Supporting the Urban Informal in Africa: An Options Paper for SPJ June 27, 2023 Wendy Cunningham & Christian Bodewig 1 Abstract The slide deck report presents a narrative on the urban informal sector in SSA and outlines 5 intervention areas that can help jobseekers become productively engaged in the informal sector, the urban informal to become more productive, and risk management for all. While formal modern sector employment may be the optimal source of jobs, the data show that such economic development is a long-term process; jobs in the informal sector are the most feasible source of jobs for the masses under the current economy and institutions. Turning to the micro-level, the analysis finds that over 70 percent of sub-Saharan Africans work in the informal sector. Half own household enterprises and the other half are employees. Among the household enterprise owners, more than 70 percent can be classified as survivalist or constrained entrepreneurs who will not become part of the formal economy. The majority of survival and constrained entrepreneurs are voluntarily in the sector since owning their own enterprise provides greater earnings and other job-related benefits as compared to being a wage worker. Most wish to expand their business by selling more and improving their products but do not wish to add workers, formalize, or close the firm. However, 60 percent do not pursue these goals due to a combination of business and personal reasons, as well as not having tools to manage frequent shocks to their businesses and households. Based on the analysis, the slide deck report proposes a five-pronged strategy to increase labor productivity and resilience of the urban informal in Africa, sharing examples of successful evidence-based interventions. The slide deck concludes by reflecting on how SPJ can support the sector, finding that SPJ is already active in the right kinds of interventions but the models need to be adapted for an urban informal environment. This points to a significant learning agenda to expand SPJ's toolkit to better serve urban informal workers and (survival and constrained) entrepreneurs to become more productive and more able to manage risk. 2 Table of Contents I. Getting our Bearings: What is the PPT, the Task, and How did We Get Here 3 II. Motivation: Why urban informal as an entry point to Africa’ poverty reduction? 12 III. Setting the Stage: A Broad picture of urban informality in Africa 19 IV. Increasing Welfare: What Survival and Constrained Entrepreneurs Want 30 V. Increasing Welfare: Managing Risk in Urban Informal Enterprises 36 VI. Interventions: Needs that WB can respond to 45 VII. Operationalization – the SPJ value proposition & Learning Agend 69 VIII. Annexes 79 IX. End Matter 99 3 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter I. GETTING OUR BEARINGS I. The Slide Deck Report What is the PPT, the Task, and II. III. Study Objective Methodology & Data How did We Get Here IV. Definitions 4 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter This document is a slideument, or a slide-deck report, that presents a storyline and evidence, as a report would, but is in the form of PPT slides A slide deck report is a report, presented in a different A slide deck report heavily uses hyper-links form The slide deck report is hyper-linked to provide details, A slide deck report is a document that is more than PPT slides references, etc. without interrupting the flow of the storyline. that would accompany an audio presentation but less than a This hyper-links include report. • Detailed definitions • Data and methodology presentations • Secondary discussions of interest that are not core to the body of the slide deck presentation The hyper-links are indicated by: Underlined blue text It benefits from the brevity of a PPT and the detail that would be provided via the audio part of a PPT presentation. It is a To return to the main text from a linked page, click on the link shorter and more visual presentation than a report. RETURN TO PRESENTATION It is intended to be read through, without audio The slide deck report uses endnotes to cite the references the accompaniment. information is drawn from. This appears as superscriptslike this in the text. The full list of endnotes is provided at the end of the document 5 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The primary objectives of this slide deck report are to (i) delineate a development space that the WB is struggling to fill and (ii) propose how SPJ can contribute A development space that the WB The Development Space: Increasing labor productivity and resilience of the urban informal in Africa, is not filling: with an emphasis on non-growth oriented (household) enterprises Urban Motivation for focusing on the urban informal: + ❖ During the COVID pandemic client governments drew on social safety net tools, social registries Working (or potential to work) in and programs to support the rural affected. non-growth oriented (household) ❖ But client governments had few tools at their disposal to support the urban informal population, a enterprises group that, by definition, does not collect job-mandated social benefits and is largely disconnected + from the state system. Increasing productivity and ❖ SPJ and other WB GPs creatively helped to fill that gap in an ad hoc manner. resilience in the ❖ But the experience brought to light a development gap – support to the urban informal to thrive and enterprise/household space manage risk – that is yet to be filled. + Short-term results (take the Why SPJ may have a role to play : SPJ already works in this space, many SPJ tools can be adapted to economy as given) serve this population. How SPJ can contribute to filling this gap: Better leverage our suite of interventions to support urban An alternative safety net strategy – informal to be more productive and resilient household enterprise owners or workers through via labor productivity and interventions at the household level, micro (subsistence) enterprise level, and government systems. resilience 6 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The Intermediate objective of the slide deck report is to promote thinking and discussion on the urban informal in SSA To develop a collective understanding of the challenges the African urban informal face in improving their job situation and resilience and to crowd-source SPJ solutions We will achieve this through The slide deck report is intended to be a living document that 1 Sharing the ideas in the slide deck report with operational teams evolves as we learn. Inviting operational teams to add evidence, examples, and ideas to the slide deck report to 2 build ownership Developing a PPT with narratives that can be used by SPJ teams in 3 discussions/negotiations with CDs, project teams, funding opportunities, etc. 7 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The intended audience of the slide deck report is the Africa SPJ team and CMUs. Africa SPJ teams would use the document to CMUs and VPs would use this document as • Share a common storyline within the AFR SPJ GP and • A quick primer on the vulnerable urban informal in Africa, in vocabulary about the development needs and SPJ solutions for terms of their size, development challenges, aspirations, and the African urban informal vulnerable constraints • Prepare PPT slides to present concepts in a succinct manner • A guide to the SPJ interventions that can be leverage to fill this and open discussion with clients and WBG colleagues development gap • Be a repository of evidence studies, projects, and ideas as we • A starting point to encourage GP teams to innovate interventions learn about and engage to close this development gap to support productivity and risk management of the urban informal vulnerable in Africa • Identify partnerships within the WBG and externally to advance the Africa urban informal vulnerable agenda 8 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The Slide Deck Report’s Narrative Delineating the development space: the urban informal SPJ can contribute: operationalizing interventions ❖ While the formal growth-oriented private sector is the ideal source ❖ Interventions to successfully support urban informal of African jobs, support to urban informal enterprises and workers and (survivalist and constrained) entrepreneurs workers is the appropriate short-run jobs strategy. to be more productive and build resilience can be grouped ❖ Most urban workers (enterprise owners and employees) and urban into 5 categories enterprises in SSA are informal, with significant heterogeneity ranging from survival enterprises to growth-oriented ❖ SPJ has a comparative advantage to fill the gap in WBG enterprises. support to the help the urban poor and missed middle to become economically active and for the informal ❖ Most informal (survival and constrained) household enterprise economically active to become more productive and resilient owner want to keep doing what they are doing, earn more, and face less risk, but few take action to achieve these goals ❖ SPJ can adapt, and improve on, our current tools to provide packages of interventions appropriate to help 85% of ❖ Urban household enterprises are highly risk exposed and have the African urban informal to become more productive and few coping strategies to prevent a slide-back to poverty resilient 9 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Methodology To understand the development space and SPJ’s potential to fill it, the slide deck report develops a narrative by exploring 4 questions, through a 3-step process, creating 3 outputs 1 2 What do the urban 3 What primary risks do 4 What are the operational entry points to addresses Questions Who are the urban informal (survival and the urban informal the social assistance, informal in Africa and constrained) (survival and social insurance, and what make them entrepreneurs aspire to constrained) employment needs of unique? and what do they need to entrepreneurs face and poor and missed-middle improve their welfare? how do they cope? urban informal in the Africa region? ❖ Quantitative research and 5 sources of data to understand the scope, motivations, aspirations, and constraints facing the vulnerable Process urban informal in Africa in terms of their job situation and resilience(this ASA), and literature review, especially new WB studies ❖ Curation of SPJ operational work to clarify how SPJ helps to fill the development gap ❖ Development of the slide deck report to lay out the narrative in four steps (above diagram) ❖ A narrative Outputs ❖ Five sets of operational tools ❖ An SPJ learning and innovation agenda 10 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Definitions The African urban informal workforce is a sub-set of the total workforce; the slide deck report focuses on the workers (and enterprises) in yellow ❖ Based on ILO definitions, we define the formal workforce as people whose household Urban Workforce enterprise or firm is registered with the state or who are employees who receive job-related social benefits mandated through the law. ❖ The informal workforce are household enterprise owners or employees who are not Formal Informal registered. We define three types of informal sector jobs: ❖ Informal household enterprise owners - Also referred to as own-account. Not registered Household Firm owner enterprise Employee with authorities. Enterprise is an extension of the household. May (employer) or may not owner (self-employed) have paid or unpaid employees. “Survival entrepreneurs” own enterprises that are not growth oriented. “Growth entrepreneurs” own enterprises with Survival characteristics similar to formal micro or small firms. A continuum of entrepreneurs Employee Unpaid Entrepreneur across the space. ❖ Unpaid employees – Employees who do not receive pay or social benefits via their jobs. Growth Entrepreneur Paid Often family members working in the family business. ❖ Informal employees - Paid but no social benefits. May work in a formal or informal firms. 11 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Definitions The slide deck report uses additional definitions for the labor force and the socio-economic status of the workforce Additional labor force definitions Socio-economic definitions ❖Enterprise – an entity that produces output for sale or in- ❖Urban – people living in spaces with population density. kind trade. It may comprise of one individual who owns and ❖Poor – households with per capita consumption below is the sole worker in the entity or owners and workers. $1.90 daily. A small share of urban SSA are classified as poor ❖Employee – a person working for another, with or without ❖Missed middle – household enterprises that are not poor, pay, who does not own the firm. but are at risk of falling into poverty, and do not have access to social insurance (since they are not poor) or social insurance (since they are not registered). 12 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter I. SSA is rapidly urbanizing II. MOTIVATION II. Most urban adults work in the Why Focus on Urban Informal III. informal sector Optimal strategy is formal private Household Enterprises in sector-driven job creation but this is a slow process Africa? IV. Jobs are needed in the short-run and the informal sector can fill that gap 13 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Section message While the formal growth-oriented private sector is the ideal source of African jobs, support to urban informal household enterprises and workers is the appropriate short-run jobs strategy for most countries 14 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Why focus on urban? 42% of sub-Saharan Africans live in urban areas, growing 4 percent annually as SSA continues to rapidly urbanize. A lot of Africans live in urban areas. Today’s urban SSA population is Africa’s urbanization trends 1970 to 2015 roughly 567 million people, equivalent to 42 percent of SSA’s population. (link for decade-by-decade representation) In 1960, 15 percent of SSA’s population was urban (see figure)4 Sub-Saharan Africa is the world's fastest urbanizing region. 16 of the 20 fastest urbanizing cities are in Africa. Megacities are mushrooming across the region: Kinshasa and Lagos are already megacities. Luanda, Dar es Salaam and Johannesburg will attain the status by 2030. Abidjan and Nairobi will do so by 2040. By 2050, Africa’s cities will host an additional 950 million people. 5 The urban population in Africa is growing by 6 ➢ one person every second ➢ 2.6 million per month, and ➢ over 31 million a year. 15 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Why focus on urban? The urban context shapes the nature of informal sector jobs and the challenges for improving them ❖ Lots of Poor – the share of the urban poor is less than in rural (figure), 7 however, ❖ Urbanization and increased GDP per capita are not correlated in Africa, unlike in Asia, where they are positively correlated8 ❖ Concentrated in urban slums with limited connectivity to the modern urban environment & markets ❖ The agglomeration economies sparked by spatial concentration are not automatic: when the demand for services, jobs and housing outstrips government and city-level capacities to meet them, the urbanization process can evolve into congestion economies.9 ❖ Slum formation is a symptom of low-quality urbanization process. About 53-56% of African’s urban dwellers live in informal settlements or slums. In countries like Central African Republic and South Sudan, the share of slum dwellers out of the total urban populations exceeds 90%, while it’s above 70% in Mozambique DRC, Sudan, Chad, Sao Tome, Liberia and Somalia 10 ❖ Prone to shocks with limited use of informal coping strategies ❖ Not only is poverty urbanizing, but so are shocks. The poorest tend to live in erosion and flood-prone outskirts areas. For example, in Kinshasa between 1975-2014, the amount of built-up area located in a flood risk zone increased at an annual rate of 5.6%.1 16 (link for details) Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Why focus on informal? 