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Include informal businesses by first identifying who is informal and what prevents them from accessing opportunity, then involve their representatives in designing coordinated, locally tailored support. Pair business services with a viable, rights-respecting path to formal coverage; a training course, loan, or registration drive alone is not an ecosystem strategy.
What counts as an informal business?
The International Labour Organization (ILO) defines the informal economy as economic activities by workers and economic units that are not covered, or are insufficiently covered, by formal arrangements in law or practice. The definition does not include illicit activities.
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It covers a varied set of people and organizations: own-account operators, employers, cooperatives, social and solidarity economy units, and workers in informal employment relationships. Some workers in informal employment may work for formal businesses. Informal activity occurs across sectors and in public and private spaces. A policy should therefore state whether it is addressing workers, enterprises, employment relationships, or more than one of these—not assume every informal business has the same needs.
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What ecosystem inclusion requires
The ILO’s Inclusive Entrepreneurship Ecosystems Development approach starts with a practical question: do local ecosystem conditions enable particular entrepreneurs to access the goods and services they need, or block that access? It puts specific groups—including women, young people, and refugees—at the forefront and calls for strategies grounded in local incentives and capacities.
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That means assessing connected conditions rather than treating support as a menu of generic courses and loans. A service can exist yet remain out of reach because of its cost, location, timing, language, eligibility rules, documentation requirements, or a policy barrier. Diagnose the obstacle before choosing the intervention.
| Ecosystem condition | Questions to diagnose access |
|---|---|
| Business and policy environment | Which rules or procedures affect operation, registration, or access to support? Are requirements workable for the businesses concerned? |
| Finance | Can operators access suitable financial services, and do costs or eligibility requirements exclude them? |
| Business development services | Are services available in locations, languages, and formats that entrepreneurs can use? Do they address a locally identified need? |
| Human capital | What skills or other capabilities are relevant to the specific group and its business context? |
| Entrepreneurial culture | Which local norms and incentives shape whether people can participate in, or benefit from, entrepreneurship support? |
| Markets | Can businesses access the markets they need, and how do market conditions interact with other barriers? |
A practical sequence for ecosystem builders
- Map informality in its local context. Assess its factors, characteristics, causes, and circumstances. Specify the unit of analysis—worker, enterprise, employment relationship, or a combination—so the diagnosis and proposed response match the population concerned.
- Give informal businesses a real role in decisions. Consult representative employers’ and workers’ organizations and include membership-based organizations of informal workers and economic units. At local level, give informal entrepreneurs and workers a direct voice in planning decisions that affect them; consultation should inform design, implementation, and review.
- Identify connected constraints and incentives. Examine the six ecosystem conditions in the table together. Check who can actually use existing provision and why others cannot. This helps distinguish a missing service from an inaccessible one, and a skills gap from a barrier that training cannot remove.
- Coordinate a tailored package across institutions. Align business support with employment, social protection, and development policy. Coordinate the government bodies and stakeholders responsible for services, registration, finance, labour, and protection instead of treating formalization as a standalone registration campaign.
- Make transition to formality viable and rights-respecting. The ILO’s Recommendation No. 204 sets objectives that include fundamental rights, income security, livelihoods, and entrepreneurship. Support the creation and sustainability of formal enterprises and decent jobs, while preventing formal jobs from becoming informalized.
- Review results with participants. Regularly assess whether policy is effective in consultation with representative organizations. Use the findings to revise measures that do not improve access or protection.
How to choose and assess policy measures
Measures should follow the local diagnosis rather than be treated as a universal package. The OECD’s analysis of Egypt, Iraq, and Jordan describes actions such as making social insurance more affordable and accessible through cost or procedural changes; training and wage subsidies, including temporary support for groups such as women and young people; easier business registration and access to inclusive financial services; and fairer, more consistent enforcement. These are examples from a report focused on the MENA context, not a recipe that can be assumed to work everywhere.
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Before adopting or expanding a measure, assess it against these criteria:
- Access: Can intended participants meet its cost, documentation, location, language, and time requirements?
- Fit: Does it address a diagnosed local constraint, or simply deliver a standard programme?
- Voice: Did informal business representatives shape the measure, and can they influence revisions?
- Livelihoods and rights: Does the route to wider formal coverage protect income security, fundamental rights, and decent work?
- Coordination: Do the relevant business-service, registration, finance, labour, and social protection institutions work together?
- Evidence and review: Are outcomes checked with participants, and is the measure adapted when it fails to improve access or protection?
Measure inclusion by more than registrations
A rise in registrations alone does not show whether informal entrepreneurs can use support, whether livelihoods remain secure, or whether work is decent. Review access to services alongside enterprise and worker outcomes, protection, job quality, and whether support responds to the constraints participants identified. The ILO calls for regular policy review with representative organizations; participation should therefore continue after a programme is launched, not end with initial consultation.
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For scale context, the ILO’s Small Matters report draws on household, labour, and other statistical surveys conducted in 99 countries between 2009 and 2018. That figure describes the evidence base’s country coverage; it is not an estimate of informal businesses’ share of employment or a current global prevalence rate.
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