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The Informal Sector
Epitomizing the
Small and Medium Enterprises
What can the Informal Sector learn from SMEs? |
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 uch attention has been placed on
small and medium enterprisesA business with up to 250 employees and moderate levels of turnover and assets, encompassing both small and medium-sized firms.
(including 'microenterprisesA very small business typically employing fewer than 10 people and operating with limited capital and market reach (Often sole proprietor or family-run).') as a means of kick-starting a failing economy. It provides more market opportunities, creates jobs, and makes more efficient use of scare resources.
But the informal sector has been doing precisely that - albeit without recognition. The informal sector in fact epitomizes SMEs and we need to acknowledge the key contributions that it makes vis-a-vis the SME sector. |
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Economic Weight:
SMEs account for 90 percent of all businesses and 70 percent of employment globally, highlighting the potential pathway from informal microenterprises to formal SMEs.
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Productivity Gap:
On average, formal SMEs are 3 to 4 times more productive than informal firms in the same sector, mainly due to access to finance and technology.
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Transition Examples:
Vietnam's "household business reform" (2018-2023) enabled over 25,000 microenterprises to register formally, offering simplified taxation and digital tools to support scaling.
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