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2.1.10. Improving linkages between formal and informal economy

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Alessio Lupi16 May 2018

Indicators: a) GP and LL on how to improve linkages between formal and informal economy identified.

b) Challenges on improving linkages between formal and informal economy identified and possible means to overcome challenges identified and analysed.

Data Analysis Methods: Identification of types of linkages between formal an informal economy implemented in different settings (including through systems analysis). Identification and analysis of GP and LL to determine adaptability and scalability. Identification of challenges identified during strengthening of linkages between formal and informal economy and determine if/how these were overcome.


1. Include the private sector as well as the government when working with people dependent on the IE. This is particularly important where public sector financing is limited.

ReferenceUNIDO, 2014, Integration and progress through protection and empowerment of displaced groups in South Sudan, Final Evaluation, UNIDO, Vienna.


2. To enable an efficient agricultural environment, ensure that public and private sector coexist and cooperate strategically. Ensure that private sector implementation is aligned with government rules and incentives. Steps towards this goal should be phased and may be composed of:

  • Initial short term state-led infrastructure investments
  • Governmental interventions in seasonal finance and input supply systems
  • Government withdrawal and private sector gradually taking over

ReferenceSahin, Sila; Prowse, Martin; Wigh, Nadia, 2014, Agriculture and Private Sector: Agriculture and growth evidence paper series, Meta-analysis of evaluations, DFID, London, Collection of studies concerning agricultural reforms and projects in several countries.


3. In designing programmes on the IE, pay attention to context, including country geographic, socio-cultural and economic differences. Actions on establishing linkages may work well in one context but not another. Innovations on linkages between formal and informal entities should be vetted through pilot and stakeholder consultations to ensure their suitability for the local context. Options should then be tested in a new context before scaling up. This is necessary to make public/private investments into strengthening the enabling environment more successful in the whole country.



4. Engage the private sector in program delivery of entrepreneurship development activities as it can enhance effectiveness. Linkages between learners and the private sector are established and content is rendered appropriate to the existing business context.

ReferenceCho, Yoonyoung; Honorati, Maddalena, 2013, Entrepreneurship Programs in Developing Countries: A Meta Regression Analysis, Meta-analysis of evaluations, World Bank Human Development Network Social protection and Labor Unit, Washington DC.


5. When designing projects or individual actions on the IE, consider supporting combining informal and formalisation aspects of economic activities. Doing this would depend on the needs and context of the community members. Combining would entail maintaining the informal and accessible character in terms of cottage industry, family labour, low technology, and local manufacturing. At the same time provide support for including important formal sector characteristics such as technical/national standards, business registration, and access to finance. Formalisation does not have to be an “either or” option but can include support for maintaining informal aspects if these are appropriate to the needs of the community members.
ReferenceAitken, Robert, 2013, Developing Energy Enterprises Project in East Africa, Final evaluation, The Global Village Energy Partnership DEEP EA, Nairobi, evaluation on the topic “Developing Energy Enterprises in Kenya, Tanzania and Uganda.


6. Avoid focusing only on creating work opportunities inside the informal economy and also include focus on working with the formal private sector to create formal employment of trained beneficiaries.

ReferenceACUMEN - Cartier Charitable Foundation, International Center for Research on Women, 2015, Women And Social Enterprises: How Gender Integration Can Boost Entrepreneurial Solutions to Poverty, General background document on issues in our research matrix, ACUMEN, New York.


SOURCE: RNSF research - Volume 4.2


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