currently seeking to develop common criteria to evaluate the success of different policy initiatives to tackle the informal economy. To do this, one needs to develop a common measuring rod (e.g., the cost per job moved from the informal economy into the formal economy; the tax revenue-to-cost ratio). The first thing that struck me is whether it is valid to use such criteria to evaluate a policy when it was not perhaps its original objective. The second thing is to select common criteria that can be used. What common measure/s would you use? And does anybody know any literature that discusses the issues involved in developing common measures to compare different policy initiatives? [more]
Colin C Williams · The University of Sheffield

Arising out of the discussion of the above question, we have produced the attached Working Paper. I hope that readers find it useful.
Colin C Williams added an answer:
What factors need to be taken into account when evaluating the cross-national transferability of policy initiatives?
I am currently struggling to develop a methodology to evaluate the feasibility of transferring policies from one nation to another where they may be suitable. In my case, these are policy measures to tackle the informal economy. Does anybody know any literature which discusses the factors that need to be taken into account when evaluating the feasibility of transferring a policy from one nation to another? [more]
Colin C Williams · The University of Sheffield

For those of you who answered this question, I am very grateful. We eventually wrote a report on the issues involved in assessing the cross-national transferability of policy measures (in the sphere of tackling undeclared work). I think that it has wider lessons for other policy realms. I attach it and I hope that you find it useful.

Once again, thank you to everybody who has been so helpful in enabling us to answer this question.
Muhammad Shehryar added an answer:
What practical measures can be taken to improve the tax morality of populations?
With the growing recognition that using deterrents to prevent informal work and incentives to encourage formal work is a costly and ineffective way to promote formalisation, many governments are seeking to pursue the 'softer' approach of engendering a culture of commitment to formality through educating people about the reasons for paying taxes, showing populations what they receive for paying their taxes, etc. Until now, however, there has been little discussion of what works and what does not, and whether there are 'good practice' approaches that could be more widely adopted. Given that this seems to be the current direction of policy on tackling the informal economy, we need to discuss and identify how this can be done in practice. In doing so, we might be able to identify some practical measures governments and other social partners can adopt to engender this culture of commitment to formality. [more]
Muhammad Shehryar · Lahore University of Management Sciences
Apart from your perception about the use of public funds by the government, which is most certainly an important factor in this connection, what I have found that there is a significant part of your tax morality which is rather undermined by the tax morality of your customer who at times does not want a formal receipt of purchase for his own benefits and hence bear an adverse effect on your personal tax morality as well. Then how much you respect the prevailing law also has a strong correlation with how much it is respected by your neighbouring shop/factory and ultimately by the whole market/industry. So it is very much a possibility that despite having a positive perception about how the public finds are invested by the government, you are strongly influenced by the demands and practices of your customers and competitors respectively.[more]
Eghosa Igudia added an answer:
What are the reasons for advocating that people should be allowed to work in the informal economy?
In recent years, there has been a shift from a policy approach that seeks to eradicate the informal economy and move towards an approach that seeks to enable the formalisation of informal work. However, there is a small emergent view that people should be left alone to work in the informal economy. What are the possible rationales for this policy approach? [more]
Eghosa Igudia · The University of Northampton
I agree with most of the postings here. Results emerging from my study of the Nigerian informal economy shows that people engage in the informal economy for many reasons. These provide justifications for allowing these individuals to work in the informal economy. #link to this work shall be provided, as soon as it is published #[more]
Bradut Vasile Bolos added an answer:
What are the best policy measures used to tackle the informal economy in south-eastern Europe?
Given the nature of the informal economy in south-eastern Europe, and the socio-economic context, I am interested in finding policy measures that can be used to formalise the informal economy in this region. I am just starting a four year European Commission funded project on this subject
Bradut Vasile Bolos · University of Buraimi
However, most of my work is unpublished, and will remain so until i get proper funding for empiric research. And i needed funding to get the data for proving my theory.
Anjula Gurtoo added an answer:
Is work in the informal economy mostly conducted by those living in poverty?
I have recently conducted a review of the relationship between the informal economy and poverty so as to understand whether the informal economy helps those who are poor to escape their poverty and how to address the informal economy in anti-poverty strategies [See attached]. This review focused upon the situation in the United Kingdom. What surprised me was that little evidence was available on the relationship between the informal economy and poverty.
Does anybody know of any studies on the relationship between poverty and the informal economy? What do you think is the relationship in other countries? Is work in the informal economy largely undertaken by the poor? Does it help them escape their poverty? What should be done about the poor who work in the informal economy? [more]
Anjula Gurtoo · Indian Institute of Science
Poverty exists in India, in general...informal economy as well as formal economy. The number of low income households are significantly high in the country. Is there a direct relationship between poverty and informality, I dont think so. Causes of poverty cannot be directly attributed to informality or vice versa. I think one is just part of the other, and not initiate or trigger each other.[more]
Anamika P. added an answer:
To what extent can the development of various sub-fields of economics be seen as genuine breakthrough and not merely passing fads?
This is in light of development of fields like neuroeconomics,health economics,environment economics, etc.
Anamika P. · Monk Prayogshala
Yes sir,given their nascent stages,time shall be the best judge.Thank you.
Colin C Williams added an answer:
Looking for publications about reducing the informal, black, shadow economy!
Thanks in advance.
Colin C Williams · The University of Sheffield
Read Tackling the undeclared economy in the European Union by myself and Piet Renooy.
Nikolay Kryachkov added an answer:
What are the best policy measures to use to tackle the informal economy in south-eastern europe?
Given the nature of the informal economy in south-eastern Europe, and the socio-economic context, I am interested in finding policy measures that can be used to formalise the informal economy in this region. I am just starting a four year European Commission funded project on this subject
Nikolay Kryachkov
I think it's impossible. Even The Ottoman Empire couldn't do that for centuries.
Colin C Williams added an answer:
Global Economic and Financial crisis and the Informal Sector
What implications do the present global economic and financial crisis have for the informal sector in developing nations?
Colin C Williams · The University of Sheffield
Some recent research in Europe by Friedrich Schneider shows that the shadow economy has declined over the years of the crisis. The suggestion is that it is not a substitute for the formal economy but acts cyclically alongside it[more]
Colin C Williams added an answer:
Current Research on the Informal Economy
What current research are you working on and what are your expected results and contributions to knowledge?
Colin C Williams · The University of Sheffield
One fascinating piece of research which will never be published is the link between tax avoidance and tax evasion. I analysed a UK dataset and showed that there is NO relationship between the concerns about tax avoidance by major corporations and the tax evasion behaviour of small businesses. A very important finding but as I say, it will never be published[more]
Colin C Williams added an answer:
How can we improve access to funds in the informal market of South Africa?
Most of black business people in South Africa are involved in the informal business and have difficult in accessing funds.
Colin C Williams · The University of Sheffield
There are many articles on micro-finance as a route to aid informal sector businesses ad this is the focus of a vast literature. Perhaps the appropriate question, however, is whether this is the solution that should be focused upon when attempting to improve the working conditions of people in the informal economy. Perhaps the solution is not so much purely one of throwing some money at them and hoping that this will help them develop and more one of a more holistic approach to facilitating their development of informal sector entreprises[more]
Sidharta Chatterjee added an answer:
Economies in the Shadows: The Informal Sector Economies, Street Markets, Roadside Enterprises.
According to some statistics, half of today's workforce about 1.8 billion people earn their living on the streets, off the books. According to the OECD, it is estimated that that by 2020 this "informal sector economy" will include two-thirds of the world's labor force. What is you view regarding such a sector which lurk in political & economic shadows? [more]
Sidharta Chatterjee ·
Much Thanks for your reference Dr. Williams. Yes, the point perhaps you meant is exploitation of labor in the informal sector, illegal jobs, wage exploitation (underpaid), child labor, and workers rights which are not enforced in the informal sector, when compared to the formal sector. The paper you suggested is interesting and seems to highlight these issues, I am going through it in some detail.

Nisantha Kurukulasooriya Ajith added an answer:
How can I make an analysis of the productivity in the informal sector?
Informal economy, efficiency and productivity.
Nisantha Kurukulasooriya Ajith · University of Ruhuna
It is not clear what you are going to do. better to describe a little bit of you study. I can help u in the analysis of efficiency with parametric or nonparametric approach.
Elizabeth Wilke added an answer:
LTTE (Sri Lanka) budget, finances, arms flows
I am a postgraduate student looking for information on the LTTE (Sri Lanka) budget, finances, arms flows or related. I am currently writing my MSc. dissertation on the potential uses of non-discriminated violence as a fundraising instrument in Diaspora funded insurgencies.

