Exploring informal economy business models in sub-Saharan Africa

Whilst the informal economy in developed countries is often considered a shadow or tax avoidance economy, in sub-Saharan Africa is typically seen as a legitimate trading environment.

In Kenya over 70% of formal businesses report sourcing from the informal. Microfinance and microcredit initiatives are increasingly focussed on supporting entrepreneurs in this economy. Those earning a living in this economy can range from highly imitative subsistence petty trading to innovative entrepreneurs whose businesses may grow into large formal firms.

Yet when we talk about businesses in the informal economy they are often referred to as if they are a homogenous group. Fieldwork over the last five years across Zambia, South Africa, and Kenya suggests there is a segmentation of  business types in the informal economy.

This segmentation has implications that impact the kinds of entrepreneurial initiatives that might be of value to different groups as well as implications for how likely such businesses are to formalise.