Informal sector and urban unemployment: small businesses contribution to large livelihood improvements

Based on quantitative data collected from 450 informal sector operators and in-depth interviews with stakeholders in Hawassa City, Ethiopia, this study assesses the improvement in the livelihood of informal sector operators. Our findings show that the majority of operators (about 90%) have improved their livelihood. Operators who are native, educated, experienced, profitable, and economical are more likely to improve their livelihood than their counterparts. However, operators face challenges such as a shortage of working capital, lack of working premises, shortage of raw materials, and narrow local market base. Given the considerable impact of the informal sector on the livelihood of the operators, the government needs to seriously consider the role of the informal sector in combating growing urban unemployment.