The informal sector provides employment opportunities for the poor and expanding populations when there are insufficient formal jobs. It exists where the means are illicit but the ends are licit as a response to excessive bureaucracy and manipulation by corrupt groups. The main causes of the informal sector are excessive government bureaucracy, rigid administrative procedures, inefficient legal systems, and the elimination of protectionism. The informal sector shows self-initiative and entrepreneurship by finding means of production and services, but it does not fall under government's planned economy and ignores official rules to meet basic needs. It consists of low-skilled labor and lacks capital and training.

1. URBAN INFORMAL SECTOR
• According to Hart (1973), “Informal sector serves
as a means for the poor to engage in
employment when there is insufficient job
opportunities for the expanding population.”
• Hernando de Soto ( 1990 )argued that
“informality” exists where the means are illicit
but the end is licit”
• Informality is viewed as a mass response to
mindless, pompous bureaucracy and the
manipulation of the economic system by corrupt
vested interest group

2. CAUSES OF INFORMAL SECTOR
Main cause of informal sector:
•Excessive Governmental bureaucracy
Rigid administrative procedures (red tapeism)
•Persistent “mercantilist” system (exploitation)
•Inefficient legal systems
•Elimination of protectionism, subsidies and
market segregation policies

3. SOCIO- ECONOMIC ASPECTS OF INFORMAL
SECTOR
 Self initiative and
entrepreneurial dynamism
• Finding informal means of
production and
reproduction, establishing
enterprises and providing
services
• Obtaining access to land,
housing utilities and
commodities
 Informality does not fall
into Government planned,
regulated and managed
economy
 Informality is
characterized by ignoring
official rules so as to meet
the basic needs
 Informal sector consists of
people low skilled labour,
inadequate capital,
training and lack technical
assistance
 Informality is dominant in
underdeveloped and
countries undergoing
socio- economic transition

4. DEVELOPMENT POTENTIALS
• Capacity to propel the engine of growth
• Employment (A simple necessity for the poor to
make a living)
• Major contributor to GDP in some countries e.g Peru
• Harnessing entrepreneurial dynamism
• Informality when decriminalized and regulated
serves the advantage to minimize illegal business
operations.
• Informality when carefully studied, it serves as a
basis for Government to orient development
strategies

5. CONSTRAINTS
• Bureaucracy
• Legal aspects
• Lack of adequate funds for operation
• Operate in small scale hence lack positive
externalities
• Social exclusion
• Market segregation
• Lack of database to inform decision making
process

6. CONSTRAINTS
• Bureaucracy
• Legal aspects
• Lack of adequate funds for operation
• Operate in small scale hence lack positive
externalities
• Social exclusion
• Market segregation
• Lack of database to inform decision making
process