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The Informal Sector

Distinguishing Characteristics of the Informal Sector

Employment, Enterprise, Habitat and Credit

Employment
Characteristics of the people engaged in the informal sector
  1. Absence of official protection and recognition
  2. Non coverage byminimum wage legislation and social security system
  3. Predominance of own-account and self-employment work
  4. Absence of trade union organization
  5. Low income and wages
  6. Little job security
  7. No fringe benefits from institutional sources


Enterprise
Characteristics of the activities in the informal sector
  1. Unregulated and competitive markets
  2. Small scale operation with individual or family ownership
  3. Ease of entry
  4. Reliance on locally available resources
  5. Family ownership of enterprises
  6. Labour intensive and adapted technology
  7. Absence of access to institutional credit or other supports and protections


Habitat
Characteristics of the informal sector land and housing
  1. Unauthorized use of vacant public or private land
  2. Illegal subdvision and/or rental of land
  3. Unauthorized construction of structures and buildings
  4. Reliance on low cost and locally available scrap construction materials
  5. Absence of restrictive standards and regulations
  6. Reliance on family labour and artisanal techniques for construction
  7. Non-availability of mortgage or any other subsidized finance


Credit
Characteristics of informal credit markets
  1. Unregulated and non-subsidized
  2. Easy accessibility
  3. Availability in very small size and for short terms
  4. Low administrative and procedural costs
  5. Little of no collateral requirements
  6. Flexible interest rates (fom very high to no interest at all)
  7. Highly flexible transactions and repayments tailored to individual needs


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