Economic Growth and Poverty: Does Formalisation of Informal Enterprises Matter?
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Date
2006
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Abstract
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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Keywords
Informal sector, Small enterprises, Formal and informal institution, Cost of formalisation, Informality, Formality, Poverty, Economic growth
Citation
Ishengoma, E.K. and Kappel, R., 2006. Economic growth and poverty: Does formalisation of informal enterprises matter?.