A study on the informal sector with a view to formalisation

Abstract

This study by IMED examines the experiences and lessons from formalisation initiatives in four Sub-Saharan African countries. Drawing upon the three main theories that explain the existence of business informality, the study offers an alternative path to business formalisation. The findings suggest that the informal sector has a small layer that responds to the simplification of regulations and a larger one that requires a different formalisation framework. This shift in paradigm, indirect or group formalisation, where business associations facilitate traceability, self-regulation, access to resources and services for members was observed in all four of the economies studied: Kenya, Ghana, Rwanda and Tanzania. The study concluded that Tanzania needs to develop its own approach to formalization.