Focusing on the LTTE's case for various reasons my main problem is to be able to estimate the budget of the LTTE as this is a key variable in my analysis; being able to break down the budget to the military procurement budget of the LTTE would be ideal, even though it is unlikely.
As gathering information on the subject is quite difficult I would gladly take any advice on where to find this information or on how to potentially extract this information from existing datasets; suggestion on proxies (and where to find them) would also be greatly appreciated. Information on informal value transaction practices used in the Tamil Diaspora, such as Undiyal or Cheetu can also be useful if in direct relation to the LTTE.

Thank you. [more]
Elizabeth Wilke · RAND Corporation
Theresa Flanigan has done excellent work on the Tamil Tigers. I strongly suggest you read her dissertation work, and contact her to see if she can provide additional resources for you.[more]
Stavroula Bougadi added an answer:
The connection between economy and crime or better criminality is an old query. What do you think about? Are they related?
For example , the economic recession effect crime ? and what form of crime?

Stavroula Bougadi · Panteion University of Social and Political Sciences
Dear Dietmar,
Thank you very much for the sources . I have n;t seen yet , i am busy these days.... but if you find anything about i will really appreciate your aid!
Anyway, you are right about poor and rich criminals. In my opinion the more dangerous are the rich and qualified person who commit very serious crime , even against humanity (it;s called 'white collar crime', as polution,corruption,economic frauds etc) the poor just steal some goods , ofcourse there are the Killers , but they don;t kill more than the auto or drugs and medical manufacturies which kill thousads 'by accident' (eg. broken brakes , or side effects of drugs).

However , because the connection between economy and crime and criminal justice exists ofcourse - economy is a social institution , maybe the most important in nowadays, and i am just a social researcher who try to find out what happen here, i just compare the general economic situation (GDP per capita, unemployment rates, ...) with crime rates and i try to discover the connection -if exist -as other research show. So any idea about is wellcame!

Thanks again and have a nice weekend![more]
Isaiah Oluranti Olurinola added an answer:
Required Guidance for a new researcher
I am entering first time in any type of research of economics. what should lear or study for it?
Isaiah Oluranti Olurinola · Covenant University Ota Ogun State, Nigeria
Manzoor, How are you? You must have gone very far in your research now. Right?
Isaiah Oluranti Olurinola added an answer:
Energy for the Informal Sector
Have you thought of Energy as being one of the biggest challenges impeding the growth of the informal sector in developing countries?
Isaiah Oluranti Olurinola · Covenant University Ota Ogun State, Nigeria
Bosco, given your view on energy and its implications for the informal sector, do you think that the current global economic crises have implications for the availability of energy to the informal sector, especially in developing nations?[more]

About Informal Sector Economics

The informal sector or informal economy as defined by governments, scholars, banks, etc. is the part of an economy that is not taxed, monitored by any form of government, or included in any gross national product (GNP), unlike the formal economy. Also called the Black Market, Shadow Markets, Underground Markets and Economies.
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Formalizing the Informal Economy: Best Practices? - NORRAG

Formalizing the Informal Economy: Best Practices? - NORRAG | Informal Sector and Informal Economy |
Summary: This article argues that efforts to formalize the informal economy often involve the coming together of multiple forms of 'best practice'. It notes that the key to formalizing the informal economy will be to create incentives for those operating informally to see the value of becoming formal. One way to formalize the informal economy may be to informalize formal structures.


What does formalizing the informal economy mean? Is it the best way forward (a best practice)? And, if so, for whom is it best practice? In what ways is it best practice? And how feasible is this best practice anyway?

There are many aspects of the informal economy that policy makers and development agencies are keen to formalize or, to put it another way, to move into 'the economic and social mainstream'. Main areas where formalization is promoted include: employment policies; basic education and vocational training; occupational safety and health; social protection; access to critical resources; dialogue and representation.

In effect, efforts to formalize the informal economy often involve the coming together of multiple forms of 'best practice'; best practice in microfinance, best practice in formalizing informal training (including best practice in skills recognition), best practice in reforming formal skills training for the informal economy, best practice in formalizing informal trade and community associations, best practice in formalizing informal social protection, in formalizing land rights and so on?

For example, since the mid-1990s there is a great deal of interest in formalizing informal apprenticeships in developing countries. There have been numerous projects and programmes that have, with mixed success, put in place public policies addressing formalization or facilitating the transition; linked formal training institutions and informal training systems; set up formal recognition and certification of skills acquired in informal apprenticeships; or worked with informal sector associations in formalizing informal training systems. There have been a number of useful lessons learned in the process (Palmer, 2007), though some lessons appear to have very short life-spans as institutional memories fade fast (see also Ellerman, this issue, "Best Practice Development Fads 101"). With regard to formalizing recognition and certification of skills acquired in the informal economy, some countries (e.g. Ghana) are attempting to use the "best-practice" of National Qualifications Frameworks (NQFs). However, incorporating skills acquired informally through apprenticeships into an NQF may prove to be too big a task for most developing countries (Palmer, 2007) (see also McGrath, this issue, "Lessons from Qualifications Framework Experience").

While there are many areas of the informal economy where formalization can be promoted, for many policy makers in developing countries, however, formalizing the informal economy - in the short term at least - simply refers to formalizing informal ventures in order for them to pay taxes and get licenses (and pay the associated fees); a desirable outcome for the public purse perhaps, but hardly an incentive for the (informal) private pocket to formalize. While this might be "best practice" for the government (e.g. they will increase their tax base), from the perspective of informal micro-enterprises it certainly is not!

The key to moving informal ventures into the economic and social mainstream will be to create incentives for those operating informally to see the value of becoming formal; in other words, to create an environment in which the benefits of formalizing outweigh the costs of remaining informal. Necessary incentives and other mechanisms making formalization more affordable and appealing to informal economy workers and economic units need to be created (de Medina, 2006). In doing this, informal ventures are more likely to voluntarily opt to formalize (Nelson and de Bruijn, 2005), and governments will have to expend less resources in enforcing formalization.

Such incentives for informal enterprises formalizing might include improvements in the accessibility of micro-finance, improvements in labour standards and legislation, social protection (de Medina, 2006) and worker benefits, secure property rights, stronger and more representative informal sector associations that can add the voice of informal workers to the policy process [1]. Policies and legal frameworks facilitating appropriate formalization need to be developed and, more crucially, implemented (de Medina, 2006). Opportunities for productivity and market enhancement need to be generated (ibid.). The costs of formalizing - in both time and money - should be kept to an absolute minimum and procedures should be greatly streamlined and simplified. For formalization of informal ventures to occur, such incentives need to be in place. In most developing countries, however, formal policies and legislation remains very much disabling for micro- and small enterprises (MSEs). In other words, the wider economic and social environment is failing to provide the incentives required for formalization.

There needs to be action at the macro, meso and micro levels to address this issue. At the macro-level, policies concerning labour standards and legislation, social protection and worker benefits, property rights and social dialogue need to be made more pro-poor and pro-MSE in general. At the meso and micro levels, public and private education and skills development, and financial and business development services (BDS) need to approach the delivery of their interventions in more innovative ways. One way of doing this is to informalise formal support structures aimed at MSEs; to make, in other words, formal support structures less formal. By learning from the existing informal providers, formal services might be better placed to reach informal MSEs more effectively. One potentially useful approach (a best practice?) is highlighted by the case of mobile bankers in Ghana.

In some districts in Ghana, rural banks have set up "mobile banking" - a daily "door-step" financial service modeled on the traditional door-to-door money collectors. Rural bank collectors go out every morning into the community and collect savings from clients, returning to the bank in the afternoon to deposit the money. The mobile banker also facilitates the process of micro-enterprises getting access to formal credit. Due to the daily personal contact they have with their clients, they are well placed to inform the bank on that client?s suitability for receiving a loan, thus breaking down the information asymmetry and some formal collateral requirements that hinder usual formal financial extension to micro-enterprises. However, these mobile bankers might be well placed to provide more than just financial services. If they were provided with further training themselves, each mobile banker could, in theory, become a mobile BDS unit; providing additional training services to their clients (including basic book keeping, business skills). Having mobile bankers/business advisors would greatly increase outreach to the entrepreneurs that need advice. Is this not a good example of how we can formalize the informal economy by informalizing formal structures?
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Formalisation of informal sector begins in Harare - The Zimbabwe Mail

Formalisation of informal sector begins in Harare - The Zimbabwe Mail | Informal Sector and Informal Economy |
Harare City Council (HCC) on Thursday started the formalisation of the informal market through registering vendors who will be later moved to designated points as council takes steps to decongest and bring order to the once vibrant city.

Addressing the media in the capital on Thursday Town Clerk Tendai Mahachi said vendors and kombi operators had 30 days to register their businesses.

“HCC recognises the important role played by the informal sector in the national economy, especially during this period when our economy is hard-pressed for jobs. It is that honest acceptance that the informal sector is a vital cog in job-creation and self-sustenance that we are gathered here to announce mechanisms that will promote our informal sector,” said Mahachi.

