Informal businesses have often been perceived in a negative light. They are seen to be high risk ventures, a nuisance to formal enterprises and government as well as being of little assistance to the growth and development agenda of most nations. This is due to the fact that most of them have haphazard modes of operation and a majority are not registered and hence do not pay taxes. This sector has however registered rapid growth over recent years. In Kenya for example about 82% of those employed are engaged in informal businesses. The high levels of poverty has exacerbated this growth as a majority of people seek to make a living where jobs are hard to come by.
There are a wide range of issues that, if addressed, will see most of these businesses develop to a level where they will be even more positive contributors to the economy. A place to start would be offering financial literacy programs for those that operate these businesses. Due to the fact that a majority of them do not keep records of their day to day operations, it becomes difficult for financial institutions to offer any assistance because there is no clear basis from which performance can be tracked. The importance of basic skills like book keeping needs to be emphasized when developing capacity building programs for the sector.
Access to health facilities for informal workers is another area that can improved. In my experience while visiting various informal businesses around the country, most business operators have had to leave their work unattended as they try to seek medical attention whenever they fall sick. Most work under deplorable conditions without the required protective gear. The Kenyan government through the National Hospital Insurance Fund (NHIF) has launched a program that seeks to increase the number of informal workers who can access quality healthcare. The program aims to recruit 12 million Kenyans under a cover that sees them pay a monthly contribution of between Kshs 150 to Kshs 500 depending on their income status. This is a step in the right direction that needs to be replicated.
While interacting with businesses in the sector, a major hurdle that has consistently come up is the difficulty they face when trying to market their goods and services. Most do not have the skills required to widen their scope of customers. This is an area that should be considered by those developing capacity building programs for the sector. Another barrier has been the allocation of spaces they are given to operate their businesses. Most of these are in areas that potential customers cannot easily access and are often unattended to by those that collect revenue from them in terms of garbage collection. This considerably compromises the ability of the informal sector to attract clients and customers to their business.
Although information on those engaged in the informal economy is hard to come by, my experience indicates that the sector is ready for engagement; it is critical we tap into this goodwill. However, note that the Kenya National Bureau of Statistics (KNBS) released the Micro Small and Medium Enterprise survey in 2016. In as much as this is a move to be applauded, most of the players in the informal sector that I interviewed over the past few months feel that the report was inconclusive as it excluded a huge percentage of micro businesses. A proper census will need to be carried out to provide a clearer picture of where the sector stands. This will go a long way in better informing policy makers and those that would like to engage with the sector.
In conclusion, these interventions can be best leveraged through bodies such as the Micro and Small Enterprises Authority (MSEA), who have established a credible network around the country as well as various organizations and associations that work with the informal sector at the county level.
Informal Economy Analyst