Challenges and Opportunities of the Urban Informal Business Sector: The case of Addis Ababa Nefas Silk Lafto Sub-city, Woreda 02

Abstract

Millions of poor people in developing nations depend on the urban Informal business Sector for employment and income. However, this sector often faces marginalization and neglect in urban policies and plans, resulting in various obstacles such as lack of access to finance, infrastructure, markets, skills, and social protection. Despite these challenges, the urban Informal business Sector also provides opportunities for creativity, adaptability, and inclusion in both the urban society and economy. This study investigates the challenges and opportunities faced by the urban Informal business Sector in Addis Ababa, specifically in the Nefas Silk Lafto Subcity Woreda 02. It uses a mixed-research approach that involves both quantitative and qualitative data. Due to the lack of formal records or registration of businesses in the informal sector, it was difficult to obtain a representative sample. Therefore, a purposive sampling technique was employed to target key informants who were knowledgeable about the selected business sectors and could provide valuable insights. A total of 120 questionnaires were distributed with a 20% reserve rate, resulting in a sample size of 108 usable responses. The data were mainly collected through structured questionnaires and interviews. The data analysis employed descriptive statistics mainly Mean and Standard deviation. The study focused on four key informal business sectors: street vending, food processing, tailoring, and shoemaking. The challenges included financial constraints, issues related to market premises, knowledge gaps, and regulatory hurdles. Despite these challenges, the Informal business Sector still offered prospects for job creation, entrepreneurship development, and flexible self-employment. Based on the findings, the study made recommendations to address the existing issues within the urban informal sector. These recommendations included addressing law enforcement harassment, enhancing access to finance and markets, investing in training, as well as establishing supportive policies and regulations.