75% of working-age urban sub-Saharan Africans work in the informal sector • On average, half the urban population is of working age; more than 300 million adults are age 15-65. • 75% of the urban SSA workforce are in the informal sector, as compared to 88% of the rural workforce • In 32 of the 36 countries for which we have data, more then half the urban labor force works in the informal sector • Urban informality rates are particularly high, exceeding 75% of the urban labor force, in Western and Central Africa Source: generated using data from Cunningham et al (2023) and ILO (2018) 17 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Why focus on informal? Formal sector jobs in the modern private sector may be the preferred way to grow urban jobs but African economies evolve slowly Informal household enterprises may disappear in the …. But the urban labor force does not uniformly long-run. The share of the urban workforce in the informal sector is lower in countries with higher GDP move toward growth-oriented enterprises in Instead, urban the short run.3 per capita2 … informal GDP per capita and share of urban informal employment in 27 Annualized change in GDP and urban informal employment in 5 SSA countries SSA countries, 2015-2019 household 16000 enterprises will GDP per capita, PPP (constant 2017 USD) GAB Informal Self-employed 14000 ZAF 12000 5.0% LBR be the source of Annualized change in informality for 4.0% 10000 8000 SWZ 3.0% SSA labor markets for AGO 2.0% 6000 CMR NGA GHA CIV LE-SE 1.0% ZMB 4000 KEN many years. ZWE STP ZMB CMR SEN BEN MLI B… GIN 0.0% 2000 LBR S…MWI UGA G… TGO TCD -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% NER BDI 0 -1.0% UGA GHA 10 30 50 70 90 110 -2.0% Informal urban employment (%) Annualized change in GDP 18 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Why focus on informal? The time-lag in formalization means that countries will need to support today’s informal workers and firms to address jobs needs today as they invest to spur formal firm job creation in the long-run We can define the short-run as taking as given the current We can define the long-run as the period when the economic structure of economies and the institutions that govern structure and institutions that govern them have transformed to a them. Given these constraints, what can policy achieve? new equilibrium. What policy can be implemented today to drive the economy of the future? IMPACT in the Interventions today to short-run: Better IMPACT in the support urban informal today urban informal long-run: jobs in today’s SSA Sufficient urban economies formal sector jobs in an economically thriving SSA Interventions today to create the economy for a developed modern sector in the long-run 19 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter I. More than 70 percent of urban workers and firms are in the informal sector. More than half of the informal III. SETTING THE STAGE are household enterprise owners. II. Significant heterogeneity in the urban A picture of urban informality in informal sector, with stark differences by gender and age sub-Saharan Africa III. Informal household enterprises span the range from survivalists to “informal in registration status only” (growth) entrepreneurs 20 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Section message Most workers and enterprises in SSA are informal, with significant heterogeneity within the informal sector 21 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Jobs Distribution of urban employment by employment types, 70-75 percent of urban jobs in 26 countries from the SSA region12 SSA can be classified as informal (the sample covers >70% of the SSA working-age population) ❖ Informal self-employed is the most common job type, comprising nearly 40% of SSA workers (figure) Informal = unpaid & inf wage & inf s-e & (a subset of) other s-e and employers ❖ Informal wage employment is the second most common job type with 18.8% (another 10% are unpaid) ❖ Within type of work, the informal sector dominates: ❖ 49% of the labor force are enterprise owners (self-employed or employers), though less than 9% are formal sector enterprise owners. ❖ 51% of the labor force are employees; 29.7% are paid or unpaid in the informal sector and 10.1% percent work in public sector jobs. ❖ Only 11% of the African urban workforce are private Note: The data do not include information on firm registration or receipt of benefits of the self- formal sector employees. employed. Thus, the authors use education level of the self-employed person as a proxy for formality status, where enterprise owners with less than completed secondary are classified as “informal,” while the others are not given a formality status. This practice is common in the literature. 22 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Jobs The country distribution of job Distribution of urban employment by employment types and country13 types are similar to the regional Benin 21.3 14.0 57.1 1.1 2.4 1.3 2.7 trends, with few exceptions Chad 20.8 18.6 44.7 2.7 2.6 8.2 2.5 Togo 13.0 22.4 50.4 3.92.34.4 3.6 Liberia 14.3 13.8 40.7 11.8 2.2 5.4 11.9 Malawi 12.5 13.8 42.4 11.5 3.2 6.2 10.5 Guinea 15.6 25.4 40.1 5.61.1 8.6 3.5 The informal sector is home to most jobs in most Ghana Nigeria 6.4 14.2 9.9 14.3 26.8 39.0 26.5 6.6 6.0 10.2 8.9 11.1 11.0 9.1 countries, especially informal self-employment. For Sierra Leone Cameroon 13.4 9.5 13.4 16.6 35.8 43.1 8.4 6.3 2.9 5.5 11.3 9.2 11.3 13.2 example, of the 26 countries in the sample: Niger 21.0 25.3 33.5 1.1 7.0 9.3 2.9 Guinea-Bissau 13.2 34.9 35.3 6.8 1.3 5.8 2.6 Cote d'Ivoire 13.4 31.9 37.5 2.52.2 5.3 7.1 ❖ Informality (unpaid + informal self-employed + informal Sao Tomé and Principe 6.3 16.2 44.8 1.0 8.1 23.4 0.2 Burkina Faso 13.9 26.7 36.5 1.44.3 10.6 6.7 wage) dominates in 23 countries Uganda 15.0 28.3 31.6 4.2 5.8 5.4 9.7 Mali 9.2 31.1 37.8 3.02.6 10.8 5.6 ❖ Informal self-employment is the most common type of Angola 6.6 11.6 40.7 1.8 8.5 16.5 14.4 informal employment in 24 countries Senegal Zambia 10.2 4.2 27.9 38.2 28.7 36.4 12.9 1.5 14.8 1.6 1.7 5.8 6.1 10.1 ❖ The share of unpaid workers is usually small, i.e., less Kenya Burundi 3.3 11.3 26.3 31.3 24.3 30.6 17.2 0.4 7.1 0.3 2.7 14.5 21.4 9.3 than 15% of total urban employment Zimbabwe 2.7 23.1 29.0 5.90.4 14.2 24.7 Gabon 9.1 20.9 25.6 2.14.0 19.0 19.2 ❖ The formal private sector exceeds 15% in only 6 Eswatini 0.4 26.5 11.2 0.93.3 25.0 32.8 countries South Africa 0.5 14.1 4.9 4.2 6.0 16.6 53.6 0.0 20.0 40.0 60.0 80.0 100.0 ❖ Public sector employment exceeds private sector Unpaid employees Informal Wage employee formal employment in 13 countries Informal Self-employed Employer Other Self-employed Formal Wage employee (Public sector) Formal Wage employee (Private sector) 23 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Workers Heterogeneity across urban informal workers segments along gender and age lines14 By gender By age By poverty status By occupation Share of informal, by age Share of each job type who are poor Distribution of skill-level, by job type Share of informal, by gender 80% 60% 40% men, women, 48% 52% 20% 0% 16-24 22-54 55+ ❖ Women’s informal sector ❖ Prime-aged adults are 66% of participation is proportional to the urban informal workforce their share of the workforce but 56% of the workforce ❖ women are disproportionally ❖ Youth crowd into unpaid represented in unpaid work (58%) employment (62%) ❖ Informal workers are poorer and informal self-employment ❖ Older workers have a than formal workers, only 15% ❖ Informal are (60.5%) while men are in informal particular propensity for of urban informal sector disproportionately wage employment (67%) informal self-employment workers are classified as working in middle-skilled ❖ Married women are particularly “extreme poor.” jobs working as unpaid or informal self- ❖ 5% of formal employees are ❖ Unpaid are in the lowest employed jobs extremely poor skilled jobs Other authors characterize the informal sector in the aggregate, finding similar profiles as in this slide. 24 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Workers The data give us a profile of three types of urban informal sector workers in SSA, which segment along gender and age lines15 Unpaid workers are loosely linked to the Informal self-employed is the semi-skilled Informal wage employment is the domain of urban labor market. (10.9%) service sector dominated by women. (40%) vulnerable men. (19%) They are generally characterized as They are mainly This sector is mostly ❖ married women (58%) ❖ female (60%) ❖ men (66%) ❖ youth (62%) ❖ adults (72.4%) ❖ prime-age adults (70.8%) ❖ limited education (80%) ❖ poorer than formal workers (16% are ❖ low-educated (71%) ❖ poorer than all other type of informal and extreme poor). formal urban workers (18.9% are extreme ❖ in middle-skilled occupations (74.7%) in the ❖ poorer than formal workers (9% of them are poor) services sector (53.7%), extreme poor) ❖ access to technology and sanitation is below ❖ in middle-skilled occupations (70%) across ❖ half work in the agriculture sector and in low-skilled occupations (46%), that of all other formal and informal sectors. employment types (9.3% have access to a ❖ the other half work in middle-skilled computer, 34.7% to internet, and 35.9% to ❖ access to technology and sanitation is better occupations improved sanitation) than for the other informal types (52.6% have ❖ access to technology and sanitation is low access to internet, 85% to a mobile phone, and ❖ 75% have access to a mobile phone. (8% have access to a computer, 35% to 36.5% to improved sanitation) internet, and 34% to improved sanitation), lower than for other informal types, they do not enjoy the benefits associated with a formal wage job, but earnings are such that they ❖ 83% have mobile phones. can access more goods and services than those working in other informal employment types. 25 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Informal Enterprises There is a continuum of informality across informal enterprises, ranging from mobile street sellers to people running small shops A continuum of “informality” 1. Survivalist enterprises 2. Constrained enterprises 3. Growth enterprises will never become a “firm.” could become a firm, but significant constraints formal in all but registration status Characteristics: low-skilled and female owners, Characteristics: older owners who are somewhat productive; Characteristics: Older owners, paid employees, low productivity, fewest business practices or young educated owners who are giving it a try linked to markets, more productive 26 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Informal Enterprises The distribution of informal enterprises is skewed to the survival end of the continuum, with a clear class of constrained and growth entrepreneurs. Using a cluster analysis, a sample of self-employed break into 4 distinct groups in Togo and 5 in Cote d’Ivoire (Figure).16 The distribution is skewed toward those that have fewer characteristics that formal businesses have. This heterogeneity is observed by authors using different methodologies in Africa and other countries. More than 60 percent are survival 60 Cote d'Ivoire Togo enterprises in these countries (at the left), that share few characteristics with formal 50 5-15% are growth entrepreneurs (the group enterprises farthest to the right) estimated from data from 40 various country studies, that share many 30 characteristics of small formal enterprises. 20 10 0 Continuum of informality Survivalist Enterprises Constrained Enterprises Growth Enterprises The literature proposes three informal enterprise types: Survivalist, or static, – small, low-productivity informal because cannot do another job; Constrained or 27 . emerging entrepreneurs – small, constrained; and Growth entrepreneurs – small, productive, formal in all but registration status. Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Informal Enterprises This distribution of enterprises roughly maps to Bandiera’s three transitions of work Phase 1. the marketisation of work: from home production Phase 2. the emergence of firms as the Phase 3. the growth of firms: specialization (unpaid, mostly subsistence) to market transactions (paid) main organising unit of work: from and creation of ’new’ jobs within firms self-employment to wage work 60 Cote d'Ivoire Togo 50 40 30 20 10 0 Continuum of informality Survival Enterprises Emerging Enterprises Growth Enterprises 28 or The literature proposes three informal enterprise types: Survivalist, or static, – small, low-productivity informal because cannot do another job; Constrained gazelles, . emerging entrepreneurs – small, constrained; and Growth entrepreneurs – small, productive, formal in all but registration status. Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Informal Enterprises On average, informal enterprises Distribution of Urban Informal Enterprises by enterprise Type17 in SSA are small, young, and in The enterprise types map to the survival (left-most) and growth (right-most) entrepreneurs low value-added sectors ❖ More than 80 percent of informal enterprises in 5 SSA countries (Togo, Cote d’Ivoire, Mozambique, Zambia, Zimbabwe) are at the left tail of the graph on the previous slide – survival or constrained entrepreneurs Based on data from three informal enterprise surveys (figure) ❖ A minority of informal enterprises manage to survive and grow. Roughly 40% are start-ups and about 30% in existence survival enterprise Constrained/growth enterprise Employer for 2 to 5 years ❖ Retail trade – a low value-added sector – is the dominant activity among informal enterprises, especially the survival entrepreneurs ❖ Most urban informal enterprises operate outside of Note: The firms in the sample are not registered with authorities. To align the data with the worker categories, the firm types are defined as follows: (i) survival enterprise - no paid household premises employees and the owner has less than a secondary education, (ii) Constrained/growth enterprise – no paid employees and the owner has at least a secondary education, and (iii) ❖ Informal enterprises are small, primarily only employing Employer – has at least one paid employee, likely constrained or growth entrepreneur their owners. Self-employed report an average of 0.5 (unpaid) workers per enterprise while employers average 29 1.9 workers (half of which are unpaid) Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Informal Enterprises Sales per worker in previous month. In PPP 2018 USD17 Across the informality continuum, enterprises look similar to each other in terms of earnings and business practices ❖ While average sales and profits per worker differ by informal enterprise type, there is a high variance, and significant overlap, in the distributions (top figures) ❖ Informal enterprises use few and poor financial management practices and tools, and survival self- Reason for not Registering with Authorities, by Informal employed have the worst practices enterprise Type17 ❖ All three informal enterprise types identify information No benefit from being registered asymmetries, low benefit-cost ratio, and taxes as the Lack of information about the process of registration motivation for not being registered with authorities, with some differences by enterprise type. Similar views Taxes that need to be paid if registered emerge from focus groups in Cote d’Ivoire. Inspections and meetings with government officials Bribes registered businesses need to pay 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Static self-employed Constrained/growth self-employed