“Beginning today (yesterday) and for the next 30 days, Harare City Council will be registering all vendors ad kombi operators doing business in the city. By the end of the 30-day-period we hope to have a register of all vendors and kombi operators. If one is not registered he/she cannot do business in Harare.”

Registration for vendors is for free. To date council has approved 13 points to be occupied by registered vendors.

Currently, vendors are occupying every space in the street thereby hindering smooth flow of both traffic and humans. Moreover, the city of Harare, whose 2025 vision is to make Harare a world class city, has been blamed for scaring away investors because of disorder in the city.

“Each person would be allowed one vending spot in the CBD and suburbs. There would be no multiple stallholders. We want to avoid issues of subletting, racketeering and profiteering. Each vendor will be issued with a registration number and identification that restricts one to a particular vending site,” added Mahachi.

According to council, flea market operators pay $3 daily for trading space while fruit, vegetable, airtime, dried foods and newspaper vendors would pay $1.

There shall be no vending at traffic intersections, road islands, and street pavements and in the middle of roads.

In a bid to bring sanity to the city, recently HCC unveiled the Coventry Holding Bay that has successfully decongested the Copa Cabana area of kombis.

The results, however, came after council imployed tough measures that saw 420 kombis impounded within 12 days.
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Way out of informality: Facilitating Formalisation of Informal Economy in South Asia

Way out of informality: Facilitating Formalisation of Informal Economy in South Asia | Informal Sector and Informal Economy |
This is a Sub-regional Project covering three countries namely Bangladesh, India and Nepal. This project will apply integrated decent work strategy for the informal economy to the formalization aspect, emphasize knowledge management to fill the large knowledge gap in the policymaking, and embrace the proven ILO strategy of participatory dialogue.
When: 1 January 2012 - 31 December 2016
Contact(s): Harunur Rashid, National Project Coordinator

The project is an ILO/Japan Multi-bilateral Technical Cooperation Programme: under the Framework for Cooperation between Ministry of Health & Labour Welfare (MHLW)-Japan and the ILO for a period of 5-years (2012-2016). And project partners are the ILO constituents (Government/Employers’ Federation/Worker’s Federation) and other Non-Government and Social partners

Background/Situational Analysis
The concept of the “informal sector” was first introduced by the ILO to highlight the presence of a high percentage of labour force working in activities which are generally unregulated, unrecognized and of “low productive” in nature. Informal economy was included as one of the agenda items at the 90th Session of the International Labour Conference, 2002. For the ILO and its constituents, the most meaningful way of looking at the situation of those in the informal economy is in terms of decent work deficits: poor-quality, unproductive and un-remunerative jobs that are not recognized or protected by law, the absence of rights at work, inadequate social protection, and the lack of representation and voice are most pronounced in the informal economy, especially at the bottom end among women and young workers.

South Asia is known to have the highest incidence of informal economy in terms of number of persons employed, from 80 to 90 percent of the labour force. For example, 87 parent of the labour force is employed in the informal economy in Bangladesh (LFS 2010). According to the LFS 2010, the total labour force (persons 15 and above) of Bangladesh is 56.65 million (39.48 million males and 17.17 females). In terms of broad characteristics of employed persons, 47% are employed in agriculture followed by services (35%) and industry (18%). People who work in the informal economy include wage labourers, self-employed persons, unpaid family labour, piece-rate workers, and other hired labour.

The sixth Five Year Plan (SFYP) of Bangladesh (2011-2015) recognizes the vulnerability of the workers in the informal economy and the document states “This calls for changing the structure of employment by withdrawing labour from low productivity agriculture and informal jobs (also known as disguised unemployment) to higher productivity jobs in the manufacturing and formal services” (SFYP document, March 2011, p. 46).

While the on-going efforts of the constituents and the ILO are addressing the informal economy issues in one way or another, the proposed project ‘Way out of Informality: Facilitating Formalisation of Informal Economy in South Asia’ intends to tackle the core problem of the informal economy in South Asia: specially in Bangladesh, India and Nepal since the continuous growth of the vast informal economy is considered as a challenge to stable and sustainable development in the region.
Project Location

Project Location
Bangladesh, India and Nepal

Timeframe for Implementation of the Project
The duration of the project is Five years (01 January 2012 to 31 December 2016).

Key Strategic Partners

Ministry of Labour and Employment
Bangladesh Employers’ Federation
National Coordination Committee for Workers’ Education (Trade Unions)
Other Government and Non-Government Organizations

Development Objective: The project is expected to contribute to the shift in growth and employment policies to those that facilitate accelerated expansion of formal sector, curb the growth of informal economy and reduce vulnerable employment

Outcome 1: The regulatory and policy environment in the target local areas made more conducive to formalization and protective to the risks of informalization

Outcome 2: Formal job growth promoted through job-rich growth strategies and integrated formalization assistance in the target local areas

Outcome 3: Good practices and tools of promoting formalization better understood by the constituents and key stakeholders at the national level in South Asia

Contribution to poverty reduction
Formalization of businesses and employment directly relates to the realization of productive and decent work. The latter is recognized as a core element of the millennium development goal (MDG) 1, “eradicate extreme poverty and hunger” and linked MDG 1b that the ILO has set for “full and productive employment and decent work for al including women and young people” as an indicator.

Main Output
Outcome 1: The regulatory and policy environment in the target local areas made more conducive to formalization and protective to the risks of informalization

Output 1.1: The incentives and the disincentives to formalizing unregistered small firms and own-account workers analysed and addressed

Output 1.2: The incentives and the disincentives to formalizing informal workers and informalizing workers analysed and addressed

Outcome 2: Formal job growth promoted through job-rich growth strategies and an integrated formalization assistance in the target local areas

Output 2.1: Job-rich growth strategies implemented at the target local areas

Output 2.2: The ready-to-formalize groups better linked to the upgradation and risk mitigation services

Outcome 3: Good practices and tools of promoting formalization better understood by the constituents and key stakeholders at the national level in South Asia

Output 3.1: A web-based knowledge sharing and monitoring platform developed and kept functional

Output 3.2: Good practices documents and videos from the project shared

Output 3.3: The national constituents and other key stakeholders are better exposed to the international experiences of formalization efforts

Management Framework

International Labour Organization (ILO)
The ILO Country Office for Bangladesh in Dhaka shall implement the Bangladesh country component of this regional ‘Way out of Informality: Facilitating Formalization of Informal Economy in South Asia’ project. The overall responsibility of the project implementation includes the effective delivery of planned activities, outputs and objectives. While Chief Technical Advisor (CTA) and relevant specialists from the ILO’s Decent Work Team in New Delhi, India and relevant technical units at ILO headquarters will ensure the technical quality of project. ILO Country Office for Bangladesh in Dhaka will provide technical, administrative and other support to the Bangladesh component of the Project.

In addition, ILO in general will have the specific responsibility of monitoring the project implementation and delivery in line with standard ILO procedures and Agreement between ILO and the Japanese Government under which the funding is provided to the project.

Ministry of Labour & Employment (MOLE)
The Ministry of Labour & Employment (MOLE) will be the implementing partner, and Bangladesh Employers’ Federation (BEF) and National Coordination Council for Workers’ Education (NCCWE) will be the primary constituent partners. In line with the standard practice for regional, sub-regional and global TC projects of the ILO, the Project Advisory Committee (PAC) will be formed at the MOLE to provide guidance and support to the country level work. The project team will liaise closely with the PAC on specific project activities to be implemented.

Project Coordination
In order to ensure a smooth functioning of the project, a coordinating advisory mechanism in the form of a Project Advisory Committee (PAC) will be established at MOLE with representatives from relevant Ministries/Departments/Organisations/Agencies and from the employers’ and workers’ organizations. The Project Advisory Committee will meet at the beginning of the project and will then meet every six months. It will be chaired by the Secretary, MOLE.

Monitoring and Evaluation
The ILO Country Office for Bangladesh will work closely with MOLE, national level tripartite constituents and other relevant stakeholders on the formalization issue for effective reporting, monitoring and evaluation of the project and ensure its conformity referring to the current regulations and requirements of the country and the donor. The ILO shall undertake both technical and financial review of the project at different stages of its execution.

The project will develop a web-based knowledge sharing and monitoring platform. Most of the project activities will be recorded through meetings with partner organizations and service providers and incorporated into the regular reports.

During the project implementation periodic evaluation will be conducted as per standard ILO practices, while a final evaluation will be carried out at the end of the project.

