1. TRANSFORMING THE INFORMAL ECONOMY: THE ROLE OF THE SOCIAL ECONOMY By Fredrick O. Wanyama, School of Development & Strategic Studies, Maseno University, KENYA.

2. INTRODUCTION Informal economy in the 1970s: ▫a temporary “survivalist” phenomenon that would be absorbed by the modern formal economy Has persisted in developing countries to: ▫Generate jobs and income ▫Meet the needs of poor consumers ▫Provide accessible and affordable goods and services ▫Distribute goods and services for the formal economy, etc.

3. However, the informal economy has some deficits: ▫Produce lower quality of goods and services ▫Lack of employment security ▫Low and irregular payment or non-payment of wages ▫Poor working conditions ▫Limited bargaining power among workers ▫Low productivity, competitiveness and profitability; etc. These decent work deficits have triggered interest in formalizing the “informal” economy so as to: ▫Create more secure jobs; ▫Guarantee rights at work; ▫Extend social protection; and ▫Increase representation and voice of workers, etc.

4. The challenge is how to transform the informal into the formal economy ▫No clear roadmap for the transition from the informal to the formal economy What role can the social and solidarity economy play in this transition? Where is the evidence on the contribution of the SSE to the formalization of informal work and enterprises?

6. A DEFINITION Informal economy used here to refer to the unincorporated and unregulated work and enterprises that produces goods and services for remuneration and/or sale The workers and enterprises are - in law and practice - not sufficiently covered by state and market regulations in situations where similar activities are being regulated Informal economy tends to be identified by salient characteristics

7. CHARACTERISTICS OF THE INFORMAL ECONOMY Non-regulation of work and business activities Lack of recognition in law and regulatory frameworks Small-scale operations with limited entry criteria Low entry capital and skills Skills acquired through apprenticeship Labour-intensive methods of production and provision of goods and services Irregular payment or non-payment of wages

8. Prevalence of cash transactions with little record-keeping Dependence on local markets Prevalence of self-employment, casual and seasonal labour Poor working conditions: ▫Low earnings ▫No proper working spaces ▫Lack of employment security ▫No occupational safety, e.g. unsafe or outdated equipment ▫undetermined working hours ▫Workers less unionized, hence not represented and protected from exploitation ▫Exclusion of workers from the social security system

9. MANIFESTATION OF THE INFORMAL ECONOMY Informal economy is extremely heterogeneous: ▫Street hawkers and open-air market traders ▫Construction workers ▫Carpenters ▫Motor vehicle mechanics and cleaners ▫Metal workers ▫Farm labourers ▫Workers in micro-enterprises ▫Waste pickers ▫Taxi drivers ▫House helps, among others

10. The informal economy is inclusive: ▫Both women and men; women the majority ▫Youth and adults ▫The least educated and fairly well-educated ▫Persons with disabilities ▫The poor and marginalized as well as the relatively rich members of society But it is less empowering: ▫Low and irregular income ▫Numerous work-related risks like insecure employment, poor working conditions, etc. ▫Lack of social protection ▫Limited representation and bargaining power, etc.

11. SSE vs. INFORMAL ECONOMY SSE share some characteristics with the informal economy: ▫Some social enterprises are self-owned and not regulated ▫Cooperatives in some countries are not regulated by the state However, not all informal economy activities can pass as SSE, e.g. ▫Informal economy may have no concern for social goals ▫Informal economy may not be democratically controlled ▫Some SSEOs are incorporated and regulated

12. FROM INFORMAL TO FORMAL ECONOMY What roles can SSE play in the transition from informal to formal economy? ▫Generate economies of scale among informal economy workers and enterprises to enhance productivity and profitability ▫Generate and disseminate information and knowledge on entrepreneurship to improve enterprises or start new ones ▫Provide opportunities for skills development and training to enhance productivity and profitability ▫Mobilize capital for investment in large and formal ventures

13. ▫Organize informal economy workers and enterprises to increase their bargaining power ▫Create opportunity for enhanced voice and representation among informal economy workers and enterprises ▫Provide social protection through mutual assistance, solidarity and reciprocity among informal economy workers SSE can, therefore, create a “virtual triangle” of opportunity, empowerment, and protection for informal economy workers and enterprises To what extent has the SSE performed these roles?

14. LOOKING FOR THE EVIDENCE Examples of SSE organizations already fulfilling these goals include, among others: ▫micro-finance and micro insurance societies ▫mutual health benefit schemes provide social protection ▫social enterprises formed to reintegrate disadvantaged population groups or perform community work ▫different types of cooperatives in various sectors

15. Dairy Cooperatives in Kenya Context: ▫Collapse of KCC and its impact on marketing milk ▫Liberalization of the economy allows competition ▫Rise of the informal economy in the dairy sector Cooperative response? ▫Conceptualizes the idea of establishing milk processing plants ▫Mobilizes capital through members’ contributions, borrowing and grants ▫Sets up efficient milk processors, with innovations on cheaper packaging to enhance competitiveness and profitability ▫Creates a network of product distributors

16. Results? ▫Formal milk market offering farmers better prices ▫ Increased membership and loyalty to the coop. ▫Increased milk productivity to supply the factory ▫Decline of informal milk marketing in the locality ▫Increased cooperative profitability; high turnover ▫Profits invested in provision of productive services ▫Farmers paid for milk deliveries monthly (regular) ▫Workers’ association enter bargaining agreement with the management ▫Created more decent jobs

17. Discussion guide What support does the social economy require to fully reach its potential in building a bridge between the informal and formal economies?