This extract from a new REDI3x3 book proposes a constructive way to approach the possible ‘formalisation’ of the informal sector. A common impulse is to reduce formalisation to regulating and taxing informal enterprises – two blunt instruments that can be destructive. Formalisation must rather be seen as a means to aid the quest for better livelihoods for more people and stronger, more self-standing informal enterprises. Smart formalisation can be pursued with a ‘formalisation menu’.
This extract from a new REDI3x3 book outlines an appropriate and ‘smart’ policy approach to enable enterprises in the informal sector. Such policies need to be differentiated and nuanced, recognising that both one-person or multi-person enterprises are situated on a developmental spectrum from embryonic to mature states, some ‘survivalist’ and others ‘growth-oriented’, with different aspirations, entrepreneurial aptitudes, degrees of development, complexity and capacity – and different needs and challenges. Factors for good policy design are identified.