For further information, please contact:
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Formalising the informal economy | BusinessDay

Formalising the informal economy | BusinessDay | Informal Sector and Informal Economy |
The informal economy is a globally prevalent phenomenon, but nowhere more visible and contributive to activity than in the developing and transition economies. The Organisation for Economic Co-operation and Development (OECD) estimates that the informal sector contributes about 42% to output in Africa, 41% in Latin America, 35% in the transition economies of Europe, compared to 13.5% in OECD countries. The informal economy largely accounts for those who cannot find work in the formal economy, with a disproportionate number of them women, the youth and the disadvantaged groups. Indeed, it is estimated that 84% of women in sub-Sahara Africa are employed by the informal sector.

Formalisation is a gradual process, hence, there is a continuum between the formal and the informal. There are few organisations that follow all the regulatory rules and there are few that follow none of the rules. In-between both ends of the spectrum are those that pick and choose what rules to follow based on a cost-benefit analysis. Many of these organisations will only follow the formalization rule book up to the point where the potential benefits outweigh the costs.

The informal sector seems to only provide temporary solution to poverty amelioration, as coincidentally, countries with higher share of informal economy also have the lowest per capita income, while countries with the highest per capita income have smaller informal sectors. Although formalisation is not the magical silver bullet that will cure all economic woes and reduce poverty, but on the long-run, it is expected that it will broaden the tax base (potentially permitting lower tax rates), provide higher quality, better paid and more sustainable jobs, reduce the cash economy and provide more resources for financial intermediation by the formal financial institutions, and also build investor confidence, thereby, increasing investment.

Although anecdotal evidence suggests formalisation is a win win situation for both the private enterprise and the government in the long-run, yet, many of the issues that militate against the ease of doing business in many of the developing countries also prevent the formalisation of these economies. There is a strong global body of evidence that suggests regulatory, administrative and corruption barriers exert the most compelling influence against formalisation.

Regulatory barriers are inordinate requirements put in place by governments that do not appreciate or understand the impact of every extra procedure and compliance on businesses, particularly, those regulations that have no bearing on the standard of goods and services. The small and medium enterprises are usually the most affected by these obstacles. Over the years, poor quality regulation and laws have created a web of inconsistencies and complexities that have become insurmountable for businesses seeking formality.

Administrative barriers stem from the procedures for enforcing regulations. Bureaucratic obstructions, abuse of authority, excessive paper work and inefficiency/delayed decisions are some of the barriers faced on a daily basis by businesses. These administrative barriers take their roots from some salient causes- lack of capacity on the part of the regulators, archaic ways of working that are no longer relevant in the 21st century, complex procedures, and over-centralisation of authority. In many cases, the public servants do not understand the needs of the private sector, and erroneously assume the role of control and enforcement, rather than facilitator of processes and procedures. They become the new obstacle and oracle that need to be worshipped and appeased. The role that public servants arrogate to themselves often breeds contempt and corruption, hence, general distrust of the public sector.

Corruption is also a major deterrent to formalisation, as businesses try to avoid corrupt public officials by staying off tax rolls and registers. Corruption erodes the little trust businesses repose in their governments, and leads the informal enterprises to the conclusion that their long-term prospects in the formal economy are poor. Reducing and simplifying regulatory and administrative requirements limits opportunities for corruption, but this also explains why government officials that benefit from these complexities will be reluctant to pursue such reforms.

Thankfully, there are already established frameworks for improving formalisation. The indicators in the global competitiveness and ease of doing business reports are a good place to start. Compelling body of evidence shows strong correlation between positive performances on those indicators and improvements in level of formalisation. Although correlation does not preclude causation, indicators in those frameworks have also been identified as the main catalysts for formalisation.

Governments and regulators can take practical steps to educate their employees on their roles as facilitators of processes and procedures. Including formalisation incentives in the enterprise service promotion may also go a long way in bringing the informal sector into the formal fold. Tax administration, rather than tax rates, is often more cited as a barrier to formalisation; this can be further simplified. Single taxes, with different payment options (one-off or installment), should be considered for SMEs. Government should also avoid retroactive taxation for businesses that formalise, as enterprises will be reluctant to formalise if they expect a large tax bill.

Finally, the government needs to start engaging businesses in discussions on the use of their taxes, and how businesses will benefit from enhanced services as evidence suggests improved compliance rate when businesses are aware of what they are getting in return for their payments.
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Formalising the informal sector : a case study on the City of Johannesburg

Formalising the informal sector : a case study on the City of Johannesburg | Informal Sector and Informal Economy |
Informal trading is a phenomenon prevalent throughout the world, but nowhere more visible and contributively to local economies than in the developing world. South Africa faces similar challenges as any other emerging economy, which demonstrates a duality insofar as its formal and informal arrangements are concerned. In addition, poverty and unemployment, HIV/AIDS and concomitant social problems all form part of the Country’s current socio-economic landscape. The Constitution of the Republic of South Africa, 1996 provides local government with a mandate to govern, provide service and to promote development within their areas of jurisdiction. The Constitution of the Republic of South Africa, 1996 stipulates in Section 153 that local government must structure and manage its administration, budgeting and planning processes to give priority to the needs of the community and promote the social and economic development of the community.


The concept of developmental local government is extensively elaborated upon in policy documents and legislation, which impress the obligation of local government to apply technologies to further its developmental objectives. The Metropolitan Trading Company (MTC) in the City of Johannesburg is mandated to manage trading within the area of its jurisdiction by acting as a conduit and facilitator to economic activities associated with bottom end trading. This function poses significant challenges, especially if taken into account the extent of poverty and different forms of disenfranchisement, which traders currently experience. Location in terms of finding appropriate trading venues, abiding with the regulatory framework imposed by the authorities (especially the municipal authorities) and access to support mechanisms to enhance their prospects of success (including finance, skills development and product/market options etc.) are all contributive factors to limiting the success and growth that is needed by such traders. On the one hand, a proper system within which orderly trading is assured (such as a regulatory framework that limits trading in particular areas and registration) is necessary and highly desirable.


Yet, on the other hand it should be noted that the trading community would remain and possibly even grow. It should be noted furthermore that the trading community would continue to expand even if general local economic growth is significantly improved. Global trends in countries, which demonstrate similar socio-economic characteristics as South Africa, testify to this. Urgent support mechanisms are needed to improve this state of affairs. The fundamental role of these mechanisms is to transform the informal sector and trade into a contributing channel of entrepreneurial performance and job creation. This article endeavours to assess the issues faced by local government in this process and offer some solutions within the frame of a case study.

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Informa Sector: Stop harassing vendors – S K Moyo - The Zimbabwe Mail

Informa Sector: Stop harassing vendors – S K Moyo - The Zimbabwe Mail | Informal Sector and Informal Economy |
The senior minister of State in the President’s Office, Simon Khaya Moyo, on Friday ordered the MDC-T-controlled Bulawayo City Council to stop municipal police from treating vendors and informal traders in a “barbaric” manner amid reports the local authority is still using oppressive by-laws crafted during the colonial era.

Moyo said this in a speech read on his behalf by the principal director in his office, Gatsha Mazithulela, during a Zimbabwe Chamber of Informal Economy Associations conference held in Bulawayo.

“I am aware that some of the challenges you encounter emanate from a constrained regulatory environment, where local authorities make it difficult to obtain suitable working premises,” he said.

“This is not your fault but the fault of city councils – yet this yields the untenable situation where vendors are considered to be non-law abiding, public nuisances and are then harassed by law enforcement agents, which itself breeds fertile grounds for corruption. As we speak, there is probably a vendor right now who lost his investment to roaming patrols by the Bulawayo City Council police and others.”

Moyo said the informal sector was a significant contributor to employment creation, providing jobs for 5,7 million people and therefore should be assisted to “migrate” into the formal sector instead of being frustrated by local authorities.

“We have all witnessed the way that vendors, trying to make a dollar for survival, are treated in the most barbaric way, everyday,” he said. “I would like to ask his worship the mayor (councillor Martin Moyo). Is this the way to treat people as a city father? Is there no solution available? In any case the current treatment of vendors can never be a solution. This problem is yours to solve. Yekelani ukuhlupha omama labo baba abazilungisela impilo! (Stop harassing mothers and fathers trying to make an honest living).”

The minister said even the First Lady, Grace Mugabe made the same appeal when she addressed a rally in the city recently as part of her whirlwind tour of the country, following her nomination as the leader of Zanu PF’s women’s league.

Municipal police as well as members of the Zimbabwe Republic Police, have been playing a ‘cat and mouse’ game with vendors in the city, with allegations of corruption against the law-enforcement agents.

“Your (city council) policemen must stop harassing vendors,” he said amid thunderous applause from the audience.

“Stop it and find better ways of dealing with them. Our mothers, our sisters and brothers are human beings with feelings. I therefore call upon all licencing authorities to be transparent in their licensing requirements and spell out clearly the activities to which a residential property converted to commercial use can be allowed within sound town planning principles.”

