Poverty and Informality: A Restraining or Constructive Relationship?

In this paper, we will attempt to find answers to some questions on the factors that help make small/informal enterprises perish or survive; what makes the survivors succeed and graduate or stagnate and barely manage; what happens to the small entrepreneurs’ household over time; if they manage to develop their enterprises and thus raise their families’ income as time passes, or they remain, small, informal marginal entrepreneurs, with households stuck at the lower end of income and wealth; and if the small and successful enterprise capable of raising the household’s socio-economic status or do the poor households hinder the MSE from growing steadily. The paper is divided into sections with an introduction that deals with the methodology and the used panel data sets. Section two covers the changes that occurred to the enterprises between 1998 and 2006. Section three focuses on the factors influencing the success/ failure of small/informal enterprises. Section four discusses the entrepreneur’s household status overtime. Section five deals with the relation between the enterprise growth and the household’s graduation to a higher wealth status. The last section presents the main conclusion and the policy implications.