Employer 30 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter IV. Increasing Welfare I. Urban informal have high levels of satisfaction/ welfare What Survival and Constrained II. Many aspire to have more profitable businesses but face Entrepreneurs Want multiple constraints to pursuing those goals 31 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Section message Informal (survival and constrained) household enterprise owners want to keep doing what they are doing, earn more, and face less risk but few take action to reach these goals 32 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Survival and constrained Level of Satisfaction in the Current Job18 household enterprise owners (Liberia, Niger and Senegal) seem to generally be satisfied with their jobs… wage employee ❖ In Ghana, the self-employed with family employees is the most desired form of work. Workers seem indifferent among formal wage, public sector, and self-employed (without employees). Lower satisfaction of household enterprise informal wage is due to lower earnings (when control for lower earnings, preference difference disappears).17 ❖ Among poor and vulnerable urban in Liberia, Niger, and Senegal, 0% 20% 40% 60% 80% 100% household enterprise owners are more satisfied with their jobs than satisfied neutral unsatisfied employees are (figure).18 In addition: ❖ 87% hope that their children become household enterprise owners Source: Cerkez et al (2023) ❖ 35% would not accept a wage job at the same earnings ❖ 69% consider their current job the ideal; another 16% consider the ideal job to run another business; 7% identify a private sector wage Methodology: A substantial literature questions whether informality is job as ideal welfare improving or not. While many studies compare earnings, profits or ❖ In Cote d’Ivoire, informality was a rationale choice, especially among the job characteristics to draw conclusions, these studies are subject to missing non-growth oriented enterprises19 variable bias. Other studies use a reduced-form approach, instead measuring worker’s or entrepreneur’s satisfaction, where the respondent ❖ Similar findings in other regions. In Vietnam, only 12% of HHE owners endogenizes the missing/hard to measure variables in her response. are not happy with their jobs20 33 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter … though they do want earn more Aspirations for their enterprises, 202221 and develop (though not expand (Liberia, Niger and Senegal) the size of) their businesses Change sector Change activity in the same sect Amongst the urban vulnerable in three West African countries:21 Improve the quality of the goods ❖ Most want to (i) increase profits/sales, (ii) sell to new clients, Register/Formalize the firm and (iii) improve the quality of the goods (figure) Change location ❖ About 20% have tried marketing, special deals/discounts, or Increase profits/sales substituted inputs. A notable fraction are also saving to acquire a new location. Sell to new clients ❖ Few want to Hire more workers ❖ register/become formal (<8%) Close the business ❖ grow the size of their enterprises (<15%) No change ❖ close their businesses (<3%) 0% 10% 20% 30% 40% 50% 60% 70% ❖ More than 60% do not take action to realize these aspirations NIGER SENEGAL LIBERIA The sample was drawn from the urban social registry in each country, which itself collects information from residents of poor urban neighborhoods. That said, for example, only 1% of urban Liberians consume less than $1.90 monthly, and thus are not classified as poor. They may better be defined as being vulnerable to poverty. 34 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Urban household enterprise owners Constraints to taking action to reach the business aspirations cannot act on their ambitions due to (probed responses) 22 financial, personal, and business- Loss of perishable goods related factors21 Poor quality of inputs Prices of inputs ❖ When asked about constraints, shortage of funds and limited Your own illness or health access to finance stood out. The respondents said that the Road conditions and transportation money is needed to Access to adequate tools or equipment ❖ purchase raw materials ❖ expand the enterprise premises (Liberia) No Problems ❖ Household food consumption (Niger) Access to finance/loan ❖ acquire equipment Non-paying customers Electricity Access ❖ When probed (ask if each category is a challenge), a broader Family/household responsibilities range of constraints emerged (in rank order) Low Sales (Competition) ❖ shortage of funds and limited access to finance/loans ❖ household responsibilities Shortage of money to run the business ❖ low sales 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% ❖ non-paying customers NIGER SENEGAL LIBERIA ❖ inadequate equipment The interviewers asked the respondents the degree to which each potential constraint affected ❖ prices of inputs their businesses. ❖ Reliable electricity (Liberia) 35 • All else equal. Perhaps formal wage jobs do not exist or are not accessible Qualitative data collected in Angola, Liberia, and South Africa repeat that labor market connections are need to Side Bar get wage jobs22 • Perhaps the formal wage options are not a better option than the current job. 65% in the 3-country survey of enterprise owners would take a wage job that offers the same salary. At the same time, their preferred job (by 95%) is to own a household enterprise Perhaps they know that it is not feasible to get a wage job with the same earnings as their household enterprise (figure: “higher income than other kind…”),23 as 95% say that they earn more as a household enterprise owner than they would in a wage job • Perhaps self-employment offers benefits For example, qualitative data finds greater sexual harassment in an employer-employee) context than as self- employed. Payment is more infrequent – once per month – which is not feasible for the urban poor – and wages are often not paid24 • Perhaps the self-employed value a range of factors that self-employment offers, such as time flexibility and Why do the informal independence (figure)25 Reason for Starting the Small Business in SSA not aspire to Gives more time with children/family Can work from home be formal wage Being my own boss is more… Higher income than in other kind… employees? I do not like to rely on others It is a good business opportunity No other work was available Flexibility in work hours Easier than finding other work To diversify income 0% 10% 20% 30% 40% 50% NIGER SENEGAL LIBERIA 36 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter V. Increasing Welfare: Managing I. Urban Informal Workers Manage both Business and Risk in Urban Informal II. Household Risks They use own risk management Enterprises strategies, with limited effectiveness, especially for women and youth 37 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Section Message Urban informal household enterprises are highly risk exposed and have few coping strategies to prevent a slide-back to poverty 38 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Urban household enterprises are risk exposed and resilient, but not as resilient as households that rely on wage income26 Households owning urban non-farm household enterprises Urban non-farm HHE also rebounded more quickly (than households with other were particularly adversely affected during COVID. They were types of work) from the pandemic-related shut-downs, though women, youth, more likely to experience income loss than households owning and poor were slower to do so. Wage employment recovered more quickly than urban farm HHE or working in wage employment self-employment Probability of household income loss in the first three months of the Covid-19 pandemic, by urban Percentage of urban self-employed women and men reporting income job type of the household head declines, farm (left) and non-farm (right) self-employed 90 80 70 60 *** 50 40 30 20 10 0 wage earners farm enterprise non-farm enterprise Source: HFPS. Notes: Self-employed household heads in urban areas. Multiple SSA countries *** statistically different from wage earners at the 1% level 39 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Urban Informal household Shocks experienced by the household enterprise owner in the enterprise owners do not past year27 distinguish between business and Damage to the operating space household risk COVID - Disruption Draught - Natural disaster Floods - Natural disaster ❖ In a study of three West African countries: Damage/breakdown of a productive asset ❖ The 3 most common shocks (data collected Shortage in input supply 2021) were COVID disruption, increase in household expenses, and increase in price of Increase in the Household expenses inputs (figure) Fall in the selling price of products or… Increase in the price of inputs ❖ With differences across countries in the nature of shocks. In Niger, illness of earning member Lack of workers for HH-Enterprise and business failure were also quite common. Theft of money or other properties In Liberia, theft was notable. Business Failure ❖ In all three countries, a non-trivial fraction of Job loss of a household income contributor HHEs were affected by flooding. Illness of an earning household member ❖ Data (2018) from urban informal households in Cote Death or disability of a household income… d’Ivoire also finds that price shocks (and financial 0% 10% 20% 30% 40% 50% 60% problems) were among the top kinds of shocks (about NIGER SENEGAL LIBERIA 20%), only less problematic than health or family events (about 35%). Formal sector households had similar likelihood of facing these shocks.28 40 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Most urban informal household enterprises did not manage shocks or used household mechanisms to Shock management, by shock type29 manage shocks to the enterprise29 70% 60% In the study of three West African countries: 50% ❖ Regardless of the type of shock, the principal response 40% was to not respond (>60%) (figure) 30% ❖ Household resources – reduced consumption and use of savings – were commonly used to address shocks 20% to the enterprise, such as an increase in input prices or COVID disruptions 10% ❖ Own savings is an important risk-management tool, 0% COVID disruption increase in input business failure illness of earning floods theft of even among extremely poor household enterprise prices member money/property owners top 5 types of shocks, across three countries ❖ Government and private assistance was leverage for nothing reduced consumption used savings outside assistance new work idiosyncratic shocks Absence of a bar in any y-axis shock indicates the related shock management mechanism was not offered as a potential response in the survey. 41 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Limited shock management may be Where informal urban Liberians keep their savings 30 more attributable to not having the mechanisms available rather than in the ability to manage shock ❖ By definition, urban informal do not have access to social benefits that may help them to manage job-related risk ❖ They also have low earnings, which limits the available income to manage shocks on their own ❖ Urban areas are less covered by social safety nets than rural ❖ Private savings opportunities may be inadequate to fully manage risk. Data from Liberia provide some insights:30 ❖ 66% save; HHE owners are 16 percent more likely to save than those who earn wages or salaries ❖ Average monthly savings is USD 35 ❖ Primary reasons for saving is to meet short-term needs, purchase land, and meet household enterprise expenses ❖ Many savers were able to finance living and business expenses when faced with an economic shock. ❖ Most use informal savings clubs (figure), though would prefer the security of more formal institutions 42 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Limited social assistance to manage the COVID crisis was accessible to the urban poor early in the pandemic, though support declined over the first year for self- employed household heads, especially women.31 ❖ About 20% of households received some assistance at the on-set of the ❖ Receipt of assistance fell over the first year of the pandemic for pandemic, without differences by household enterprise ownership self-employed household enterprises, especially for women status ❖ An average of 5 percent of households headed by self-employed individuals received public assistance across the pandemic, while 10 percent received private assistance across the pandemic Percentage of self-employed household heads receiving any Share of urban households receiving any kind of assistance in the first year of the pandemic, by gender assistance, by household enterprise ownership (9 countries) no enterprise non-farm enterprise farm enterprise 0 5 10 15 20 25 Percent of households 43 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter In general, low public sector support to Schematic of Risk Management Tools Available, by Segment urban informal household enterprises of the Urban Labor Force32 reflects their status as the “missed middle” of a social protection system.32 Job-Linked Pension, Workers in formal wage Unemployment employment (public sector, Insurance, Health big private sector companies) Factors associated with the urban informal make them the “missed Insurance Systems who get benefits through middle,” being outside of social insurance and social assistance their work programs: ❖ not poor enough to be eligible for social safety net benefits, and not well-off enough to be part of social insurance programs mandated for the formal sector (figure). Workers with irregular ❖ social assistance programs are less common in urban areas. For MISSED MIDDLE income - the informal who example, while 40% of informal sector workers are covered by some Targeted Schemes for Informal do not have access to job- form of emergency transfers nationally, such rate was 1% in Dakar sector, Self Employed and related or poverty-targeted and Dar es Salam, and zero in Accra.33 Independent workers programs ❖ may have a cushion to guard against small shocks but may be unable to manage big income shocks. ❖ small size and with low and irregular earnings, which limits their eligibility for formal savings schemes Vulnerable and Poor Most urban informal household enterprise owners and workers would be Non-contributory unable to work, who in the missed middle, as only 15% are poor, yet none are covered by job- social assistance, Benefit from social related social benefits. social pension assistance The COVID crisis put the spotlight on a lingering gap: how to extend coverage of social assistance in urban areas in low and middle-income countries. 44 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The social protection missed middle is prevalent among the informal in urban SSA. eg: among the informal sector in Togo and Côte d’Ivoire, a larger share of urban than rural workers are “informal, non-poor,” or the missed middle.34 Togo Cote d’Ivoire 100% 4.8% 90% 17.7% 39.6% 80% 30.1% 36.4% 70% 48.2% 48.9% % Population by hh. type 6.4% 60% 54.0% 50% 40% 55.8% 30% 58.7% 1.8% 20% 26.5% 10% 0% Rural Urban 45 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter I. Entry point VII. Interventions II. 3 entry points, tailored to the type of Supporting African Urban 1. informality Get the urban jobseekers into work Informal to be More Productive 2. 