Speaking during the same conference, an official of the Zimbabwe Chamber of Informal Economy Associations, Zororo Zenda, said the increase in the number of vendors meant there was now a need for the local authority to construct adequate and suitably designed infrastructure.

“The city council is requested to consider ‘temporary sites’ as has been done in other cities and this should include relaxing trading hours,” he said.

“There are some sites that have already been identified by the past council. The approval or construction of these sites needs to be expedited. Vendors are willing to co-operate with council in ensuring cleanliness of trading sites.”

During the meeting, vendors raised concern that some of the by-laws used by council dated as far back as 1976 and allowed only 20 informal traders to operate in the central business district.

It is believed that an estimated $7 billion is circulating in the informal sector.
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The Informal Sector and some Development Paradigms

The Informal Sector and some Development Paradigms | Informal Sector and Informal Economy |
A number of development paradigms that have been in vogue is compared to the informal sector concept:

The development decades of the 50s and 60s first threw up this strategy of 'growth.' Aiming for an economic growth of five percent of the GDP, it was assumed that the benefits of this growth would reach all the sectors of the economy. This did not actually take place. Consequent to the pursuance of this strategy, inter-personal and inter regional disparities, in fact, increased. The urban informal sector could be seen here as an answer or solution to the failure of the 'trickle down' growth strategies.

Growth with Distribution/Equity
Since the growth strategies brought about disparities, later economic and developmental strategies stressed on 'growth with distribution/equity'. It was assumed that strategies which stressed on equitable distribution of growth would be more appropriate. For various reasons, this distribution again did not take place. In this respect, the urban informal sector, in fact, ensures a more equitable distribution of income among the poor, by employing migrants to the city, through it may be thinly spread (since the job which could be done by one person, is actually done by five or ten persons)

Employment Generation
As a result of the failure of the 'growth with equity' strategy, the focus of development shifted to strategies on 'employment generation, since it was found that the growth-with-equity strategy did not actually generate employment. Even though this did work to an extent, the formal sector, which these developmental strategies were aimed at, was not able to absorb the multitudes of semi-skilled and unskilled migrants to the city. The urban informal sector has been able, on the other hand, to generate employment for these people with few skills or 'undesirable personal characteristics', since it used technologies which were appropriate and labour-intensive.

Appropriate technology
One glaring drawback thrown up by the employment-oriented strategies was a lack of technology which suited the less developed countries' economies. Blind adoption of western technologies only compounded the the problem. So later strategies stressed on 'appropriate technologies' as a necessary ingredient of development. But then, the urban informal sector had been using appropriate technology all the time: using local resources, efficiently using or not using scarce resources, reusing and recycling 'waste' materials etc.

Human resource development
While the stress on appropriate technologies was a desirable direction in development strategies, a need for developing skills for these technologies arose. Thus, there was a shift in focus towards the development of human resources. The urban informal sector has, in this respect, absorbed migrants with little or no skills, trained them in various skills in an informal apprentice way and used it in its own growth - using very little of the formal education processes.

Basic needs
The present thrust of most strategies has been the provision of basic needs like food, clothing, shelter etc. to the population and effect overall long-term growth as a result. The urban informal sector has been providing basic needs for urban populations and migrants at affordable prices and qualities.
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Transforming the informal sector: The Lagos example  

Transforming the informal sector: The Lagos example   | Informal Sector and Informal Economy |
By Tayo Ogunbiyi   The informal sector is an economic activity that is neither taxed nor monitored by a government; and is not included in that govern
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The Informal Sector in Asia: Public Policy and Actions toward Decent Work

The Informal Sector in Asia: Public Policy and Actions toward Decent Work | Informal Sector and Informal Economy |
The Informal Sector in Asia: Public Policy and Actions toward Decent Work Offer Price $74.70 ISBN:3639241568 Authors ATM Nurul Amin List Price : $83.00 Availablity Usually ships in 24 hours Publisher : VDM Verlag Dr.
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Donnas Ojok sur Twitter

Donnas Ojok sur Twitter | Informal Sector and Informal Economy |
The informal sector economy still employs millions of people in the developing world, but the challenges are enormous
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Govt Urged to Invest More in Informal Sector -

Govt Urged to Invest More in Informal Sector - | Informal Sector and Informal Economy |
Rwanda should invest more in innovation, capacity building and value addition to enhance the performance of its informal sector and be able to enjoy economies of scale, Peter Kiguta, Director General in charge of customs and trade at the East...
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Column: Formalising the informal sector

Column: Formalising the informal sector | Informal Sector and Informal Economy |
There has been considerable consternation over the issue of the large and growing underground or informal economy. The main focus has been on the drafting of the Lokpal Bill, defining the scope, powers and functions of the Lokpal. Debate has been raging on whether the Lokpal should have jurisdiction over the functioning of the Prime Minister and higher judiciary and whether he/she should have an investigative agency working independently under him/her. Most people are lost in this melee and, in the process, there is hardly any discussion on what the factors that drive the informal economy are, and what policy measures are needed to formalise them. Isn�t prevention better than the cure?

One of the most important sources of the underground economy is in the urban land and housing market. In urban areas, the transactions are many and the values of transactions are large. Further, the impact of fast spreading the informal market is widespread as whoever wants to buy or sell land and houses is automatically embroiled in the parallel economy and forced to break the law. Of course, unlike in the case of ill-gotten money parked in tax havens abroad, this form of underground economy has a vibrant domestic economic activity and creates income and employment.

However, proliferation of the informal sector results in significant resource misallocation. It forces even law abiding individuals to violate the law. As the sector substantially escapes the tax net, a large and disproportionate burden of tax is placed on the formal sector.

There are a variety of laws that have prevented the development of an organised market in this sector. There has been much focus on land ceiling and rent control acts and, even as the Jawaharlal Nehru National Urban Renewal Mission has mandated reforms to free the land market, they continue to constrain formalisation of the markets for urban land and housing in many states. Continuation of these archaic laws, poor information of land records and the prevailing tax treatment of capital gains and stamp duties have been responsible for the proliferation of an informal economy in the sector.

The most important impediment preventing the organised development of land and housing markets in urban areas is the prevailing tax system. The tax system provides enormous incentives to understate the value of properties for both the seller and buyer. In a situation where urban land and housing prices have been sky rocketing, the prevailing system of
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How to formalise informal sector

How to formalise informal sector | Informal Sector and Informal Economy |
INFORMAL sector prospers in developing countries, particularly where the rule of law is extremely weak. As a large informal sector drains the formal economy, the key question is how to formalise it. The informal segment of the industry and business mainly consists of small units producing goods or services. Its activities are marked by low levels of capital, skill and technology, with loose access to organised markets. Their working conditions are depressing, their incomes too small and jobs they offer unstable.

The sector remains outside the purview of the official policy-making and its incomes are included as guesstimates in national accounts. In developed countries, this sector is described as unreported employment; is hidden from the state for tax, social security or labour law purposes but is legal in all other aspects.

Two conferences on informal sector’s role in the economy held early this month — one in Karachi highlighting entrepreneurs’ perspective and the other in Cape Town, South Africa, looking at organisational issues — were of the view that an enabling environment needs to be created by the state and business bodies jointly to absorb this fast expanding sector into the mainstream.

The Karachi moot was informed that the country’s informal sector has grown faster than the formal economy during the last three decades and accounts for at least one-third of the country’s gross domestic product. Other estimates put the size between 30 to 50 per cent or roughly $51 billion in total economic activity. In developing countries, according to Wikipedia, some 60 per cent of the labour force earns its living in the informal sector.

The discussion forum was organised by the Centre for International Private Enterprises (CIPE) and the Karachi Chamber of Commerce and Industry. The moot was attended by 40 persons from trade, industry, financial sector, the State Bank, and informal businesses.

It recommended that CIPE and Pakistani chambers should join hands in identifying the clusters where the informal enterprises are based and encourage them to become part of the formal sector.

There was consensus that the informal sector should not and cannot be equated with ‘black economy’ which is mostly illegal and crime-related. Since most of the informal enterprises are now seen pursuing legitimate economic activities they should be classified as ‘extra-legal,’ and not ‘illegal.’

The solution lies in neither encouraging nor suppressing informal economic activity but rather in facilitating the transition of informal businesses to the formal sector by removing barriers.

Once having entered, the formal sector itself creates new opportunities for the small businesses to realise their potential. But the government remains indifferent towards the needs of most vulnerable workers. There are about 8.52 million home-based, or informal, workers in Pakistan, representing 70 per cent of the women workforce, based on the 2009 Pakistan Economic Survey.

The key reasons for the growing informal sector are barriers such as lengthy registration processes, red-tape, licencing requirements, lack of access to private property rights and a complicated taxation policy. These barriers have been erected by the system itself and are supported by greedy elements within the state apparatus.

