Informal Sector & Property Rights

The informal economy comprises half to three-quarters of all non-agricultural employees in developing countries. In countries with large informal sectors, business activities go unrecorded, taxes are not paid, opportunities for corruption are rampant, and many citizens are not able to participate in public policymaking. Informality is a symptom of underlying institutional problems. To harness the capital locked in the informal sector, governments must offer incentives that encourage entrepreneurs to formalize, such as a simplified business registration process.

CIPE and its partners have developed key solutions that can help bring entrepreneurs into the formal economy. One of the most important factors is private property rights – in many developing countries, there is a gap between what is “on the books” and what happens in real life. To effectively reduce informality, governments must ensure that property rights are clearly defined, strongly enforced, and accessible to all citizens.

Informal Sector & Property Rights Programs at CIPE

Through its programs and international partnerships, CIPE helps formalize the informal sector and improve property rights protection in these areas:

  • Raise awareness about the extent of the informal sector in economies.
  • Promote reforms to remove barriers to business that fuel informality.
  • Strengthen the legal framework for well-defined and enforceable property rights.
  • Emphasize the need for institutions that make property rights available to all citizens.
  • Empower women and other groups often excluded from formal property ownership.

Strengthening Institutions and Property Rights

Ethiopia: CIPE worked with civil society to provide recommendations to the municipal government on land allocation and infrastructure. The government now holds regular civic forums and has implemented recommendations that have increased water, electricity, and road service to over 1,000 homes.

Global Programs: CIPE and the International Real Property Foundation developed the International Property Markets Scorecard tool to map the institutional components of property markets and advocate for reforms. Together with local partners, CIPE:

  • Improved legal protection of tenants in Armenia
  • Proposed solutions for more secure property rights in China
  • Facilitated land policy dialogue and awareness in Kenya
  • Enhanced local administration of property in the Philippines
  • Established reform priorities at a regional level in Russia

Reforming the Informal Sector

Peru: Through a long-standing partnership, CIPE and the Institute for Liberty and Democracy (ILD) strengthened private property rights, administrative reform, and business formalization, improving the rights of informal entrepreneurs. Recently, CIPE and ILD educated nearly 100 indigenous women in the Amazon and the Andes about their property and business rights.

Egypt: CIPE partner the Federation of Economic Development Associations collected grassroots input and submitted a draft law meant to help Egypt’s estimated five million street vendors enter the formal economy. The law aims to effectively regulate vending, making licensed vending accessible to the average Egyptian.

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