3. Enhance productivity Reduce risk and Resilient III. A Learning Agenda 46 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Section message Interventions to successfully support urban informal workers and (survivalist and constrained) entrepreneurs to be more productive and build resilience can be grouped into 5 categories 47 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Who to Support? The urban informal sector is heterogeneous, requiring us to narrow down the target population for the interventions discussion. We will focus on survival/ constrained entrepreneurs, informal sector employees, and labor market entrants Given that The target population for the interventions • The largest share of urban jobs in SSA are in the discussion will be urban informal who are: informal sector 1. Survival or constrained entrepreneurs • Urbanization and population growth will drive (where most urban Africans work) the need for even more urban jobs 2. Informal sector employees (the second • We are interested in jobs and productivity in the most frequent source of jobs in urban Africa) short-run, taking institutions and the current economy as given 3. Labor market entrants whose most likely • Increased well-being comes from having a job, jobs will be in the informal sector (reflecting urbanization and population growth) higher productivity (and thus earnings), and risk management. Thus, our focus is on interventions to support the African urban vulnerable to become economically active and help the economically active to become more productive and resilient 48 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter How to Support? Labor, capital, entrepreneurial ability and transformative institutional factors contribute to improving the quality of and access to informal sector jobs for the target population in the short-run Labor: Building Capabilities & Connecting People to Job Opportunities • Improvements in human capital to improve worker and entrepreneurial productivity An Environment that mixes K, L, and A • Basic social protection to support transitions and to Create Enterprises and Jobs alleviate constraint to work • A macro-economic, regulatory, and In different combinations, these • Closing information gaps to match workers to jobs tax environment that incentivizes factors lead to investments Capital: Access to productive capital & Risk • Regulatory environment for small • Household enterprise creation management producers & productivity • Access to capital and risk-management tools with flexible conditions • Digital, water, electrical, and other • Informal employment & • Affordable assets, including technologies public services productivity • Social customs and norms in Entrepreneurial Ability support of household enterprises • Business training • Social protection to enable risk-taking • Information to connect micro-enterprises to markets Adapted from “Jobs and Economic Transformation (JET) – Drivers, Policy Implications and World Bank Group Support” prepared by th e World Bank Group for the October 19, 2019 Development Committee Meeting. https://www.devcommittee.org/sites/dc/files/download/Documents/2019-09/JET%20Final_DC2019-0008.pdf, drawing from the micro- 49 enterprise literature. Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Putting together the who and the how: Drawing from the first column on the previous slide, and taking as given the second column, we structure our intervention options by 2 types of beneficiaries and three inter-related goals, for 5 intervention areas II. Increase productivity (and earnings) in the informal I. Getting People into informal work sector enterprises Informal 1. Economic inclusion via self-employment & 3. Personal, public goods, and market-driven entrepreneurial services interventions for productivity enhancement in different types of informal enterprises Informal workers 2. Job orientation services where there are 4. Informal and practical development of in- markets; LiPW+ where there are not markets demand skills III. Risk Management 5. Savings, insurance, and emergency transfers for urban informal 50 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Intervention Area 1: Get People into Work via Informal (Survival) Self-Employment strategy: a bundle of coordinated and sequenced interventions that walk the beneficiary through a process to overcome their constraints to income generation. Challenge to becoming self-employed in urban areas. Solution: Productive economic inclusion programs (PEI) People have: ❖ A bundle of coordinated multidimensional interventions that help ❖ Limited understanding of markets and individuals, and households establish and run small enterprises competition ❖ The package differs by the needs of the target population ❖ Few assets to launch a business ❖ Most programs include 5-6 components ❖ Social constraints that make work difficult (lack ❖ Operating in >90 countries globally, in both urban and rural areas of childcare, living far from markets) ❖ Effective in low job-growth economies ❖ Slim professional networks to operate a business ❖ Components delivered by public and private providers ❖ Limited skills to produce the good/service and ❖ Coordination across program components is a fundamental key to manage an enterprise success. The beneficiary is at the center and the components come to him/her. ❖ Psycho-social barriers (especially women) 51 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Yook Koom Koom Project, Senegal supporting poor urban Senegalese women to launch survival household enterprises Key elements of project design Project Impact o Micro-enterprises started by participants annual business o A component within the Sahel Adaptive Social Protection Program (ASPP) revenue increased by 24% o Implemented in 3 urban areas in Senegal, supporting 12,000 beneficiaries of a o Increase in savings (last 3 months) of 125%. safety net project. Project cost approx. $427 per capita. o Project design ✓ Group Formation and coaching: Formation of groups of around 20 Key to project success beneficiaries. Coaches provide support to groups and individual beneficiaries. o A package of support, namely the combination of life ✓ Community sensitization on aspirations and social norms Screening of a skills/ psycho-social training + micro entrepreneurship short video showing how a married couple overcome tensions and work training in one program, with all components targeted to together to diversify their livelihoods, with follow-up discussion the beneficiaries ✓ Facilitation of community savings and loan groups (VSLAs): weekly o Layering the training with a productive grant to support meetings with weekly contributions from VSLA members; possibility of beneficiaries to invest borrowing small loans; distribution of savings + accumulated interest after cycles of 9 to 12 months. Learning and ideas for adapting the project design ✓ Life skills training: Group-based training over 3 to 7 half-days, covering topics o Impact of psychosocial components were muted such as self-confidence, gender relations, communication skills, risk taking suggesting effectiveness of psychosocial components ✓ Micro-entrepreneurship training: Group-based training over 3 to 7 half-days, varies across contexts and may be relatively less needed in covering basic microenterprise management skills for both agricultural and urban settings or among younger and more educated non-agricultural activities populations. ✓ Cash grants: One-time transfer for business start-up (~USD 250) Source: Bossuroy et al 2023. 52 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Intervention Area 2. Get jobseekers into work via job orientation services, revamp public works, and rethink ALMPs. The package of support will differ by labor demand. Where there is a market, programs can close information asymmetries. Where there is no market, create a time-bound “artificial” market. Solution: Information when there are markets; replicating work where Challenge 1: no labor market in some areas there are not Challenge 2: a functioning labor market and, through natural turnover, jobs will appear. However: When there is not a market: Public works oriented to jobs ✓ Workers have poor information about labor demand, including unrealistic employment expectations • Standard model: public works as a form of social assistance role ✓ Workers offer insufficient information about their abilities • Proposed: time-bound public works as a means to prepare people for the labor market ✓ Job search is costly (transport, childcare, time) ✓ Having a job is costly (transport, childcare, meals, When there is a market: Job orientation services to close information gaps uniforms, etc) and set expectations ✓ Growth in labor supply may outstrip the growth in labor • Standard model: public employment offices to provide face-to-face job- demand matching services. BUT they underperform in SSA (Weber et al 2023) and a growing private employment services sector more efficiently provides information on jobs and job-matching for certain segments of the population (Davern 2020) • Proposed: job orientation services that provide information on the process to prepare for and get a job, complemented by PPPs for service delivery 53 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Pilot Project: Basic Package of Support in South Africa. wrap-around job orientation services to get out-of-labor force people into jobs Project Impact The project is in pilot phase; evaluation is in process Key elements of project design o Community-based service center co-located with other social services (public employment services, ID registration, etc). combined with community outreach Key to project success o On-site personalized “case workers” o Starting point is the job-seeker’s goals and constraints, with “jobs” o Structured, multi-visit program to walk beneficiaries through a coming later. Process is guided self-discovery conversation to understand job goals, work experience, and o Addresses the broader issues that constrain a person from being a personal constraints to job search and/or holding a job worker, not just the job-related constraints o Referral services from a database of community-based o Individualized services over several months providers, including skills development, transport vouchers, childcare, mental health services, general health services, ID acquisition, etc. o MIS system to track beneficiary progress Learning and ideas for adapting the project design o Use of IT to alleviate the demands on counselors o Triage mechanisms to allocate program resources where most valuable Source. 54 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Urban Local Government Development Program II (ULGDP II) Ethiopia Labor intensive public works plus to equip beneficiaries to become micro-entrepreneurs upon graduation Project Impact Qualitative study showed evidence of beneficiaries amassing considerable savings from the cobblestone contracts, enabling them to launch their own enterprises after leaving the program. Up to 50% pursue their own enterprises Key elements of project design o Urban labor-intensive public works in 44 cities o Most projects required cobblestone road construction, which involved over 100,000 people o Participants grouped into cobblestone construction Key to project success cooperatives and receive TVET technical training on paving Acts as a “bootcamp” providing a capital and skills injection to beneficiaries. The project intervention - technical and business training, working in (1-2 months) plus entrepreneurship training (1 week) cooperatives, technical support to beneficiaries to bid for contracts – develop o Cooperative bid for contracts on different road sites skills for post-program entrepreneurship. through a competitive procurement. Beneficiaries graduate from the programs after an average of 3 years o Micro & small enterprise offices help them after graduation to launch own enterprises Learning and ideas for adapting the project design Need a quantitative evaluation that tracks post-program beneficiary outcomes relative to a control group. Source. 55 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Digital Public Works under the Kenya Informal Settlements Improvement Project LIPW in the digital sector for urban informal residents Project Impact Key elements of project design • Increase income for vulnerable youth • Participants feel improved their digital skills • 300 participants • Allow to manage other responsibilities • 3 informal settlements • Work objective was to create GIS data on roads, buildings, and points of interest • The program provided mobile phone, drones, and laptops Learning and ideas for adapting the project design • The beneficiaries learned basic digital skills • Production of urban datasets: (i) How do we ensure that critical urban datasets produced are utilized for dev? (ii) • The program was results-oriented, namely the beneficiaries would How to increase the availability of open source settlement work remotely and on their own schedules level digital data? • Beneficiaries were paid $48,000 Kenyan dollars • Skills: (i) How to better support skill building and signalling? (ii) How to better support longer-term job finding and earnings growth? • Participatory and inclusive approaches (leave no one behind): (i) How to ensure that development is community driven and participatory (ii) How to ensure that development is inclusive of traditionally excluded groups Source. 56 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Intervention Area 3. Increase Productivity of the Informal Self-Employed A package of support differs by the nature of the informal enterprise. Need to target not just the entrepreneur, but the larger context, as well. Solution: a package of interventions that account for the type of Challenges to productivity enhancement (link) entrepreneur it will target • At the aggregate level: Continuum of “informality” • A municipal environment that hinders enterprise operations, especially for the less connected and poor (bribes, security) • Limited public services that are inputs to small enterprises (water, electricity, refuse removal, connectivity) Constrained • At the individual level: entrepreneurs • Training programs in the wrong topics Survival Mid-skilled workers with • Few assets /low access to finance/space to operate entrepreneurs some entrepreneurial ability (older owners who Growth entrepreneurs • Limited access to markets Low skilled, little are somewhat More/most skilled, capital, limited entrepreneurial productive; or young ambitions to become formal ability, ambitions to educated owners who and link to markets for earn more but not are giving it a try), greater profits, most expand business ambitions to earn more entrepreneurial (has the but not go too big will). May add workers. 57 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Togo Private Sector Development Support Project personal initiative training + stipend for survival entrepreneurs Project Impact A randomized controlled trial. 4 follow-up surveys tracked outcomes Key elements of project design for firms over 2 years • 1,500 entrepreneurs (53% women) in the program • personal initiative training increased firm profits by 30%, • Business training (500 beneficiaries) • Traditional training increased firm profits by 11%, but results were • 3 half days a week for 4 weeks = 36 hours classroom not statistically significant. • one 3-hour visit in-person per month for next 4 months • The training is cost-effective, paying for itself within 1 year. • Cost per person invited: $718 • Offered for $10 • Take up 84% Learning and ideas for adapting the project design • Personal initiative training (500 beneficiaries) • Introduce similar Psychology based trainings adapted to • 3 half days a week for 4 weeks = 36 hours classroom different contexts (example tackling youth social exclusion in • One three hour visit in-person per month for next 4 months South Africa) to complement other program elements that • Cost per person invited: $756 tackle different constraints (financial, markets etc) • Offered for $10 • Take up 84% • Attendance >10 sessions: 73% Source. 