RNSF - Management Information Tool

Indicators:

a) GP and LL on formalising in IE identified.

b) Challenges to formalisation identified.

Data Analysis Methods: Identification of GP and LL on formalising the IE; Analysis of GP and LL to determine adaptability and scalability. Identification of challenges identified during formalising in the IE and determine if/how these were overcome (expected benefits of formalising: improved access to decent work conditions, social protection, government support programming).

RECOMMENDATIONS:

1. Carry out research to collect systematic evidence of “what works” in the transition from the informal to the formal economy. Evidence of good practices are limited though common approaches are:

• Strengthening labour rights through protective legal and policy frameworks and their implementation
• Strengthening labour inspection,
• Increasing partnerships with ministries of health and agriculture to enable greater access to supportive programs.

Reference: Decent work results of ILO employment promotion interventions, ILO 2014

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2. Foster formalisation in both the regulatory framework and the quality and availability of public services while avoiding drastic enforcement of strict anti-informality legal frameworks. Note that where formalisation is purely based on enforcement without developing supportive regulatory frameworks, it will likely lead to unemployment and low growth.

References:

• Business Environment Reform and Poverty, Meta-analysis of evaluations, DFID 2015
• Informality in Latin America and the Caribbean, World Bank 2010

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3. Encourage formalisation of IE operators, since it can lead to higher profits, better access to improved equipment, reduced taxes and less corruption. For workers it may lead to improved access to decent work conditions through enforcement of labour laws and policies and access to social protection.

Reference: RNSF analysis.

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4. Be aware that group formation of IE operators and workers into registered associations, cooperatives and other groups can also be a means to formalise the informal economy. Note that it is a misconception that formalising the informal economy entails only the registering of individual IE operations.

References: 

• Business Environment Reform and Poverty, Meta-analysis of evaluations, DFID 2015

• On the benefits of formalization, panel evidence from Vietnam, UN WIDER 2015

• Mc Culloch, 2009, "Rural investment climate in Indonesia”; Rural Investment Climate in Indonesia, General background document on issues in our research matrix, Institute of Southeast Asian Studies, Singapore. Evidence sample: McCulloch (2010) used data from the Indonesian Rural Investment Climate Survey of non-farm household enterprises, conducted in six districts in 2006. Comparing between informal and formal firms (i.e., those with at least one local business license) he found that licensing does provide advantages in terms of reduced tax and corruption payments.

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5. Introduce and facilitate the development of agricultural cooperatives to pull local farmers out of informality and share market benefits with broader communities.

Reference: Small Farmer Livelihoods and Income Enhancement in Baghlan Province, Final evaluation, FAO

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6. Consider establishment of a brand with guaranteed quality and marketing of the brand to expand the potential of promoting the associated products.

Reference: Palestinian Women’s Economic Empowerment Project – Final Evaluation, 2013 ILO, Geneva

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7. When facilitating the establishment of new businesses, identify possibilities for down-stream and up-stream job creation for people dependent on the IE. Integrate consideration of such possibilities during business support mechanisms for new businesses.

Reference: Evaluation of DANIDA Business to Business Programme 2006-2011, Final evaluation, 2014, Danida, Copenaghen

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8. Consider that many evaluations have found that a significant determinant of whether workers can access social protection is based on whether they are in the formal or informal economy.

Reference: ILO 2015, Small and medium-sized enterprises and decent and productive employment creation

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9. Note that business development projects can be more or less beneficial to the creation of formal employment of people dependent on the IE depending on the type of enterprise and the level of technology to be used. Where modern technology is introduced it may reduce employment among IE workers.

Reference: Evaluation of DANIDA Business to Business Programme 2006-2011, Final evaluation, 2014, Danida, Copenaghen

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10. Design tailor-made strategies for formalisation that are in line with the local context. Take into account all the possible hurdles, implications and reactions of the system. Note that at least one study found that providing information and reimbursing the cost of registration did not induce more firms to register than those who were not provided with reimbursements.

Reference:  The demand for, and consequences of formalization among informal firms in Sri Lanka, Impact evaluation, 2012, IZA

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11. Ensure that beneficiaries participating in IE project activities—including  improved market linkages—are  supported to obtain the required trading permits / licences to avoid being conflict with laws and regulations.

Reference: Evaluation of NRC Food Security and Livelihoods Projects in Chipinge and Chiredzi Districts, Zimbabwe, 2011-12

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12. Take into consideration basic steps to improve conditions of water vendors and similar IE workers with respect to their essential service:

• Recognize their role and view them as an integral part of the water supply system as it may
• help in the design and implementation of more comprehensive policies that better serve the poor end‐users;
• Build trust and accountability
• Address existing constraints on informal water markets such as high prices relative to piped water;
• Changing counter‐productive laws against water vending;
• Remove constraints on water supply;
• Reduce water tariffs for water vendors and reducing costs constraints;
• Form of vendor and consumer associations and improving the relationship between vendors, consumers and water utilities providers.

Reference: Wanjala, Mathews Chirasha, 2011, Water vendors associations in informal settlements, Meta-analysis of evaluations, DEW Point Enquiry No.A0415, DEW, Northampton, Collection of studies concerning water supply in informal settlements in urban areas and water vendors associations, Covered countries: Tanzania, Kenya, Sudan, Ghana, Uganda.Evidence sample: The evaluation suggests a list of rules on how to improve the vendor services:

1) Recognize the role played by water vendors;

2) Seeing water vendors as an integral part of the water supply system may help in the design and implementation of more comprehensive policies that better serve the poor end‐users;

3) Recognising water vendors as official partners in the water system can also build trust and accountability;

4) Addressing existing constraints on informal water markets such as high prices relative to piped water;

5) Changing counter‐productive laws against water vending;

6) Removing constraints on water supply;

7) Reducing water tariffs for water vendors and reducing costs constraints;

8) Formation of vendor and consumer associations and improving the relationship between vendors, consumers and water utilities providers.

SOURCE: RNSF research - Volume 4.2