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The benefits and challenges of working in the informal sector as a young entrepreneur in Kenya

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The informal sector is a large and diverse part of the Kenyan economy that encompasses all jobs that are not recognized as normal income sources and on which taxes are not paid. According to the Institute of Economic Affairs (IEA), the informal sector employs over 80% of the Kenyan working population1. The informal sector includes activities such as street vending, car washing, motorcycle taxiing, tailoring, carpentry, hairdressing, and many others.

The informal sector offers many benefits for young entrepreneurs in Kenya who want to start or grow their own businesses. Some of these benefits are:

  • Low barriers to entry: The informal sector does not require high levels of education, skills, capital, or registration to operate. This makes it easier for young people to enter the market and offer their products or services to customers.
  • Flexibility and innovation: The informal sector allows young entrepreneurs to adapt to changing customer needs, market conditions, and personal circumstances. They can experiment with new ideas, products, or services without much risk or regulation. They can also adjust their working hours, locations, and prices according to their preferences and availability.
  • Income generation and poverty reduction: The informal sector provides a source of income for many young people who would otherwise be unemployed or underemployed. It also helps them to support their families and communities, and to contribute to the economic growth of the country.

However, working in the informal sector also poses many challenges for young entrepreneurs in Kenya. Some of these challenges are:

  • Lack of access to finance: The informal sector is often excluded from formal financial services such as banks, microfinance institutions, or mobile money platforms. This limits the ability of young entrepreneurs to access credit, savings, insurance, or payment options that could help them grow their businesses or cope with shocks.
  • Lack of protection and security: The informal sector is often subject to harassment, extortion, eviction, or confiscation by authorities or other actors who view it as illegal, disorderly, or undesirable. This exposes young entrepreneurs to insecurity, uncertainty, and vulnerability that affect their livelihoods and well-being.
  • Lack of recognition and support: The informal sector is often ignored or marginalized by policy makers, employers’ organizations, workers’ organizations, or other stakeholders who do not see its value or potential. This deprives young entrepreneurs of opportunities to access training, markets, networks, infrastructure, or social protection that could enhance their productivity, competitiveness, or quality of life.

Despite these challenges, some young entrepreneurs in Kenya have managed to succeed in the informal sector by leveraging their creativity, resilience, and networks. Here are some examples of their stories:

Mary Wambui: Mary is a 25-year-old mother of two who sells tomatoes on the side of the road in Nairobi. She started her business with a loan of 500 shillings ($5) from her sister and now earns about 15,000 shillings ($150) per month. She uses her income to pay for her children’s education and health care. She also saves some money in a group savings scheme with other women traders. She hopes to expand her business by buying a bigger stall and diversifying her products.

John Mwangi: John is a 22-year-old college graduate who supports himself as a motorcycle taxi driver in Mombasa. He bought his motorcycle with a loan from his uncle and now earns about 20,000 shillings ($200) per month. He uses his income to pay back his loan and to invest in his education. He is currently pursuing an online course in digital marketing. He hopes to use his skills to start his own online business in the future.

Grace Akinyi: Grace is a 24-year-old fashion designer who runs her own tailoring shop in Kisumu. She learned her craft from her mother who was also a tailor. She now employs three other young women who help her make clothes for her customers. She earns about 30,000 shillings ($300) per month. She uses her income to pay for her rent, utilities, and materials. She also supports her younger siblings who are still in school. She hopes to open another shop in a bigger town and to showcase her designs on social media.

These stories show that working in the informal sector can be rewarding and empowering for young entrepreneurs in Kenya who have the passion, determination, and vision to pursue their dreams. However, they also highlight the need for more recognition and support from the government, the private sector, and the society to enable them to overcome the challenges they face and to realize their full potential.

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