58 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Project Impact Successful Project : Kenyan Women • RCT in 157 rural markets in Kenya. Sample: 3,537 firms, • Firms assigned to training are Entrepreneurs in Dense Rural Markets • 3 percentage points more likely to survive after three years, training to increase constrained entrepreneurs’ • earn 18 percent higher sales and • make 15 percent higher profits. productivity • their owners have better mental health and higher subjective standard of living. • The gains grow over time (up to four years, when measurement stopped) Key elements of project design • Benefits are similar for firms assigned to training only compared to firms that were also • Targeted to women market traders in rural areas (with assigned to a mentor. medium or high market density) • The gain in profits is sufficient to cover the cost of the course within one year and a half. • Training using the ILO’s Gender and Entrepreneurship Together – Get-Ahead for Women in Enterprise program. • 5 day course • covered topics typical of standard business Key to project success training programs as well as topics designed • Training focused on practical entrepreneurial skills, from a gender perspective specifically to help overcome gender constraints • Training was used to develop markets, by encouraging firm owners to broaden the range • addressed practical and strategic needs of low- of products they offer, work harder, and possibly generate multiplier effects whereby income women in enterprise by strengthening successful firm owners increase demand for other products in their markets. their basic business and people management skills. • Supports women to develop their personal Learning and ideas for adapting the project design: entrepreneurial traits and obtain support through groups, • Almost all existing literature to date has been unable to measure impacts at the market networks and institutions dealing with enterprise level. This project finds that market growth appears to stem from better customer development”. services, better business practices, the introduction of new products, and multiplier • Follow up mentorship for half the sample assigned to effects from firms acting as customers to one another, with no significant impacts on training. Mentors were female business owners of a access to finance or input management. similar age • Hence, in underdeveloped markets, microenterprise success need not come completely at the expense of competitors, and business training can help the overall market grow. • Exploring innovation within traditional sectors and activities can support this trends. Side Bar Many country governments prioritize formalization, assuming that correlational relationships are causal. However, this policy may be not be the most welfare enhancing for the poorest urban informal in AFR for various reasons: 1. Productivity enhancements are welfare improving; formalization is correlated with, but not causal to, higher productivity 2. Formalization is a factor of production; firm owners buy into formalization when the benefits exceed the costs 3. The benefits of formalization are low for small, informal self- employed but may be larger the closer a firm is to the “formality frontier” (looking like and acting like a formal firm, but not Why not prioritize policy to 4. registered) Ceteris parabus, poor informal workers prioritize other productivity- formalize the informal?37 enhancing measures. 5. Risk management, which is welfare enhancing, can be achieved more efficiently through other tools 60 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Intervention Area 4. Informal and practical skills development, where there are markets A mix of institutional skill development (while young) and alternative skill development process (when working age) Challenge: people are unaware of the skills that they need to Solution: Incorporate various kinds of informal skills training into acquire, and education/training system are not aligned with jobs projects labor markets or have the scope to serve all ✓ Short-term training across the range of skills ✓ Training is applied (not theoretical) and practiced during the Consensus that a range of skills are needed to enhance labor training course productivity: For example: the Ethiopia Urban Safety Net Youth • Foundational skills (literacy, numeracy) Employment component provides skill development across • Technical skills several types of skills in a range of formats. • Socio-behavioral skills ✓ Engage the enterprise sector • Digital skills For example: the dual apprenticeships – which goes beyond • Entrepreneurial skills traditional apprenticeship by adding a formal training Learning can happen outside the classroom component - though the evidence on cost effective program • On the job design with impact is still mixed • On-line • Community-based short-course Standard ALMPs are not very successful in SSA, Skill development will not create jobs but may increase allocative requiring a re-think.38 efficiency and thus earnings. 61 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Mafita Program (FCDO) in Nigeria formal (classroom-based) training of marginalized youth in conflict-affected zones Project Impact COSDEC participants were • 35% more likely to be employed in self- or family-owned businesses; • 39% more likely to be in wage employment; Key elements of project design • increased profits from self-employment by 38% • FCDO funded and implemented by Adam Smith • increased income from wage employment by 54%. International (ASI) in four Northern Nigerian states: • Literacy and numeracy training did not have an impact. Business-related soft skills Kaduna, Kano, Katsina and Jigawa drove the results. • Community Skills Development Centers (COSDECs) provided vocational and technical training aimed at developing trade-specific skills through a Key to project success classroom-based approach in which fully equipped • Designed for marginalized youth (migrants, adolescent girls, disabled youth, orphans workshops and production facilities were used to & vulnerable children, and early school leavers). train students. • Designed for conflict affected states in Northern Nigeria • Included basic foundational skills training in literacy, numeracy, and business-related soft skills. Learning and ideas for adapting the project design • Can youth literacy and numeracy training have an impact on job success? Source: Source: Crawford et al (2021) 62 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Dual apprenticeships in Cote D’Ivoire subsidized mix of classroom and on-the-job training Project Impact • net entry of apprentices into firms. • The intervention created 0.74 to 0.77 new position per subsidized apprentice. • The subsidy offsets forgone labor earnings. • Four years after the start of the experiment, treated youths perform Key elements of project design more complex tasks and their earnings are higher by 15 percent. • Dual training provided through practical on-the- job learning complemented by theoretical courses. • A monthly subsidy of half the formal minimum wage, paid directly to apprentices for 12 or 24 Learning and ideas for adapting the project design months (depending on occupations). Analyzing long run impacts and impacts of large-scale government implemented programs Source. 63 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Kenya Youth Employment and Opportunities Project (KYEOP) informal and formal training and apprenticeship. Key elements of project design Project Impact Life Skills Training: intended to equip beneficiaries with adaptive and positive • beneficiaries in employment increased from 32% and 23% behavior that will enable them to deal effectively with the demands and challenges of in employment to 37% and 49% in wage and self- everyday life employment respectively Core Business Skills Training: equips youth with the entrepreneurial insight, financial • earnings increased by 20%. foresight and management skills Key to project success Job Specific Skills Training: • Interventions that address supply, demand and 1) Training with a Formal Training Provider (FTP): 2 months of classroom training intermediation in the same project. to learn about the sector and 3 months of internship in a firm to apply the classroom • The project works in cycles (of beneficiaries) and each training in a practical environment cycle applies lessons learned from previous one. OR • Training, especially the Life Skills, has showed to be very 2) Apprenticeship with a Master Craftsman: 5 months of on-the-job training effective and useful for the youth, regardless of the sector offered through an apprenticeship with a master craftsman who offers both training or type of employment they end up in. and an internship Learning and ideas for adapting the project design • Improve the quality of the informal sector trainers and strengthen linkages with employers in the formal sector, by experimenting demand-driven training approach • Experiment with results-based financing mechanisms results that are defined as employment to better link training and the job market • Focusing attention on the actual placement of graduates in employment Source. 64 Side Bar Definition: Active Labor Market Programs can be defined as: “a general denomination for specific policies [and programmes] that could be broadly grouped into four big clusters39 ✓ vocational training, ✓ assistance in the job search process, ✓ wage subsidies or public works programmes, and ✓ support to micro-entrepreneurs or independent workers” In essence, ALMPs are services that bridge the gap between the general education system and the labor market or between a former and a new job. Application: These four groups are, in essence, captured by Intervention areas I-IV. The main difference presented in this slide deck report is that, through operationalizing What about ALMPs? these programs, the design has taken on distinct characteristics in Africa, in urban, and for informal populations. A key policy question: how to leverage what we know about ALMPs and shape (and relabel) it to fit the urban, informal, African context? 65 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Intervention Area 5: Risk Management Tools for the Urban Informal Adapt poverty-targeted programs and formal-sector programs to align with the missing middle Challenge: Characteristics of the urban informal have Solution: 3 types of interventions, facilitated by digital implications for the design of risk management tools: delivery systems and services ❖ Less access to community savings mechanisms 3a. Build personal (individual) savings to manage a (VSLAs, savings clubs, etc) range of shocks ❖ Heterogeneity in risk management needs due to Example: Ghana, Kenya, Cote d’Ivoire diversity of urban areas ❖ Irregular savings and income through short-term informal work or uneven consumer demand 3b. Access to public (group) savings to manage ❖ Simultaneous exposure to economic, weather, and a core set of short (unemployment, health) and personal shocks long-term (old-age) shocks ❖ Hard to reach due to their mobility Example: Kenya, Rwanda, Ghana and Benin ❖ Informal economy is not organized into strong professional associations ❖ Many urban informal are the missed middle – too rich to 3c. Emergency cash transfer when savings be eligible for social assistance but too poor to buy into fall short social insurance Example: Togo, Morocco, South Africa 66 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Ghana Productive Safety Net Project Savings Components Helping the urban informal to save via private savings schemes Key elements of project design Project Impact The Ghana Productive Safety Net Project includes Productive Inclusion Preliminary results from an impact evaluation found: Schemes. 1. Beneficiaries seem to be gradually building the culture of saving The savings activities are subsumed within two project components: for predetermined goals. • Complementary Livelihood and Asset Support Scheme 2. Beneficiaries are using multiple savings options e.g., Susu (CLASS) that seeks to support the promotion of boxes, VLSAs, savings with MFIs Enterprise/Livelihood activities for beneficiary households and 3. Beneficiaries are savings for investment (buying inputs for • Linkage to Agriculture support (LAS) aims at boosting the agric. business) and for consumption. productivity of beneficiaries 4. Evidence of spillover effects of intervention - where other • The savings components included: beneficiaries who were not selected into the sample have started • Training curricula: the training for livelihoods included applying some of the tools shared training on the importance of and strategies for savings • Mentoring and coaching: program design included Key to project success mentors/coaches discussing and encouraging savings • The savings components were built into a productive inclusion behaviors project, where beneficiaries were receiving and managing money • Mobile money: provided opportunities for beneficiaries to • Face-to-face coaching for behavior change save the transfers they received through the program • Mobile money lowered the transaction costs of actively saving • Pre-program mapping: during program design, assessed the existence of and capacity of local informal savings Learning and ideas for adapting the project design associations that could be leveraged by project participants • long-term savings of these schemes • Experimenting with mobile money scheme to incentivize more savings. Source: https://drive.google.com/drive/folders/1dqpdF4LzK16xiGHphvD_1Uq1pjs7YmIs 67 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Promising Project: Mbao pension scheme in Kenya Helping the urban informal to save via public savings schemes Project Impact The program has not been evaluated for impact As of 2019, the program had 76,000 accounts, a fraction of the informal poor in Kenya Key elements of project design • The Mbao pension scheme is a voluntary individual savings Key to project success plan designed to encourage savings for retirement among • Flexibility in savings amount and periodicity, unlike the public savings scheme for poor, informal workers. formal sector workers • Participants can contribute any amount and at any frequency • Use of mobile money accounts to make deposits to lower the transaction costs through mobile money accounts (Kenya has a strong mobile money ecosystem) of participating • Members can withdraw savings three years after their initial • Allowing participants to withdraw money before retirement, to reduce the contribution. perceived risk of not being able to access one’s own money • Regulated by the Retirement Benefits Authority, which is also in charge of awareness raising through television, radio, and printed materials. Learning and ideas for adapting the project design • Incentives that link savings to other benefits – such as matched government contributions or funeral insurance – may further lower the cost of participation • Due to the common practice of group savings, should reach out to cooperatives and women’s organizations Source: Guven 2019. “Extending Pension Coverage to the Informal Sector in Africa.” 