The informal sector offers real-life lessons free
The informal business sector rules our streets, pavements, village bazaars and the remotest of locations. Operating out of tiny shops, tarpaulin-covered structures, bamboo kiosks, wheel carts and even bicycles, these small businesses cater to the bulk of our day-to-day needs.
Yet the informal sector remains unhonoured and unsung. Youngsters, particularly those who are privileged to receive some education, prefer to remain unemployed and, thus dependent on their ageing parents than join the informal sector. Why?
Our society looks down upon “petty” work. Our education system has taught us anything but dignity of labour. No wonder, small-level entrepreneurship is looked down upon.
Being largely unregistered and unregulated, informal businesses do not easily lend themselves to accurate data collection by government authorities. They, therefore, miss out on whatever meager government facilities that exist for them. According to International Labour Organisation estimate, over 70% of Nepal’s economically active population is engaged in the informal sector business.
This number is rising!
A World Bank report (October 2020) proclaimed that informal workers will be the worst hit by the seemingly unstoppable Covid pandemic as they have no social security and face extreme poverty and exploitation. Economists are of the view that urban and semi-urban informal enterprises are placed worse than rural units who can draw sustenance from their farms. That is why the World Bank has been advocating universal social protection. Governments and local authorities cannot leave vulnerable sections of the society to fend for themselves especially during the Covid crisis which has deeply scarred our and the South Asian economy.
There is amazing fluidity in the informal sector’s market mix. The same person is seen selling different things during different festival seasons without having ever heard of ERP or SAP.
A February 2021 report by the Nepal Economic Forum asserts that 84.6% of Nepal’s labour force ekes out a living from informal enterprises. The figure includes not just workers but also unregistered business owners like street vendors. This oppressed lot is unable to avail of any social security benefits or formal financing. Relief available to formal employees remains a mirage for informal workers, the report asserts.
Yet the informal sector constitutes the biggest business environment in the world. Surveys show informal units are growing globally. Their domain is large but their contribution to the GDP is relatively low. For example, in India 90% of the labour force is involved in the informal sector but its share in the country’s GDP is just 50%. This is a sad reality.
Predictions that this marginalised sector will only grow add to our concerns and worry. Will more and more of our educated youth (read management graduates) be compelled to become informal sector entrepreneurs? The predicament is not unlikely considering our economic model wherein growth will happen only by slashing jobs. Technology – artificial intelligence, machine learning, et al – is fast becoming the biggest enemy of working humans.
It is in this context that we need to study the survival skills of the informal sector which has been battling assaults by heartless technology for a long time. The secret lies in the informal businesses’ agility, ingenuity, innovativeness and the ability to take double-quick decisions. These attributes come naturally to them because their neck is always on the chopping block. They change so that they do not perish.
The return on investment in the informal sector is way higher than the formal sector. Also, the informal sector ensures equitable distribution of profit down the supply chain. The profit margin of the ultimate seller is quite slim as she shares the proceeds with a number of persons involved in creating the product viz. momos, noodles, dal-bhat, samosa, etc.
There is amazing fluidity in the informal sector’s market mix. The same person is seen selling different things during different festival seasons without having ever heard of ERP or SAP. Compare that to the long time – five to seven years – taken by the formal sector to change a product line.
There are many street vendors who sell ‘chana’ to joggers around parks in the morning and move to liquor shops in the evening to cater to a separate customer base. While the street flower or toy seller can decide to offer even a 50% discount to his customer any time, a corporate manager has to go way up the management chain to get even a 5% price cut approved. While companies prattle unceasingly about gender diversity, the phenomenon has been a reality in street, pavement and hole-in-the-wall businesses forever.
The street is a free trainer for aspiring managers. Go. Walk!