Informal and Formal Businesses Operated by Women in Jigjiga City: Characteristics, Informal-formal Sector Linkage, Challenges and Way forwards

Abstract

This study is aimed at making inferences on the general picture of businesses in the Somali Region, with a focus on women operated business units both in the formal and informal sectors of the economy. The sample of the study involves two categories of respondents: women in the formal sector and Business women in the informal sector. The study heavily relied on primary data sources as source of information. Quantitative and qualitative data were gathered through structured questionnaires and focus group discussions (FGDs). Field observation was also taken as an important source of information. The study employs a mix of quantitative and qualitative techniques of inferences. The quantitative analysis involves descriptive and econometrics tools. The study found out that lack of alternative employment opportunities and low income in the formal employment as major reasons driving women into the informal businesses. Cumbersome business registration requirements and tax administrations in formal sector arrangement are also another reason that was found to be discouraging formal sector engagements which rather incentive to work underground. Moreover, the study concluded that migrant laborers are major players in the informal businesses in Jigjiga City. More importantly, the study found out that informal businesses complement businesses in formal businesses. The linkages between the informal and formal sector were identified as source of raw materials, labor, information and capital. The study further concluded that social capital is an important component of the economic environment, having facilitating role in business activities both in the formal and informal settings. The findings of the study suggests for legal and institutional reforms which facilitate the way informal and formal businesses can function together. Informal sector development interventions should also align migration and urban development issues as central parts of their undertakings. As the study concluded social capital for having vital role in the business undertakings, policy regimes aimed at business development have to capitalize on the stock of social capital.

Keywords: Informal-Formal business Women, Jigjiga, Ethiopia