68 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Successful Project: Covid-19 "Tadamon" transfers in Morocco to urban informal workers Supporting urban informal in times of crisis Project Impact o Transfers mitigated most of poverty impact of pandemic. Poverty increased during lockdown from 0.5% to 7% in urban areas. The transfer reduced this to 1.4% . Key elements of project design o Avoided negative coping strategies such as depletion of assets or complete o Emergency cash transfers to around 5.5 million households failure of informal business operating in the informal sector and directly impacted by lockdown measures o Transfer amounts varied by household size and transfers were made in 3 tranches during the lockdown period o Multi-payment mechanisms including banks, mobile money Key to project success and physical pay points o Specific focus on informal sector workers who were unable to work due to the o In the absence of a social registry, government targeted emergency. Digital platform allowed their rapid enrollment and cross-checking households using the database of the largest safety net their eligibility against other national databases program - non-contributory health insurance, which included households working in the informal sector Learning and ideas for adapting the project design o Designing mechanisms that can accurately identify people working in the informal sector affected by the emergency, and reducing inclusion and exclusion errors 69 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Addressing the additional constraints faced by women Challenge: As noted, women are more likely to be in self- Solution: A package of interventions to empower women to be more employment or unpaid employment, both lower-earning and productive and resilient household enterprise owners and wage earners unprotected forms of work. Women are particularly vulnerable ❖ Work environment interventions may include due to43 ❖ Working with local business councils to change gender norms ❖ A hostile work environment (context): social norms that in the workplace, such as security for women market-sellers in limit women’s occupation and work opportunities, legal Angola discrimination (labor, assets) or failure to protect (GBV) ❖ Complementing labor legislation with redress and enforcement ❖ Limited resources: lower levels of education, asset mechanisms to reach informal sector workers ownership and control, digital access and market ❖ Enhance women’s resources including information than men. Need for complementary assets ❖ Providing mobile phones and teaching digital literacy to (childcare). vulnerable household enterprise owners ❖ Agency: lower self-esteem and self-efficacy than men, less ❖ Supporting (often women-led) informal savings groups to entrepreneurial mindset, fewer professional networks integrate into market and provide options for long-term savings . ❖ Strengthen women’s ability to make decisions and act on them (agency) through ❖ Women mentors in productive economic inclusion programs ❖ Self-efficacy and self-esteem training 70 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter VI. Operationalization: The role of I. SPJ has a comparative advantage in SPJ to better support the urban II. this space SPJ would lead on some initiatives informal and partner w/o leadership on others III. A significant learning agenda 71 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Section Summary SPJ can adapt, and improve on, our current tools to provide packages of interventions appropriate to help 85% of the African urban informal to become more productive and resilient 72 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The WB can increase its support to the urban informal in Africa and SPJ has a comparative advantage to support the survival and constrained entrepreneurs, and informal workers, who comprise 85% of the urban informal sector The WB should increase its support to SPJ has a comparative advantage to support survival and constrained the urban informal since entrepreneurs and the informal workers in those enterprises since ❖ Most of urban Africa work or will ❖ SPJ works at the household level, which is which is the best way to work in the informal sector reach informal workers and enterprise owners ❖ Informality is crucial for poverty ❖ SPJ works with the poor and missed middle in urban and rural settings and inequality reduction in AFR in ❖ SPJ works with systems to identify and deliver services to those who are the near future outside of registration systems, which is where the urban informal are ❖ Governments, and the WB, under- ❖ Informality is intricately linked with SPJs resilience-related work serve this potential population. It is a potentially big area of business ❖ Informality is intricately linked with SPJ’s labor market and economic for the WB. inclusion portfolio Most importantly, SPJ is already working with the urban informal in Africa 73 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter SPJ programs already serve the poor and missed middle informal workers and survival/constrained entrepreneurs (blue circle) while other GPs (eg: FCI- yellow, ED – red) supporting growth entrepreneurs and less poor informal. FCI Microfinance Growth Social Insurance Business plan competitions Registration/formalization Entrepreneurial services Microfinance Social Insurance Business plan competitions Entrepreneurs Alt Insurance Registration/formalization Commercial finance & SMEs Cash + skills SPJ Microfinance Microfinance/commercial banking Entrepreneurial services Social Insurance Informality Continuum Constrained Economic inclusion Skills development Registration/formalization Alt Insurance Entrepreneur Alt Insurance Formal TVET Economic inclusion Private savings Economic inclusion Entrepreneurial services Microfinance Survival Cash+ training Alt Insurance Informal TVET Alt Insurance Formal TVET entrepreneur Emergency transfers Alt Insurance ED Private savings Alt Insurance Alt Insurance Informal apprenticeships Formal TVET Formal apprenticeships Informal LIPW+ Informal apprenticeships LIPW+ Job-matching services Wage-subsidies sector Worker Emergency transfers Private savings Job matching services Job orientation services Most poor/ few assets Missed middle/ some assets Least Poor/most assets Income/productive asset ownerships 74 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter But we cannot do it alone. SPJ can lead on some segments of the African urban informal agenda, based on comparative advantage, with other GPs leading in other spaces Partner with GPs that are sectoral (eg: agriculture), spatial (eg: urban, rural dev) or topical (eg: education) experts SPJ focuses on the informal who are the bottom 80% (poor & SPJ focuses on improving SPJ focuses on economic missed middle) of the income employment/ productivity in the inclusion (broadly defined) aimed distribution. SPJ’s entry point is short-run, taking urban markets at the (survival or constrained) the household as given entrepreneur and worker While (eg) FCI leads on non-poor While (eg) FCI and MTI lead on While (eg) FCI leads on formal (or and firm-level entry point; SSI long-term structural, AG leads on near formal) SMEs and business leads on community-based entry urban agriculture, and Urban environment and Urban leads on points; ED leads on formal leads on future cities the urban environment education 75 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Can we just expand our current operational tools to the urban informal space? Not really. We have work to do … 76 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter First, specific characteristics of urban and informal populations will shape the design of interventions, and we will need to adjust program design accordingly 35 Urban Informal Workers and Enterprise Owners Infrastructure and markets are more present in urban areas while tend to be more vulnerable and less visible/engaged than formal household community structures are more fractured than in rural (even in urban areas) areas, for example: ❖ They have lower literacy (language, digital) than formal ❖ Urban areas have greater access to digital infrastructure, workers, which may limit their access to digital financial so digital G2P delivery systems are more feasible inclusion ❖ Urban areas has greater proximity to product markets, so ❖ They are not registered so will not be eligible for jobs programs will include interventions to link to existing programs that draw from existing registries. markets ❖ The are often Cash-based, which limits their use of ❖ High turnover of the urban population and lower social mobile money, both for savings and for trading with more cohesion, may require mass media (rather than formal enterprises community outreach) to advertise jobs programs ❖ They are exposed to High risk & few management tools, ❖ “household” is a more fluid concept in urban areas, which which makes them highly susceptible to high income may affect the way that poverty targeting is done variability and related poverty Due to heterogeneity in the informal sector (across enterprises and workers), these constraints will be more (left tail of the informality continuum) or less (right tail of the informality continuum) binding 77 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Second, there are big picture questions about adapting existing SPJ interventions to serve the urban informal Intervention Area 1: Economic Inclusion and Entrepreneurship to Get People into Jobs • Is SPJ being too modest? Should we support a “big push” (a la Bandiera?) for greater resources and support to get people into survivalist enterprises? Intervention Area 2: LIPW+, job orientation, and ALMPs to get people into jobs • Can LIPWs be designed to be more about jobs, as opposed to primarily about social assistance? • Can job orientation services be designed to serve poor and missed middle who face multiple constraints, many of which are not even related to work? • Which ALMPs can be shaped to serve urban informal? How to reshape them? Intervention Area 3: Productivity Enhancement in Survival and Constrained micro-enterprises • Which growth entrepreneur or formal firm interventions are relevant for survivalist/constrained entrepreneurs? Intervention Area 4: Productivity Enhancement of Informal Sector workers • Standard training programs for employees are not very successful in SSA. What innovations – PPP, digital technologies, on-the-job training – might make them work better in the SSA context, especially for working-age adults? Intervention Area 5: Risk Management Tools • How to adapt the design of savings schemes to address these unique challenges of the urban informal in Africa? • Personal savings -- These programs are largely in rural areas, with accessible VSLAs. What would an urban program look like, where access to formal savings institutions is less constrained? • Public (group) savings – current programs are few and are low-subscribed. What can we learn from the current experiences? • Time-bound emergency cash – it is hard to reach the urban informal, especially during crises. What registration systems can be build for those who do not want to be registered (the informal?) 78 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter This means a significant learning agenda. While SPJ has experience in these kinds of interventions, we need to innovate – refine, improve, and create new products – to better support our clients to serve informal sector workers ❖ Going back to the 9 intervention types Strategy → Fine- Modify Create ❖ Most of the work is to CREATE - to design and test new tune & designs for 7 of the 9 intervention areas. This will expand require piloting, evaluation, and learning-by-doing (last Getting People into jobs 1. Economic Inclusion via self-employment xxx column of table) ❖ Even what we do well, there is a need to innovate, 2a. Job orientation services xxx 2b. Public works plus xxx continue learning, and continue improving. This may Doing better in Jobs mean pushing into new design for public works that is 3. Productivity enhancement in urban survivalist xxx appropriate for urban areas or adjusting economic entrepreneurs inclusion or emergency cash for urban informal 4a. informal training xxx contexts. 4b. OJT xxx Risk management tools ❖ Proof of concept. We did it with CCTs. We are doing it with 5.1 Private savings xxx 5.2 Public (group) savings xxx PEI. What is next? 5.3 Time-bound Emergency Cash xxx 79 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter “People love to say: ‘Give a man a fish, and he'll eat for a day. Teach a man to fish, and he'll eat for a lifetime.’ What they don't say is, ‘And it would be nice if you gave him a fishing rod’.” -- Trevor Noah, South African Comedian 80 ANNEX Linked slides for deeper information 81 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The narrative’s storyline draws from several new analytical papers, operational experiences, and four primary data sets METHODOLOGY DATA • Prepared 8 background papers, using various data • World Bank’s Global Monitoring Database (GMD) sources and methodologies A repository of harmonized household surveys • Reviewed international literature, particularly informal • World Bank’s High Frequency Phone Surveys (HFPS) sector employment in SSA and comparator countries A phone survey carried out during COVID to explore, among others, economic shocks and coping strategies • Drew from operational experiences by SPJ TTLs in SSA • World Bank’s Informal Enterprise Survey (IES) and comparator countries Surveys of businesses in the manufacturing and service sectors that are not registered with their governments • Specialized surveys A survey of urban workers living in poor neighborhoods in Liberia, Niger, and Senegal; A survey of savings behavior of poor workers in Liberia • General data sources (WBI, ILO, WEF, etc) RETURN TO PRESENTATION 82 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Background Papers 1. Mapping the Urban Informal Sector. Quantifying the urban informal sector in Africa, with attention to urban variables. 2. Aspirations and Constraints of Urban Informal Household Enterprises. Lessons from a survey of urban informal self-employed in 3 West African countries to understand their risks, risk management, strategies and aspirations. 3. How did Urban Household Enterprises in Sub-Saharan Africa fare during COVID? This paper uses data from high frequency phone surveys on urban households in 12 Sub-Saharan African countries to investigate which kinds of income-earning activities were most affected, what coping strategies were utilized, heterogeneity in impacts and coping strategies by socio-demographic characteristics, and the medium-term effects of the pandemic on households. 4. Cash transfers in urban Africa: emerging operational lessons and strategic directions. The discussion note would pull together current Bank knowledge on cash transfers in urban Africa, identify lessons in project design and implementation, and place cash transfers in the context of the larger social protection system that aims to support the transition from social assistance to livelihoods and informal sector employment. 5. Economic Inclusion & Social Protection in Urban Africa: Assessing the Potential. Lessons and directions for support to the urban informal sector in Africa, drawing from the SEI report, including the emerging mega-trends that will shape urban markets and social protection needs; where PEI lies in the safety net-to- informal sector employment or self-employment continuum; and operational considerations related to program costs, institutional coordination, targeting, and other implementation issues. 6. G2P Systems in Urban Africa - Lessons Learned. A summary of lessons emerging from 4 country case studies, including reflections on: accessibility, robustness and integration, effectiveness in reaching the urban informal sector, and performance in reaching and empowering women. And recommendations for task teams to support the continued building of delivery and payment systems in a post-COVID context. 7. G2P Systems in Urban Africa – a Forward Look. provide a deeper discussion/analysis of the types of flexible social protection schemes that would be relevant for the informal sector, including analysis on the use of digital technologies by the informal sector, with a view to using these to promote P2G and G2P payments. Particular emphasis will be placed on the potential of the G2P Delivery System to promote financial inclusion, instill a savings culture through safety nets for the urban poor informal sector, empower women, and deliver “hybrid social assistance-social insurance schemes”. This report would also reflect on the infrastructure, financing, and regulatory needs for the services to be delivered. 