In such a business environment, businesses that may wish to enter the formal economy would dither. What is needed is a policy that rewards, not punishes, informal sector enterprises and individuals for disclosing themselves. In fact, nobody prefers to remain in informal sector for long and be deprived of benefits such as access to formal bank credit.

Following are some f the recommendations agreed at the CIPE-KCCI panel discussion:

* The State Bank has introduced the Credit Guarantee Scheme for commercial banks to cover the default risk of borrowing entrepreneurs — including those in the informal sector — for up to 60 per cent of first loss. There is a need to raise awareness among the commercial banks and enterprises to utilise this scheme.

* The State Bank prudential regulations governing collateral requirements have been relaxed to accept any documented property including their inventories, moveable property, and receivables and more entrepreneurs should take advantage of this new lending opportunity.

* Informal enterprises operating in the manufacturing sector should be encouraged and facilitated to use the testing, standardisation, and quality assurance services offered by the government to improve their product and market development capacity.

There are several methods to determine the size of the informal economy. A 2010 study carried out by a senior economist of the State Bank of Pakistan showed that the informal economy was about 30 per cent of the total economy but it declined considerably in 2000s.

The results of the autoregressive distributed lag (ARDL) model showed that Pakistan’s undocumented economy increased from less than 30 per cent in 1960s to 33 per cent in 1990s and then declined to 23 per cent on average in 2000s. The electricity consumption approach shows that informal economy increased from about five per cent of the total size of the economy in 1970s to 29 per cent in 1990s and then declined to 27 per cent in 2000s.

The Cape Town conference held on December 2-3 and organised by the Solidarity Centre of AFL-CIO, the most powerful trade union of the United States, brought together informal workers, union leaders and researchers from around the world to explore ideas and strategies for helping informal sector workers improve their lives and livelihoods.

The conference was informed that the process of globalisation has put all of the labour market structures at risk and that nobody was safe. The hard fact is that globalisation is driving workers from a high-wage economy into a low-wage informal economy. In their efforts to make both ends meet, workers in the informal economy such as domestic workers, street and market vendors often cannot organise and fight for better working conditions.

But despite the odds against them, there have been some key victories. For instance, domestic workers in Hong Kong; female beer promoters in Sri Lanka, newspaper deliverers in Pakistan and self-employed workers in Brazil have organised themselves. Market venders in Zimbabwe have set up a Chamber of Informal Economy Associations.
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Formalise informal sector: Govt urged - The Zimbabwe Independent

Formalise informal sector: Govt urged  - The Zimbabwe Independent | Informal Sector and Informal Economy |
REVELATIONS that a staggering US$7 billion is circulating in the informal sector when the country is suffering from a debilitating liquidity crunch is a major concern, but efforts should be directed towards resuscitating the economy, analysts have said.

Kudzai Kuwaza

According to a Small and Medium Enterprises (SME) survey conducted in 2012, a total 5,7 million jobs have been created from 2,8 million small businesses, while 800 000 small business had employed 2,9 million people.

While delivering a ministerial statement to update the house on what her ministry was doing to formalise the sector, SMEs minister Sithembiso Nyoni said government was losing substantial amounts of money to the untapped informal market, adding there was need to formalise it to boost government revenue base.

The need for revenue for government coffers is more acute at a time the tax base is shrinking as companies either downsize staff or close shop altogether with more people likely to join the informal sector as a result.

The failure by the government to pay civil servants salaries on the scheduled dates is indicative of the cash crunch that has paralysed the economy.

The Zimbabwe Revenue Authority (Zimra) has been blamed in some quarters for failing to put in place measures to collect tax from the informal sector, thereby prejudicing the country of millions of dollars in potential revenue.

However, tax expert Tendai Mavima does not agree. “I am fully aware of the efforts that Zimra have made,” Mavima said.

“They have carried out taxpayer education including on television. I have seen them raid Mupedzanhamo (Flea market based in Mbare) and buses and lorries offloading imported goods. To say Zimra has not been doing anything is unfair.”

He said the question was not if Zimra had made any efforts to collect taxes from the informal sector, but whether they had done enough.

He added there were adequate tax laws to collect revenue from SMEs and what was needed was the enforcement of the law.
Mavima said the renewing of the business lease for SMEs should be on condition of the proof of tax payments. This, he said, would ensure improved inflows from the informal sector.

Former Zimbabwe National Chamber of Commerce (ZNCC) president, Oswald Binha said the intensified drive by government to increase revenue through formalising SMEs smacks of desperation.

“This is a desperate position. SMEs are free riders to the economy,” Binha, said. “Once the environment becomes too stringent, they can move away just like birds moving around with the weather.”

He said the US$7 billion figure being bandied about was an abstract figure, as there has no substantive framework put in place to come up with such a figure.
“If it (US7 billion) does exist, we need empirical evidence to prove it. We need statistics such as how much is coming from cross border traders and how much is coming from small-scale miners, so we do not spread our resources too thinly,” Binha said.

He said there was need to revive the institutions such as Hwange, Sable Chemicals and Ziscosteel to help resuscitate business, adding that SMEs could only thrive in an environment that business also thrives.

“We need think-tanking on the structure of our economy,” Binha urged.

Economist John Robertson said the cumbersome requirements by government to start a formal tax-paying company encouraged the increase of informal traders. He said there was need for the government to make it easier for entrepreneurs to start their businesses.

Robertson said the figure of US$7 billion was most likely “guesswork” given that nobody knew the actual figures of revenue circulating outside the formal sector.

He said the challenge of collecting revenues in the form of taxes from informal traders was that most of them were scattered with no business address. This, Robertson said, made it easy for them to duck authorities and avoid paying taxes.

“We have created a nation of informal traders and scavengers,” Robertson said.

He said the country needed major investors to breathe life in the economy more than chasing informal traders to boost dwindling revenues.

“The country does not need SMEs as much as it needs major investors,” Robertson added.
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Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter?

Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter? | Informal Sector and Informal Economy |
The informal sector (IS) plays a significant role in developing countries viz. the provision of employment, income and supplying ignored markets. However, working and employment conditions within the sector are still poor. Its expansion and changing structures have thus drawn the attention of scholars and international policy makers to the factors hindering its formalisation. Among the factors addressed are the high costs of formalisation and the lack of incentives for operating in the formal sector.


A variety of approaches have been adopted by different stakeholders to overcome these factors. This paper assesses these approaches along with the factors related to informality-formality trade-off and the issue of formalisation as a solution for firms’ growth. By focussing on the problems faced by informal enterprises and the literature which addresses the options for accelerating the formalisation of informal enterprises, the paper will briefly summarise the weaknesses of these approaches.

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Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter?

Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter? | Informal Sector and Informal Economy |
The informal sector (IS) in developing countries plays significant roles viz., the provision of employment, incomes and supplying ignored markets. However, the working and employment conditions in the sector are still poor. Thus, its expansion and changing structures have drawn the attention of scholars and international policy makers on factors hindering its formalisation. Among the addressed factors include high costs of formalisation and lack of incentives to operate in the formal sector. To overcome these factors, various approaches have been adopted by different stakeholders.


The paper assesses these approaches, factors related to informality-formality trade-off and the question of formalisation as a solution for firms’ growth. Looking at the problems faced by informal enterprises and the literature addressing options to accelerate the formalisation of informal enterprises, the paper briefly summarises the weaknesses of these approaches.

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Rethinking Formalization: The WIEGO Perspective | WIEGO

Rethinking Formalization: The WIEGO Perspective | WIEGO | Informal Sector and Informal Economy |

Formalization of the informal economy can take different forms: registration, taxation, organization and representation, legal and social protection, business incentives and support, and more. Formalization also means different things to different categories of the informal workforce. What is required is an approach to formalization of the informal economy which is comprehensive in design but context-specific in practice.

A comprehensive design for formalizing the informal economy is outlined in Box 1:

Box 1
Formalization of the Informal Economy: A Comprehensive Approach

1. Formalization of Informal Enterprises

registration and taxation:simplified registration proceduresprogressive registration feesappropriate legal and regulatory frameworks, including:enforceable commercial contractsprivate property rightsuse of public spacebenefits of operating formally:access to finance and market informationaccess to public infrastructure and servicesenforceable commercial contractslimited liabilityclear bankruptcy and default rulesaccess to government subsidies and incentives, including procurement bids and export promotion packagesmembership in formal business associationsaccess to a formal system of social security

2. Formalization of Informal Jobs

legal recognition and protection as workersrights and benefits of being formally employed:freedom from discriminationminimum wageoccupational health and safety measuresemployer contributions to health and pensionsright to organize and bargain collectivelymembership in formal trade unions

In formalizing specific groups of informal workers, policymakers and practitioners should choose appropriate elements from this framework and tailor interventions to meet local circumstances.

