Download the file - United Nations Rule of Law

Informal and formal businesses are inextricablylinked. There are a variety of reasons for lack ofadherence to legal and regulatory requirementsby informal businesses. Non-compliance meansgreater profits for informal businesses, or it couldbe that the requirements are irrelevant, inappropriate,or non-existent for informal businesses.Possibly, informal businesses cannot afford tocomply with the regulations. Also, many do notknow what is required, or they may be unsureas to what advantages there could be under‘formal’ status. Because of the uncertainties,informal businesses continue to chart out fortheir own operational support, building networksand informal contractual arrangements groundedmore on social mores than on any legal basis.Legal, policy and regulatory reform and innovation,derived from what works for the poor andwhat would guarantee their fundamental rights,is long overdue. Millions of working poor men andwomen have no knowledge of what rights theyare guaranteed under national and internationallaw, or of government obligations to provide orfacilitate infrastructure, as well as financial,technical, and business services. With support ofcivil society organisations, or through their ownassociations, they are beginning to demand someform of legal identity or protection for themselvesand their livelihood activities.The response is a reform agenda that prioritisesapproaches to achieving the objectives,and determines the order in which the selectedmeasures are to be introduced. This would serveto optimise the productive potential of informalentrepreneurs and facilitate the protection oftheir businesses. As for the objectives, they arebroadly listed as follows: reducing regulatoryburdens; removing unnecessary barriers to formalmarkets and institutions; increasing opportunitiesfor business linkages; increasing benefits andprotections for all working in the informal sector;strengthening the organisation and representationof the informal entrepreneurs, and providingequal access of working poor women and men toall of the above.Additionally, improvement in the quality of institutionsin an economy has to proceed simultaneouslywith the transformation of the nature andefficiency of its informal economy. Learning frominstitution-building experiences of industrialisedcountries and those in transition as well from otherdeveloping countries, can be valuable. Thereare some good-practice examples from aroundthe world that illustrate how the constraintsof informal businesses have been successfullyaddressed through successful institutional andpolicy changes. At the same time, national andlocal level institutional changes can be initiatedimplicitly with the introduction of new economicactivities that may well provide direct and measurablebenefits.The Informal EntrepreneurStreet vendors, rural milk hawkers, millers andginners, small food cart pushers, shoe shiners,the itinerant fix-it technician, the roadside hairdresserand food caterer — these are the informalentrepreneurs who are vibrant visible economicplayers in the poorer countries of the world. Asan observer suggests, they are ‘the true entrepreneurs— more flexible, efficient and resilient thanthe over-regulated and overprotected dinosaursof the formal sector....’ 2 These entrepreneurs arecalled informal because they operate to some extentoutside the realm of formal legal regulationand protection, and without easy or full access tothe advantages of formal financial and businesssupport systems.There are some 500 million working poor earningless than one dollar per day (ILO 2004). The197