The Impact of Informal Economy on Employment Creation: the Case of Kamukunji Jua Kali Artisans in Nairobi

Abstract

The study’s intent was to investigate the impact of the informal economy on employment creation using the case of Jua Kali in Nairobi’s Kamukunji cluster. Specifically, the study related government policy, stakeholder involvement, incentives to urban informality and skill diversity with employment creation. Descriptive research design was adopted targeting Kamukunji Jua Kali unit managers/owners, association officials, and Ministry of labor officers for the purpose of gathering the required information. Data was collected from 80 artisans by use of questionnaires and data analysis was done using descriptive statistics and was fit into a regression model. The study found out that, government policy approach, stakeholder involvement, incentives to informal economy entry, and diversity of skills embodied in the economy helped create employment opportunities for people with different knowledge and skills. By regression, government policy approach had the lowest impact followed by stakeholder involvement. Skill diversity was rated highest factor above incentives to entry in the informal business activities. Components of skill diversity which enabled its heightened impact included learning and skill development opportunities, accumulation of skills over time, no need for basic qualifications to join the industry, numerous options in the industry to take up, and easy diversification into other skill fields. The incentives to informal economy entry included attraction due to wider investment opportunities, personal drive for Jua Kali business, joining Jua Kali a result of missing formal employment, unlimited investment freedom in Jua Kali business and partner support opens up more opportunities. To a large extent the government policy failed in ensuring interdependence with the formal economy, provision of adequate financial assistance, capacity building, fair input taxation, and in making appropriate business interventions. Moreover, stakeholder involvement sparingly failed in providing appropriate support like making tailor-made credit facilities from financial institutions, marketing of the products, and availing working knowledge and skills in the cluster. Based on the findings, the study recommended sensitization of relevant government institutions in embracing informal economy within an appropriate strategy. Also, there is need for a workable framework on maximizing synergy through a complete participatory approach between informal and formal economies.