SPEAKERS’ CORNER: Doesn’t the informal economy itself suffer from an unfair competition from the other players? Do you agree?

Definitely, there are informal small and large businesses, and as in any business the big eat the small.The large informal enterprises do not legalize their situation because they are more comfortable being in that condition with large profits without control. Contrary to small is a matter of survival, they know that the legalization would bring a relative improvement, but the administrative cost rises and unsustainable. The tax part is becoming more difficult and demanding, so away instead of closer to taxpayers.

The informal economy/grey economy operates in an environment which is basically unfare for itself. Because of not being legalised it therefore does not access social security and loan services which may contribute to its growth. Banks do not open doors for the businesses operating in a grey market because of the loan repayment risk which is usually obvious from the borrowers. I personally happened to have worked for a micro finance organisation which was extending loan services to the clients in the informal economy; as a credit officer, it was really a big challenge because I sometimes had to play a chase game with the clients under my portfolio for the loan repayment.

In Kenya as indicated elsewhere by Pedro, there are two forms of informal practitioners namely those who retain the status to avoid or evade taxation while the second category are forced into informality due to the discriminatory regulatory framework that requires physical location that is largely equated to operating from a building which most of them lack or cannot afford. Those in the first category in my opinion should be dealt with legally by the government as doing so would increase public revenues which are often in short supply mainly in developing or third world countries. In regard to those in the second category, the main challenges in Kenya include lack of or inadequate skills, regular harassment (physical and sexual) and extortion by government officials and organized criminals, corruption, inadequate capital, lack of or poor organization organization, limited access to information and knowledge of their rights and arbitrary arrests and prosecution among others. These difficulties have heavy impact on their incomes and livelihoods hence the ever increasing poverty levels amongst them.

I have implemented an Oxfam project with funding from EU that played critical role in organizing micro and small scale traders in Nairobi City with a lot of success by contributing to addressing  some of these chalenges the traders faced. Through their organizations, the scale traders influenced the duty bearers resulting into enactment of the law (Micro and Small Scale Enterprises Act) that gives them legal recognition and puts the responsibility on the government to provide them with trading spaces, finance their skills development and marketing of their products and also established a low interest loan fund for expansion of their businesses. The strong organization amonsgt them and improved linkages with the authorities also resulted reduction in some of the problems they faced e.g. arbitrary arressts and extortion went down, they have been able to negotiate for affordable fees and demand for services from the government. The challenges e.g. cartels are however still in existance both within and without the government and continue to affect the traders and government revenues. In Oxfam Kenya's current EU funded project on informal economy in which I am involved, one of our main areas of focus is promoting enabling environment that seeks to reduce and where possible eliminate the the cartels to enhance domestic resource mobilization by the government and strengthen advocacy by the micro and small scale traders mainly those in low income settlements for responsive public services e.g. markets, water and sanitation, healthcare facilities which are in acute shortage. So far, the Nairobi City Government is committed to this process and I can forsee a big change in the next few years.  

As my concluding remarks, what the informal groups require most are (1) knowledge on their rights and influcing skill to enhance their advocy (2) relevant skills to enable them do their work professionally and profitably (3) relevant information, linkages with mentors and financing sources for enhanced skills and access to affordable financing for those with businesses. In Kenya, many institutions (both public and private) finance the sector and it has been recognized by the government as very critical for the country's economic growth. I am aware that there have been proposals from some quarters that informalization is the answer to the problems of the informal sector which I beg to disagree with. My take is that enabling environment is what the informal economy require.