Rethinking the Informal Economy in Africa: Findings of a Survey of Microbusinesses in Ghana, Kenya and Nigeria

This paper presents findings of a large-scale survey of low-income microentrepreneurs in Ghana, Kenya and Nigeria, conducted in order to understand the informality of the microenterprise sector. The findings reveal three key outcomes. First, contrary to common belief in the literature on informality, a significant portion of low-income entrepreneurs boast high educational credentials, and their businesses exhibit substantial sales revenues, in each case surpassing national averages. Surprisingly, nearly all low-income microenterprises pay some form of tax and maintain official registration with some government agencies. Second, again contrary to assumptions often made, microenterprises do not exist in a homogeneous realm of informality. Broadly defining informality envelops almost all microenterprises, yet a more nuanced definition uncovers rich heterogeneity in the nature and depth of informality. Third, far from stagnating, many microbusinesses are vibrant, dynamic and resilient. This finding is particularly important because development economics has traditionally judged informal enterprises as low in productivity and inferior to their formal counterparts, and this has had a profoundly negative impact on government policy. Thus, conventional approaches to the study of informality demand critical reassessment and a paradigm shift in conceptualizing informality and a reinvigorated perspective on the dynamics of low-income microenterprises in Africa.