Rethinking the Informal Economy
Promoting Poverty Reduction by Formalizing Traditionally Informal Activities through ICT Innovation
Julius Gatune, African Centre for Economic Transformation (ACET)
In many developing countries, more than 80% of people work in the informal economy. ICT could revolutionize the informal economy, both by enabling new business models and by formalizing traditionally informal activities. New kinds of well-funded entrepreneurs are using ICT to enter spaces which have previously been informal and small-scale, such as slum schooling. Meanwhile, mobile money and microfinance applications are increasingly enabling informal economy players to access financial services and scale up. Traditionally, governments have neglected the informal economy because its growth has been unlikely to increase public sector revenues. As ICT allows for payments to be traced and thus brought into the formal economy, governments can take the opportunity to raise public funds to invest in infrastructure and other types of public goods and services, promoting poverty reduction.