8. An Operational Framework for Flexible SP Services for the Urban Informal. Identify appropriate social protection services (social assistance, social insurance, labor) to address the risks and challenges facing the urban informal, drawing from international best practice and taking into consideration operational realities of African implementing partners RETURN TO PRESENTATION 83 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The ILO recognizes that different variables are used to define an informal firm and an informal worker. We use the following definitions, adapting the ILO for our data ▪ Definition of informality: The ILO uses two approaches to define informality: the firm and the workforce approach. Enterprise and its owner Employee ▪ Firm approach: informality is based on legal and tax registration of the firm. Formal Formal enterprise (owner). Registered Formal employee. Paid with social ▪ Workforce approach: informality if an employee is not registered and/or does with authorities. May or may not have benefits. Works in a formal firm or not contribute to a social security scheme. employees. If have employees, may be for an employer in the private or ▪ Informality is, in reality, a continuum: a firm can be registered with the tax formal, informal, or unpaid public sectors. authority, but its employees are not registered with the social security authorities. Also, some businesses pay local fees, but remain de facto informal. Informal Informal household enterprise Unpaid employee. Unpaid and no ▪ Own-account workers (entrepreneurs without employees) can be considered as (owner). Also referred to as self- social benefits. Often family both, a worker and a business: employed, own-account. Not members working in the family registered with authorities. No paid business. ▪ From a business perspective, they are confronted with the market, and their employees, may have unpaid revenues depend on their productivity, product demand, product quality, employees. “Vulnerable” are not Informal employee. Paid but no investment opportunities, etc. growth oriented. “Non-vulnerable” are social benefits. May work in a ▪ From a worker perspective, they have social protection needs growth-oriented formal or informal firm ▪ From a jobs perspective, formalization should not be an objective in itself, but a Formal Employer. Has paid employees, who means for higher productivity, better market access and job creation in firms that have or may be formal or informal. In addition, the capacity to formalize and integrate a more structured economy, as well as better informal may have unpaid employees social protection for those working in these businesses. RETURN TO PREVIOUS (SOURCE) SLIDE Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Urban Informal Africa over Time RETURN TO PRESENTATION 85 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter How urban informal factors affect program design and implementation (1)  The nature of urban poverty has implications for how programs define eligible groups as well as for delivery systems in registering and enrolling beneficiaries ❖ Poverty incidence is typically lower in urban areas relative to rural areas, often with few socio-economic differences between neighborhoods. This makes geographic targeting across urban neighborhoods challenging. ❖ Defining urban households is not straight-forward, making household-level targeting complicated. The commonly used definition of “people living under the same roof” does not necessarily apply in urban settlements where multiple families may share the same room, the same housing unit, or live in multi-story buildings. Many beneficiaries lack documents for address proof largely due to insecure housing arrangements. This is particularly true for migrants. ❖ There is a great deal of dynamism in urban areas, with informal settlements often rapidly contracting and expanding over time. Urban residents also frequently change residence and there is considerable movement in and out of neighborhoods. ❖ Communities in urban areas are often characterized by higher anonymity and lower social cohesion relative to villages, with access to resources often mediated by unofficial local power brokers (especially in informal settlements)  Program design also needs to take into account the specific characteristics of urban poverty and the availability of other economic opportunities in urban areas ❖ Urban poverty is characterized by poor living conditions, insecure housing, market-mediated access to food, high cost of living, high exposure to crime and conflict, and high vulnerability to health and economic risks. ❖ Urban areas provide greater access to markets and jobs, access to information and communication technology, greater financial service infrastructure, and density of service providers. RETURN TO PRESENTATION Source: Avalos, Jorge, Thomas Bossuroy, Timothy Clay, and Puja Vasudeva Dutta. 2021. “Productive Inclusion Programs in Urban Africa.” Mimeo 86 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter How urban informal factors affect program design and implementation (2)  The urban context makes delivery of high-intensity and group interventions particularly challenging; these need to be designed flexibly to fit the needs and lifestyles of urban participants ❖ First, the greater opportunity cost of participation makes it harder to ensure continuous participation in high-frequency components. Programs also need to mitigate the risk of program attrition as access to a wide range of economic opportunities may reduce take-up of the program, reduce attendance, or result in program drop-out, unless the program design is attractive relative to alternatives. ❖ Second, though the poorest tend to be concentrated in urban slums and informal settlements, the dispersion of beneficiaries across neighborhoods makes it harder to organize viable group activities. ❖ Third, program activities need to be scheduled to fit into participants’ alternative earning opportunities. ❖ Fourth, higher anonymity and lower social cohesion (coupled with dispersion across neighborhoods) makes group formation harder to sustain. Population density and low social cohesion can also pose security risks, while high rents and cost of living can lead to dissipation of business grant to meet basic needs. ❖ Fifth, affordable venues for community mobilization or group meetings, especially safe spaces for adolescent girls or women, are often not available or too expensive. There may be limited locations for appropriate training sites in the neighborhoods where beneficiaries live, and coaches might not live in proximity to all beneficiaries  urban policy frameworks and institutional arrangements can pose challenges for programs, requiring advocacy for inclusive urban development and close coordination with local urban authorities ❖ urban local governments have direct influence over municipal taxes and incentives, zoning and land use polices, construction permits and business licenses, infrastructure and service provision, as well as public safety. Local urban governments can also stimulate economic opportunities through investments in skills and innovation, and business support services for enterprises. However, weak city planning, dysfunctional land markets, and inequitable urban policy frameworks can pose challenges for productive inclusion programs (World Bank 2015). In particular, urban planning regulations impact informal livelihoods but do not typically incorporate the needs of poor informal workers. Engaging at the policy level with urban planners is necessary to advocate for inclusive urban development RETURN TO PRESENTATION Source: Avalos, Jorge, Thomas Bossuroy, Timothy Clay, and Puja Vasudeva Dutta. 2021. “Productive Inclusion Programs in Urban Africa.” Mimeo 87 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Characterizing the informal sector – the literature A growing literature characterizes formal and informal sector workers in Sub-Saharan Africa (ILO 2018, Basu et al. 2018). ❖ Workers in the informal sector are younger (Danquah et al 2019, ILO 2018), more female, less educated, and earn lower income, on average than formal sector workers (Danquah et al 2019, ILO 2018). ❖ Informal jobs are generally characterized by low-income levels in comparison to formal jobs (see, inter alia, Grimm et al 2012, De Vreyer and Roubaud 2013, and Nguimkeu 2014 for Africa; Perry et al. 2007 for Latin America; and Kanbur 2017; and ILO 2018 for global evidence). ❖ Informal sector enterprises are mostly family operations that only employ family members. ❖ Many do not operate out of a fixed location and oftentimes they are not a full-time business, often co-mingling household and business finances (Loening, Rijkers, and Söderbom, 2008; Fox and Sohnesen, 2012; La Porta and Schleifer, 2014). ❖ Compared to larger enterprises, their capital stock is minimal, and their productivity is low (La Porta and Schleifer, 2014), partly due to the owners having limited management skills compared to formal and larger firms’ owners. ❖ A small minority of African self-employed register with local authorities (Fox and Sohnesen, 2013). The high rate of informal employment in Africa goes hand in hand with the high levels of poverty in the region (ILO 2018). RETURN TO PRESENTATION 88 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Heterogeneity in the Self-Employment Sector in SSA and beyond A literature explores heterogeneity among informal self-employed. Three studies that use data from sub-Saharan Africa paint a general picture. ❖ Using a combination of non-parametric and estimated probabilities, Grimm et al (2012) identifies three sets of groups of informal entrepreneurs in seven francophone African capital cities. The top 10 percent of informal entrepreneurs in terms of capital stock and profitability are identified as the “top performers.” The “constrained gazelles,” who comprise 20-35 percent of the sample share many observable characteristics with the top performer but have low capital stock. The “survivalist” self -employed dominates, ranging from 55- 70 percent of the sample. ❖ More recent (unpublished) work follows Cunningham and Maloney (2001) by employing cluster analysis to allow the data to endogenously identify sub-groups of informal entrepreneurs in Cote d’Ivoire and Togo. Three groups break out, which can be mapped to the Grim m et al categories: 1.5 (0.77) percent of enterprises in Cote d’Ivoire (Togo) can be considered top performers since they look simila r to a formal enterprise with a larger workforce and backward and forward market linkages, 14 (5.1) percent of enterprises in Cote d’Ivoire (Togo) are constrained gazelles who have some factors of production and can engage in the market in a more limited manner, and 84 (94) percent of enterprises in Cote d’Ivoire (Togo) are survivalists with few factors of production and little engagement in the larger marke t RETURN TO PRESENTATION 89 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter The Household is the Entry Point to Vulnerable Informal Workers and Enterprises Three reasons that engaging with household is an efficient way to reach informal household enterprise owners or informal workers 1. Poor households are visible due to the spread of social registries. Informal enterprises are, by definition, not registered. Thus, enterprise owners can be reached via poverty entry points – such as social programs. 2. Households are (relatively) constant, though they may change location or morph in shape in urban areas, while informal economic activities, especially in urban areas, fluctuate in very short periods of time. Again, enterprise owners may be more effectively reached through poverty-targeted initiatives. 3. Given that 90 percent of informal enterprises employ only the owner or unpaid family members, the individual embodies the enterprise. While informal wage workers are also, in a sense, free-market agents. Thus, it is as (more?) effective to reach out to the individual to provide support rather than trying to do so via enterprise entry points. RETURN TO PRESENTATION 90 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Economic Inclusion Programs Include a Range of An integrated package of Program Components interventions EI programs provide an integrated package of interventions to address the multiple constraints faced by the poor. Most commonly, these packages are comprised of five or more components 83% of EI programs across 90 countries have 5 or more components For examples of the types of interventions in each category, see Annex Slide 1 RETURN TO PRESENTATION 91 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Economic Inclusion for Self-Employment Evidence of Success Empirical evidence consistently finds a positive impact, especially on the poorest ❖ Economic inclusion programs have helped participants invest in productive assets and to save, earn, and consume more than they could have without these programs ❖ Absolute gains are typically small in size (and vary across programs) but represent large increases for the poorest given low baseline values. ❖ Many programs empower women, ❖ In the medium-term (within 3–4 years of program enrollment), impact is often sustained, though smaller in size ❖ In the long-term, some of these impacts are sustained for up to seven years, dissipating only nine years after program enrollment (based on evidence from three programs) sample: 80 programs in 37 countries during 2009-2020; Mostly rural programs, though similar results were found for the subset of urban programs. BACK TO PRESENTATION 92 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Obstacles to enterprise Growth Differ by enterprise Size (a proxy for informality), South Africa Source: Bhorat, Haroon. 2022. “Supply-Side Economics of a Good Type: Supporting and Expanding South Africa’s Informal Economy.” Proposal to GrowthLab, Harvard University BACK TO PRESENTATION 93 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Survey question to urban poor in three West African countries: What support do you think would be beneficial for the HH-Enterprise? A package of support. Access to markets Business training Advertising for your new product Registration of your business Access to big orders Space for business operations or Being part ofa business cooperation Reliable water Reliable electricity Greater security Access to affordable loans Better tools and technology Internet connectivity Technical training 0% 10% 20% 30% 40% 50% 60% 70% NIGER SENEGAL LIBERIA Source: Cerkez 2023) RETURN TO PRESENTATION 94 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Project Design: Skills Development in Ethiopia ❖ The project intends to strengthen youth’s Urban Productive Safety Net and Jobs Project (UPSNJP) – Youth Employment access to the labor market via a phased Component (Bikat Program) $58m approach to skills development Life skills training on job-relevant socio-emotional skills (time management, problem- ❖ The project uses several modalities to impart solving, work-place behaviors) practical job-related skills Socio-emotional skills training through mentoring and peer groups ❖ Target beneficiaries are aged 18-25, Grade 12 Digital skills training for basic digital literacy on a computer (a Microsoft program) or less and unemployed. 50,000 participating urban youth in 10 urban areas across Ethiopia On-the-job technical skills training through a 6-month apprenticeship in a private-sector ❖ The training is provided by a sub-program in enterprise (mostly manufacturing enterprises), accompanied by a stipend to finance TVET institutions; the on-the-job training is transport, childcare, lunch, and other work-related expenses provided by private sector enterprises; Job search training following the apprenticeship to impart strategies for self-guiding job monitored and financed through the Ministry search in the general economy, accompanied by 3 months of stipend to finance job search of Labor and Skills RETURN TO PRESENTATION Ethiopia - Urban Productive Safety Net and Jobs Project (English). Washington, D.C. : World Bank Group. 