Consider, for example, the specific conditions of several informal occupations in which large numbers of the working poor, especially women, tend to be concentrated:

Agricultural Export Workers

In Latin American and (less so) Africa, there has been a notable increase in women agricultural workers in the non-traditional agro-export sectors: specifically, in the production and packaging of fresh flowers, fruit, and vegetables (Barrientos and Barrientos 2002, Barrientos et al. 2004).

What are the common problems of women workers in these agro-export sectors?

temporary contractsuncertain days and hours of work: associated with “flexible” contractspiece-rate payments and low wagesoccupational segregation by gender (especially in packing houses)

What kind of formalization would these agricultural workers want?

permanent contractsregular days and hours of workwage payments and higher wagesopportunities to shift to better-paid work within occupationConstruction Workers

In many developing countries, where the industry has not been mechanized, the construction workforce is comprised largely of casual day labourers, often migrants. Many such construction workers are unskilled and engaged in lifting and carrying loads of cement, bricks, and concrete. In some countries, depending on local social norms, women represent a significant share of the unskilled construction workforce.

What are the common problems of unskilled construction workers?

irregular days of worklow and erratic earningsarduous and hazardous work: frequent accidents and occasional deathslack of occupational health and safety measureslack of accident or disability insurance

What would formalization mean to construction workers?

more regular workhigher wagesskills training: masonry, carpentry, and other construction skillssafety regulationsaccident insurance and workers’ compensationID cardsregisters or other proof of days of workHomeworkers

Homeworkers are sub-contracted workers or industrial outworkers who work under a sub-contract for one or more firms and their contractors. Whether in the garment, shoe, or electronic sectors, homeworkers face a number of common problems:

low piece-rates and earningsirregularity of workirregular and (often) delayed paymentscosts of providing/maintaining workspace, utilities, and equipment

In addition, some endure harsh or dangerous working conditions: for example, shoe makers are exposed to toxic glues. Many also suffer sore backs and deteriorating eye sight from working in badly-equipped and poorly-lit workplaces (often their own homes).

What would formalization mean for homeworkers?

regular, secure, and enforceable work ordersregular and timely paymentspiece rates that are equivalent to minimum wagesoccupational health and safety measurescapital to improve their workspace (often their home) and upgrade their equipmentbasic infrastructural services – water, electricity, and sanitation – to improve their homes-as-workplacesStreet Vendors

The common problems faced by street vendors around the world include:

insecure place of work: due to competition for urban spacecapital on unfair terms: due to dependence on wholesale tradersuncertain quantity, quality, and price of goods: due to dependence on wholesale traderslack of infrastructure: shelter, water, sanitationambiguous legal status: leading to harassment, evictions, and bribesnegative public image

What would formalization mean for street vendors?

secure vending sitesaccess to capital on fair terms: a loan product tailored to their daily need for working capitalbargaining power with wholesale tradersinfrastructure services at vending sites: shelter, water, sanitationlicense to sell and identity cardsfreedom from harassment, evictions, and bribespositive public imageWaste Pickers

It is estimated that one per cent of the world’s urban population lives off collecting and recycling waste. Waste pickers commonly suffer:

very low average earningsfluctuations in quantity, quality, and price of wasteharsh working conditions and related occupational hazardsnegative public image

In communities where both women and men (and children) collect waste, women (and children) often sort the waste – thus adding to their exposure to the waste and associated health risks – while the men sell the waste. Since they have to move around different neighbourhoods to collect waste, women (and girls) face teasing, touching, and other forms of sexual harassment (Paula Kantor, personal communication 2005).

Given these conditions, many waste pickers would like to find alternative employment opportunities. This can be done within the waste recycling sector by training them in waste-recycling skills or by organizing them into cooperatives and negotiating contracts for these cooperatives to provide cleaning services to or collect waste from government and private offices or institutions.

What would formalization mean for those who continue to work as waste pickers?

legal recognition and positive public image as waste pickers (who contribute to the upkeep and cleanliness of the cities they work in)ID cards to protect thembargaining mechanisms to negotiate with a) those to whom they sell the waste they collect and b) municipal officials and policeorganization and bargaining powerappropriate implements and protective gear (gloves and aprons) to help them avoid dangerous and toxic wasteChallenges to Formalization

Implementing a comprehensive yet context-specific approach to formalization will not be easy or straightforward. Among the key policy challenges facing such an approach are what to do about informal employers. Many informal wage workers work for informal firms. The policy challenge is whether and how to make informal employers comply with labour regulations and offer their employees formal benefits and protections. This is what the ILO has referred to as “the dilemma of the informal sector” (ILO 1991). It is genuinely difficult for many informal employers to offer legal benefits and protections to their employees at their present level of operations and profits. This suggests that formalization may need to be sequenced as follows: by first providing incentives and benefits to informal enterprises that register and then progressively enforcing compliance with taxation and labour regulations (ILO 1991, Tendler 2002). But available evidence suggests that many informal employers are not poor (Chen et al. 2004, 2005). For this more entrepreneurial class of informal operators, the issue is less whether they are able to comply with commercial and employment regulations than whether they are willing to comply.

Another related challenge is what to do about formal employers who hire workers under informal employment relations or sub-contract production to a chain of suppliers. Faced with global competition, formal firms or employers often prefer to hire workers under flexible contracts or to outsource or sub-contract production. In today’s global production system, suppliers are often small informal enterprises who, in turn, hire workers under informal contracts or sub-contracts. Hence, for producers of labour-intensive products, such as garments, who operate in global markets where demand is sensitive to price, there needs to be simultaneous change in all countries, otherwise they will be squeezed out of the market if they are the only ones to have to increase their prices as a result of meeting higher labour costs.

In sum, both formal firms and larger informal firms need a special package of incentives and sanctions to encourage them to provide benefits and protections to their workers. Admittedly, there is the risk of offering unnecessary incentives for them to extend benefits/protections to their workers or creating perverse incentives for them to continue to deny benefits/protection to their workers. But, this risk notwithstanding, appropriate labour standards and social protection can and should be developed for informal wage workers through tripartite negotiations, including employers (formal or informal), the government, and informal workers. The Self-Employed Women’s Association (SEWA), the well-known trade union of women informal workers in India, has effectively negotiated with the government and employers/contractors to obtain wage increases, annual bonuses, health benefits, and/or pension contributions for a wide range of informal workers, including: day labourers in construction and agriculture; and industrial outworkers who produce garments, embroidered goods, incense sticks, and bidis (cigarettes) at home.

Those who run single person or family businesses present a different kind of challenge. First, they do not hire workers. Second, they often earn so little that they fall into the lowest tax brackets. What are burdensome to these operators are the bureaucratic regulations and fees related to registering their businesses. For them, formalization requirements need to be made simpler and less costly through, for instance, a single-window registry system and differentiated registration fees (that is, depending on the size, output, or location of their enterprises). For them, formalization should be seen as an incremental process that begins by introducing appropriate incentives and benefits of formality and, then, progressively enforces compliance with the costs and regulations associated with operating formally. This would create the conditions under which the working poor in the informal economy would be entitled to the benefits of formality while, at the same time, being enabled to comply with the duties of formality.

Limits to Formalization

As outlined above, formalization of the informal economy can and should take different forms, including: creating incentives for the informal self-employed to register their enterprises and benefits for them once they do; and creating a mix of incentives and sanctions for employers, both formal and informal, to extend benefits to their informal workers.

However, the limits to formalization need to be understood. First, it should be recognized that formalization is not a one-time process involving a specified set of steps. Rather, formalization should be seen as a gradual on-going process involving incremental steps and different dimensions leading towards varying degrees and types of formality. Second, it should be recognized that formalization will not proceed quickly or automatically for all those who choose to formalize. The bureaucratic procedures and incentives for registered informal businesses need to be retooled and streamlined. Labour standards and benefits for informal workers need to be carefully negotiated by employers, workers, and government. Third, it should be recognized that formalization will not be feasible or desirable for all informal enterprises or all informal wage workers. Rather, it should be assumed that many informal enterprises and informal wage workers will remain informal or semi-formal for the foreseeable future. In other words, informality – in varying degrees and forms – is here to stay.

Other fundamental challenges, then, are to create more formal employment opportunities, to decrease the costs and risks, and to increase the benefits of those who continue to operate informally or semi-formally.

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Zimbabwe’s Struggle to Formalise the Informal | Inter Press Service

Zimbabwe’s Struggle to Formalise the Informal | Inter Press Service | Informal Sector and Informal Economy |

An informal, used tyre shop at a residence in Harare's Hatfield suburb. Zimbabwe has 2.8 million micro, small and medium businesses — 85 percent of which are unregistered. Credit: Tatenda Dewa/IPS


HARARE, Apr 24 2014 (IPS) - Zimbabwe’s extensive informal sector could help boost government revenue if regularised, but this won’t happen unless the government creates incentives for the informal sector to register, economists say.

