Informal Sector ; a Base to Development

Wednesday, August 16, 2006

The informal sector proves to be the major mechanism for economic growth and development. In most low developed countries, the informal sector is the largest source of employment, investment and government revenue.

This is because the informal sector offers the best opportunity for the upward mobility in lifeline of the poor people and their children.

In Rwanda, the informal sector is significant especially among the poor, the disadvantaged, low income earners and a vast majority of the rural population and some urban dwellers depend on it. And this is where poverty reduction must start in order to have the greatest impact. The people who are engaged in the informal sector in Gahoromani market centre in Kabuga have revealed that to start business in the informal sector requires little capital, hence making the sector very open to poor, new entrants with limited business skills.

Their experience also reveals that the informal sector is operated in open and semi-permanent structures, usually with roof made from old-tin sheets and mud and wattle structures. Therefore, this enables even the poor with little capital to do some business within their reach.

The upward mobility of labour in the inform sector is the key to securing the ultimate objective of development and freedom from hunger, long life expectancy, health and greater choice of more human fulfillment.

It is said that there would be no sustainable and reliable base for funding development projects such as health, education social safety nets agriculture projects without the foundation of the informal sector.

The activities of the informal sector generate taxes that finance the bulk of government expenditure critical to poverty reduction effort. The informal sector acts as an opportunity for future business persons to acquire entrepreneurial skills and the experience exposes them to appropriate technology, new ideas and this means that no single sector that can ignite development. Progress in the economy will highly depend on the aptitude of the poor people for acquiring existing knowledge. This informal sector emerges as a knowledge receptor, where competitive conditions prevail leading to enterprise, which constantly seeks out information that is locally practical.

Source: AllAfrica (link opens in a new window)