95 http://documents.worldbank.org/curated/en/438581601776877012/Ethiopia-Urban-Productive-Safety-Net-and-Jobs-Project Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Building personal (individual) savings to manage a range of shocks A suite of services that not only offers access to savings institutions but also changes savings behavior Challenge: A range of factors limit savings by the Solution: more than just savings instruments urban informal (evidence from Liberia)40 Access ❖ Low Financial literacy and financial inclusion. A 1% increase in associated indices is correlated with a ✓ Support to setting up a savings account in financial 3.6 percentage point (pp) and 2 pp increase institutions when a program provides cash propensity to save ✓ Support to mobile money access, such as distributing cell ❖ Limited incentive to save (myopia). Even small phones, setting up mobile money accounts, or providing free incentives – e.g. access to health care, free minutes minutes – can encourage people to set up accounts in Behavior change formal financial institutions. ✓ Financial literacy training via courses with a set curricula ❖ Security in accessible (informal) savings ✓ Coaches and mentors to encourage and guide savings plans, instruments. informal savings mechanisms (susu’s, efforts, and successes VSLAs) are ubiquitous, but in need of greater security mechanisms and links to the formal Institutional development financial system ✓ Capacity building in informal savings institutions (that are ❖ Ease in cash-transactions. Those with mobile used by the urban informal) money accounts are more likely to save. RETURN TO PRESENTATION 96 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Access to public savings to manage a cores set of shocks Public sector institutional savings via innovations in existing Social Insurance41 ❖ All SSA countries provide social insurance programs though only 10.9 percent of African jobs are covered. Solution: Extending Public Savings Schemes to the Informal in Africa This indicates that a structure exists that can be built on. Kenya: Informal sector specific voluntary program (started 2009) • Low contribution amounts (0.20USD minimum) leveraging mobile money ❖ Existing social insurance schemes have design features infrastructure that are not aligned with the informal sector workers: • With almost 80,000 individuals, product allows short term access to funds, more ❖ SI schemes tend to be designed based on formal appealing product with outreach and infrastructure are needed employee-employer relationships, which are atypical in the informal economy. Rwanda: Matching and product bundled individual savings account (started 2019) • Tiered government match with life insurance and funeral expenses running on ❖ SI schemes require regular monthly specialized administration platform contributions, which are not suitable for people • Short term access to part of the funds, and use of funds as collateral for loans working in the informal economy who usually receive irregular incomes. Ghana: Part of the pension system’s Tier 3 voluntary structure with 50/50 short / long term savings split ❖ SI schemes register beneficiaries and track their • Multiple private and public sector administration bodies, leveraging various contributions, informal are not (by definition) registered and their incomes are not easily contribution collection channels (on-site manual contribution collection, and mobile observed money operators) • Started in 2018, currently reaching over 300,000 individuals ❖ SI schemes are typically for long-term savings with informal workers may need to frequently Benin: Pilot program part of a 4-component social protection system designed for access funds informal sector • Free/Subsidized health insurance, pensions, micro-finance and training ❖ SI schemes require trust in the (government) • Leveraging associations for outreach through mobile money infrastructure administrators; informal workers have little administrative relationship with or trust in public institutions RETURN TO PRESENTATION 97 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Design elements to address the savings challenges of the urban informal sector 98 RETURN TO PRESENTATION Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Emergency cash transfer when savings fall short Digital technology, big data, and urban infrastructure to provide time-bound emergency relief to the urban informal42 Challenge: Urban Informal are outside of the structures Solution: use digital technology, big data, and urban infrastructure to that allow for easy horizonal or vertical expansion of reach the urban informal social programs in times of crisis. ❖ Use alternative data sources (eg: voter registry in Togo, phone registry, satellite imaging in Mozambique and Nigera) to identify the urban ❖ Although more than 45 countries in the region have social informal who may need support assistance programs, only 23.5% of the total population and 32.0% of the poorest quintile are covered. ❖ Use mass media – rather than village outreach – to communicate programs to urban informal. Nigeria uses SMS. Togo used radio. ❖ Aside from the notable cases of rapidly expanding programs with significant coverage in Ethiopia, Ghana, ❖ Use cell phones for registration, outreach, and mobile money. This Kenya, Senegal, and Tanzania, most social protection may require providing cell phones to urban informal, helping users to programs focus on the extreme poor in rural areas and are register and set-up mobile money accounts, (Mozambique), financing on a smaller scale, with limited to no urban penetration minutes, and working with the cell phone company to reach out to those who are not registered (Nigeria) ❖ Urban informal are: not in social registries so are not easy to find or to verify eligibility; less likely to have unique IDs; ❖ Connecting urban informal to financial intermediaries through mobile have limited reading, financial, and digital literacy; are not money and accompanying legislation and know your customer (KYC) well integrated in the financial system; and have limited regulations to open option to the risky informal sector risk management practices so cannot self-insure . Example: Togo Novissi program RETURN TO PRESENTATION 99 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Program Design: Emergency social assistance for the urban informal in Togo Before the pandemic, Togo did not have: TOGO NOVISSI PROJECT: END-TO-END DIGITAL EMERGENCY G2P PAYMENT • a social registry Novissi was able to distribute benefits to roughly 800,000 members of the • a broad social protection program for urban informal sector in its first phase, the majority of whom were women. • a digital G2P payment system designed Identification. Due to a lack of a social registry, used voter registration records, which Before the Pandemic, Togo did have encompassed over 90 percent of the population and were up-to-date due to a recent election • An informal sector that was 90 percent of the work force Registration and verification. Applicants were required to text their voter card number and other basic personal information, which was then verified against Election Commission • a voter registration, with information on occupation, collected shortly before the data. These records were simultaneously used to screen applicants for eligibility based in pandemic part on their occupation. • An innovative, risk-taking government. Time –bound payment. Novissi offered cash transfers of $19 ($22.50 for women) for 2 to 3 months. Payment via mobile money. If approved, beneficiaries received transfers directly into mobile accounts, with the central bank preemptively opening accounts for all registered SIM cards to mitigate the potential for exclusion. 100 RETURN TO PRESENTATION End Material 101 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Endnotes 31 Cunningham et al (2023a) 1 author’s calculations, WDI 16 Adapted from: Rother and Karlen (2023); 32 Guven et al (2023 2 author’s calculations, WDI Karlen and Rougeaux (2023) 33 Roever and Rogan, 2020 17 Cunningham et al. (2023b) 3 Cunningham et al 2023 34Rother and Karlen (2023); Karlen and 17 Falco et. al 2017 4 Adapted from OECD (2020) 18 Source: Cerkez et al (2023 Rougeaux (2023) 35 Avalos et al. 2022. 5 World Bank 2023 19 Karlen and Rougeaux (2023) 36 Bhorat, 2022 20 (Pasquier et al 2017) 6 World Bank 2023 37 Karlen and Rougeaux, 2023 21 Source: Cerkez et al (2023 7 Source: World Bank. (2022). Global 38 Weber et al, 2023 22 Muller 2023 for Angola; Gupta 2023 for 39 (Levy Yayati 2019) Monitoring Database Liberia ; and Cunningham et al. 2022 for 40 Jain et al 2023. 8(Gentilini et al 2022) South Africa 41 Guven et al. 2022 23 Source: Cerkez et al (2023 9 (Lall et al. 2017) 42 Ubah et al 2023. 24 (Gupta 2023 for Liberia, Muller 2023 for 43 Kalle et al (2023) for Angola, Gupta et al (2023) for 10 (Gentilini et al 2022) Angola Liberia, Cunningham and Gupta (2023). 11 (Gentilini et al 2022) 25 Source: Cerkez et al (2023 26 Cunningham et al (2023a) 12 Cunningham et al. (2023b) 27 Source: Cerkez et al (2023 13 Cunningham et al. (2023b) 28 Karlen and Rougeaux (2023) 14 Cunningham et al. (2023b) 29 Source: Cerkez et al (2023 30 Jain et al (2023) 15 Cunningham et al. (2023b) . 102 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter References (1) • Avalos, Jorge, Sarang Chaudhury, Timothy Clay, and Puja Dutta. 2021. “Paths to Jobs for the Urban Poor.” PEI World Bank: Washington, DC. https://openknowledge.worldbank.org/server/api/core/bitstreams/c3072017-bb5d-599b-806f-05c4d79ddbd2/content • Basu, A.K., N.H. Chau, G.S. Fields, and R. Kanbur (2018). ‘Job Creation in a Multi-sector Labour Market Model for Developing Economies’. Oxford Economic Papers, 71(1): 119–44 • Bhorat, Haroon. 2022. “ ‘Supply-Side Economics of a Good Type: Supporting and Expanding South Africa’s Informal Economy.’ Proposal to GrowthLab, Harvard University.” University of Cape Town/DAPRU. Mimeo • Bossuroy, Thomas, Markus Goldstein, Dean Karlan, Harounan Kazianga, William Pariente, Patrick Premand, Christopher Udry, Julia Vaillant, Kelsey Wright. 2023. “Economic Inclusion in Urban Areas: Impacts of a Multi-faceted Social Protection Program in Senegal.” DIME/WorldBank. • Cunningham, Wendy and Sarika Gupta (2023) “An Operational Approach to Enhancing Women’s and Girls’ Empowerment in World Bank Operations,” Social Protection & Jobs Practice, Africa Region, World Bank. • Cunningham, Wendy, David Newhouse, Federica Ricaldi, Féraud Tchuisseu and Mariana Viollaz (2023b). “How did Urban Household Enterprises in Sub-Saharan Africa fare during COVID? Evidence from high-frequency phone surveys.” Social Protection and Jobs GP/World Bank. Mimeo. • Cunningham, Wendy, Feraud Tchuisseu, Mariana Viollaz, Ifeanyi Edochie, David Newhouse, and Federica Ricaldi (2023a) “Urban In formality in Sub-Saharan Africa: Profiling Workers and Firms in an Urban Context,” forthcoming • Danquah et al (2019) find that in a four-country, national sample, women are over-represented among informal wage workers but under-represented among the self-employed. • Davern, Eamonn (2020) : Trends and new developments in employment services to support transitions in Sub-Saharan Africa, the Middle East and North Africa regions, ILO Working Paper, No. 19, ISBN 978-92-2-033701-1, International Labour Organization (ILO), Geneva. https://www.econstor.eu/bitstream/10419/263085/1/ilo-wp19.pdf • De Vreyer, P., and F. Roubaud (eds) (2013). Urban Labor Markets in sub-Saharan Africa. Washington, DC: World Bank. • Gentilini, Ugo, Saksham Khosla and Mohamed Almenfi. 2021. “ Cash in the City: Emerging Lessons from Implementing Cash Transfers in Urban Africa.” Social Protection and Jobs Discussion Paper no. 2101. World Bank. . • Grimm, M., P. Knorringa, and J. Lay (2012). ‘Constrained Gazelles: High Potentials in West Africa’s Informal Economy’. World Development, 40(7): 1352–68. 103 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter References (2) • Gupta, Sarika and Wendy Cunningham (2023). “AN ASSESSMENT OFGENDER GAPS IN LIBERIA THROUGH A WOMEN’S EMPOWERMENT LENS.” World Bank: Washington, DC. • Guven, Melis; Jain, Himanshi; Joubert, Clement. 2021. Social Protection for the Informal Economy : Operational Lessons for Developing Countries in Africa and Beyond. World Bank, Washington, DC • ILO (2018). Women and Men in the Informal Economy: A Statistical Picture. (Third edition). Geneva: International Labour Office. • Jain, Himanshi, et al. “Understanding the (un)met Savings Needs of Poor Urban Liberians”. World Bank, mimeo. • Kalle, Alina, Ana Luiza Machado, and Miriam Muller. 2023. Navigating Education, Motherhood, and Informal Labor: The Experiences of Young Women in Luanda - A Qualitative Study.” World Bank: Washington, DC. • Kanbur, Ravi. 2017. “Informality, Causes, Consequences, and Policy Responses.” Review of Development Economics, 21. 939–961. • Karlen, Raphaela ; Rougeaux, Solene ; Johansson de Silva, Sara ; and Barussaud, Simon, forthcoming. Towards a more productive and resilient informal sector in Côte d’Ivoire. World Bank, Washington, DC. • Lall, S, Henderson, J.V. & Venables, A. (2017). “Africa’s Cities: Opening Doors to the World.” World Bank, Washington, DC. • Levy Yeyati, E., Montané, M., & Sartorio, L. (2019). What Works for Active Labour Market policies? Harvard University Center for International Development faculty working paper 358. • Nguimkeu, Pierre. 2014. “A Structural Econometric Analysis of Informal Sector Heterogeneity.” Journal of Development Economics, 107, 175-191. • Perry, Guillermo E.; Maloney, William F.; Arias, Omar S.; Fajnzylber, Pablo; Mason, Andrew D.; Saavedra-Chanduvi, Jaime. 2007. Informality: Exit and Exclusion. World Bank Latin American and Caribbean Studies. Washington, DC: World Bank. • Rother, Friederike and Raphaela Karlen (editors), forthcoming. Togo Jobs Diagnostic - Confronting Challenges and Creating Opportunities for More Good Quality Jobs for All. World Bank, Washington, DC.; • World Bank. 2023. Urbanization’s Opportunities and Challenges: Supporting a Resilient Recovery: Africa ACT- Adapt Connect and Transform, People First. Urban Poverty GSG. Downloaded January 2023. 104 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Abbreviations & Acknowledgements Abbreviations Acknowledgements ❖ Prepared by a team led by Wendy Cunningham and Christian Bodewig ❖ Team includes Mohamed Almenfi, Jorge Avalos, Thomas Bossuroy, Julian Cassal, Timothy Clay, Filippo Cuccaro. Ugo Gentilini, Sarika Gupta, Georgina Marini, Saksham Khosla, Felix Lung, Ubah Thomas Ubah, Anit Mukherjee, David Newhouse, Federica Ricaldi, Ababacar Sedikh Gueye, Feraud Tchuisseu, Ubah Thomas Ubah, Puja Vasudeva Dutta, Jessica Venema, Mariana Viollaz, Brian Webster ❖ Peer reviewers included: Andrea Vermehren, Federica Ricaldi, Kathleen Beegle, Koen Maasten, Paolo Belli, Ramya Sundaram, Amer Ahmed, Emma Wadie Hobson, Raphaela Karlen, Montserrat Pallares-Miralles, Matteo Morgandi, Charles Undeland, and Jamele Rigolini ❖ Strategic Guidance was provided by Iffath Sharif, Dhushyanth Raju, and Camilla Holmemo ❖ We are grateful to financing through the G2Px trust fund and the RSR-19 105 Bearings – Motivation – Urban Informal in SSA – Welfare I – Welfare II – Interventions – SPJ Role – Annex – End Matter Publication Information Attribution – please cite the work as follows: Cunningham, Wendy and Bodewig, Christian. 2023. SPJ Support to the Vulnerable Urban Informal in Africa: An Options Paper. World Bank. Washington, DC. 106