“Formalisation of the informal sector would significantly improve revenue inflows through taxation on employees’ salaries, import duty, property fees and other forms of taxes on the sector. However, there is need to create incentives for the informal sector to register,” Eric Bloch, a Bulawayo-based economist, told IPS. 


Many businesses would be reluctant to pay taxes because of concerns that “taxes collected will not be used in the national interest”.

A 2013 FinScope survey, which is now being used by government officials as reference, indicates that 2.8 million micro, small and medium businesses — 85 percent of which are unregistered — have created 5.7 million informal jobs. These businesses generate an estimated turnover of 7.4 billion dollars, according to the survey.

Finance and Economic Development Minister Patrick Chinamasa has already cast a light on the growth of the informal sector and its significance to the economy in this southern African nation.

Responding to questions in parliament in February, Chinamasa said: “Our economy is now informal…That is the reality of our economy and it is a reality we must recognise and take measures on how to tap into this sector.”


Godfrey Kanyenze, an economist and director of the Labour and Economic Development Research Institute of Zimbabwe, a think tank of the Zimbabwe Congress of Trade Unions, explained that the government was failing to fund public programmes because the treasury struggled to mobilise money from existing industry and labour.

“There is no way the government can maximise on revenue collection in the informal sector if it is not regularised. Government must come up with a working strategy to ensure that the informal sector is formalised and taxed to improve revenue collection, which is currently in a sorry state,” he told IPS.

He said the government was also losing out because the Zimbabwe Revenue Authority (ZIMRA) was struggling to tax registered small to medium enterprises.

The formal sector has been negatively affected for more than a decade by the withdrawal of investment, low investor confidence, rampant power outages and a struggling economy that was marked by hyperinflation and acute shortages.

Kanyenze said that to ensure effective monitoring, the government must organise the informal sector into clusters based on the services or products they supplied or produced. He said the government should also offer business development and training services to the sector and devise mechanisms to protect and promote them.

Economist John Robertson told IPS that formalisation of unregistered enterprises would bring a host of other advantages.

“Besides improving revenue collection and encouraging better public sector performance, formalisation of the informal sector would hopefully ensure better working conditions for the millions said to be employed there. They would enjoy benefits associated with the formal sector such as medical aid schemes, pension, better work safety and the ability to negotiate salaries,” he said.

Related IPS ArticlesInformal Carpentry Hammers Away Zimbabwe’s State RevenueZimbabwe’s Growing Electronic Waste Becomes a Real DangerZimbabwe’s Rocky Economic Start to 2014

Tapson Mandiziva, who works as an assistant carpenter at an unregistered furniture-making firm in Glenview, a low income suburb in Harare, does not enjoy such benefits.

“I don’t have an employment contract and my boss pays me as and when he likes. Sometimes he makes huge profits from the sale of wardrobes and the kitchen furniture that we manufacture but uses the money to buy cars and personal items and does not pay us. When he does, the money is too little and he has dismissed workers on flimsy grounds,” Mandiziva, 31, told IPS.


In the three years he has worked for the furniture firm, the highest salary he has received is 200 dollars a month. But Mandiziva says he can go for as long as four months without receiving a wage and does not receive backdated payments.

The police and municipal authorities periodically raid backyard industries like the one Mandiziva works for. They have been accused of confiscating products or extorting bribes from companies operating without licences. There are also allegations that they sell the seized goods at office auctions where the officers or local authority officials are the only buyers.

Innocent Makwiramiti, an economist and former chief executive officer of the Zimbabwe National Chamber of Commerce, told IPS that the illegal raids could be avoided if the informal sector was regularised.

“The police officers, municipal and ZIMRA officials are collecting thousands of dollars in bribes from the informal traders and, in some cases,  are forcing traders to surrender part of their earnings as a protection fee against the raids.


“Part of this money could be going to the treasury had the informal sector been registered and compelled to observe company and taxation regulations,” he said.

However, formalisation and taxation of the informal sector will not be easy, according to experts.

“The biggest constraint is reluctance by small businesses to register. They tend to suspect that formalisation would open them to too much scrutiny that would affect their income generation. Since most of them are run by individuals and families that view adhering to labour laws as a burden, they would rather remain as they are,” said Bloch.

The February edition of the Public Administration and Development Journal shows that there are numerous hurdles the government faces in its attempts to harness taxes from the informal sector and registered SMEs. This includes the manpower and administrative constraints of ZIMRA.

According to the report, many businesses would be reluctant to pay taxes because of concerns that “taxes collected will not be used in the national interest”.

Many are also disgruntled over poor service delivery and the fact that some politically-connected businesspeople were being let off the hook for failing to pay tax.

Augustine Tawanda, the secretary general of the Zimbabwe Crossborder Traders Association, which comprises informal entrepreneurs whose businesses involve sourcing for resale or selling goods in neighbouring countries, told IPS: “There is plenty of money circulating in the informal sector and it is possible to innovate a win-win situation with the government.”

However, his organisation is opposed to registration of informal businesses, preferring that the government just includes them in its data base only for purposes of taxation rather than formalisation.

“The main problem is that the government is only concerned about taxing us, rather than making us grow as businesses. It does not have clear policies for formalisation and has not shown how it is going to incentivise informal traders,” he said.

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Women and the Informal Economy in Urban Africa | Zed Books

Women and the Informal Economy in Urban Africa | Zed Books | Informal Sector and Informal Economy |
n this highly original work, Mary Njeri Kinyanjui explores the trajectory of women's movement from the margins of urbanization into the centres of business activities in Nairobi and its accompanying implications for urban planning.

While women in much of Africa have struggled to gain urban citizenship and continue to be weighed down by poor education, low income and confinement to domestic responsibilities due to patriarchic norms, a new form of urban dynamism - partly informed by the informal economy - is now enabling them to manage poverty, create jobs and link to the circuits of capital and labour. Relying on social ties, reciprocity, sharing and collaboration, women's informal 'solidarity entrepreneurialism' is taking them away from the margins of business activity and catapulting them into the centre.

Bringing together key issues of gender, economic informality and urban planning in Africa, Kinyanjui demonstrates that women have become a critical factor in the making of a postcolonial city.


'This is a powerful case study, with important implications for urban planning and development in sub-Saharan Africa. Kinyanjui provides vital evidence of the genuine significance of women's informal economic activity for contemporary Nairobi. It is a concise, seminal contribution, very effectively situated in the burgeoning literature of African urban studies.'
Garth Myers, Urban and International Studies, Trinity College, Hartford

'Kinyanjui has presented us with a fresh way of understanding the complexities associated with women's socio-economic empowerment in a hostile city, in terms of access to economic space. This book is a paradigm shift in the way we talk and write about poverty alleviation in marginalized communities!'
Faith Maina, professor of education, State University of New York, Oswego

'Women and the Informal Economy is a well-researched critical analysis, providing new perspectives on urbanization in Kenya. The book is essential reading for geographers, planners, policy makers and students of African urbanization and gender studies.'
Agnes Musyoki, professor of human geography, University of Venda

'The informal sector dominates Africa's economy and women have long played an important role in it. However, their contribution to the continent's urban informal economy is neither well understood nor documented. I applaud Kinyanjui for this timely volume on the contributions of women to the continent's urban informal economy and to the broader postcolonial African urban scene.'
Kefa M. Otiso, associate professor of urban and economic geography, Bowling Green State University
Table of Contents

1. Introduction
2. Theorizing planning and economic informality in an African city
3. Economic informality in Nairobi between 1980 and 2010
4. Women in Nairobi
5. Women, mobility and economic informality
6. Women in economic informality in Nairobi
7. The quest for spatial justice: from the margins to the centre
8. Women's collective organizations and economic informality
9. Conclusion
About the Author:

Mary Njeri Kinyanjui is a senior research fellow at the Institute for Development Studies, University of Nairobi. She holds a PhD in geography from the University of Cambridge. She researches on economic justice, small businesses, economic informality, social institutions and issues of international development. She has published articles in the International Journal of Entrepreneurship and Small Business, Hemispheres, African Studies Review, African Geographical Review and Journal of East African Research and Development. She has been a visiting scholar at the International Development Centre (IDC) at the Open University in the UK and at the United Nations Research Institute for Social Development in Geneva. Some of her publications include 'Women informal garment traders in Taveta Road, Nairobi: from the margins to the center’, African Studies Review 56(3): 147-64 (2013) and Institutions of Hope: Ordinary people’s market coordination and society organisation alternatives, Nsemia Publishers (2012).
Kayla, Sean, and Max's curator insight, February 24, 2015 1:19 PM



With the urbanization taking place in Africa, after being held back by poor education, women are starting to gain increasing influence in the African economy an in it's informal district.