Monday, July 19, 2004

Somaliland: Women and the informal economy

When the country is striving hard for international recognition, where external investment is low, high underemployment and unemployment, instable economy, there are women, who contribute most for supporting countries economy through non-formal economy.
The non-formal economy is the area that is not recognised, recorded, regulated and protected by the public authorities. It is under now on discussion whether the public authority should provide support and protection to the non-formal economy.
It is hard to realize and admit for the planner, economists and policy makers that the bulk of economy and employment are being generated in the country through informal sectors. This sector not only creates job opportunities to millions of poor and unemployed but also flourishes national economy to a greater extent.
Study says that in Africa itself informal economy accounted for almost 80% of non-agricultural employment, over sixty 60% of urban employment and over the 90% of new jobs over the past decade. Though there is no available statistics about informal economy in Somaliland but it is more likely same as of rest of Africa.
Hargeisa, the capital of Somaliland, has witnessed the rising trend of informal economy over the past few years. Businesses starting from chat (one type of leaf people chew which is mild toxic in nature) to gold are operated and managed mostly by the women. The business is so rapid and fast growing sometimes it creates illusion that the Somaliland economy is moving with this. The skills and competencies women exhibit in handling this business apart from their household chores is really surprised.  People should not be astonished if I say the women primarily control the informal economy in the Hargeisa city.
Why it is called informal:
This is not an organised sector. Economy theory does not speak much about this. Economists consider this economy does not contribute for national economy at macro level. Other reasons for considering as informal economy are based on certain criteria and assumptions like; any national law does not directly govern the sector. Government does not recognise the economy so they do not protect and safe guard the economy. As this is not recognised so it does not comes under the preview of legal framework. Many economists argue that the prime reason for non-acceptance by the government is because the economy does not directly contribute financially to the treasury of Government. Whatever the reasons there in, the truth is the sector is not properly patronised and cared.
The non-formal sector works under high degree of economic and social insecurity. They do not get any support in terms of formal credit linkage, skill upgradation, and business information because of its non-recognition and not organised status.  
How this business runs?
The fundamental requirements for any business to run are buyer, seller, place, materials and money. If we analyse the market ingredients of this economy in Somaliland we find that the buyers and sellers are from rural and urban local communities. They gathered mostly in the pick hour of business that is 8 am to 12 pm. The items they sell in the market are numerous starting from money exchange, vegetable vending, jewellery selling, tea vending, chat selling, traditional handicrafts business, cloth retailing to milk and meat selling. The mode of transaction is through Somali shillings (now 1 US $ is equivalent to 6500 SSh).
The challenges for the sector:
The major challenge is the nature of business itself which is highly volatile and shaky. Second challenge the sector encounter is the access to credit. People do not get formal credit through financial institutions because of the collateral issue.  Though the credit requirement differs from business to business starting from 50 US $ to 5000 US $. It was found that almost all entrepreneurs borrow money for business from the informal moneylenders mostly from relatives, businessman. Sometimes they do business on percentage share basis. They just take product from the whole sellers then sell it in the market and at the end of the day they return money to the whole seller and receive some percentage of the profit. Third challenge they face is lack of insecurity in the field of employment because of high instability and no legal bindings. Job insecurity because the sector is controlled by various invisible agents and external factor which do not guarantee professional growth and any formal contract. Labour market security is non-existence because the government policy does not protect or provide economic or social guarantee.
How to mainstream the informal economy:
In Somaliland context mainstreaming informal economy is like mainstreaming country’s economy. It is clearly evident that the Non-formal sector absorbs more people than formal sector in the country.
The greatest challenge in front of the country is access to external resource support for mega projects. So the alternative is to create environment for small enterprises both in formal and non-formal sector. This act will not only reduce unemployment but also raise per capita income of the country. This is not only Government who is responsible for everything but also it is NGOs, civil societies, academic institutions, and financial institutions who have responsibilities and duties for the people and the cause. 
Areas need more focus and supports:
Right to work as fundamental right.
Freedom of association and right to organize and bargain collectively.
Credit support through formal system to make free from debt bondage.
Protection against any kind of exploitation in business and trade.
Ensure workplace security, work decency and basic facility.
Government policy to protect the sector and economy and strengthening labour law.
Include in social security net. Like free health service, insurance etc.
NGOs can organise workers, provide basic training and education, provide financial linkages, assist in policy advocacy and law, basis health care for the workers etc.
Bankers can train them on business, extend credit facility, organise saving and credit groups and can make necessary amendments in the bank law for the credit linkage and technical support for the non-formal sector. 


At September 4, 2004 at 1:27 PM, Anonymous Anonymous said...

Hello Panda,

Thank you for enforcing my opinion of the changes that is facing small business in Somali. I have always believed that small businesses in Somalia are volatile and shaky. The absence of government that proctects businesses in both financial and unlawful businesses, can create uncertain future in small businesses. Frankly, I would not invest any one dollar in this sector till the government and small businesses communities draft new laws that protects small businesses and customers.

Somalia Frontiers

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At October 14, 2004 at 9:28 AM, Blogger Filsan said...

yeah, it's very unfortunate that something so productive should be labled as ignoring this sectors governments are bascially ignoring what could arguably be the best aspects of society :(
too bad

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