With over 83% of Kenya’s total employment rooted in its informal economy, its significance cannot be ignored. This sector is the backbone of Kenya’s economy, yet it has remained largely invisible to many decision-makers.

In Kenya, the informal economy employs five times more workers than the formal economy, creating jobs seven times faster in 2022. Nearly half these workers (44%) are aged 15-34, and over half (58.5%) of informal enterprises are owned by women. The young entrepreneurs are already contributing $539 million per month to the Kenyan economy. 

With Africa's population set to double by 2050, the informal sector must adapt to meet shifting local and global economic demands. It is a dynamic and diverse sector with enormous potential - but only if we can collectively assist in overcoming the barriers that currently hold it back.

In partnership with TRANSFORM (a partnership between Unilever, the UK’s Foreign, Commonwealth and Development Office, and EY), and together with our brilliant local Kenyan research partners - Laterite, ProCol Africa, Busara, and Ideas Unplugged - we engaged directly with hundreds of stakeholders and local entrepreneurs, not just to conduct research, but to build lasting connections and co-create solutions with the people driving this space. These partners were instrumental in this collaboration, bringing their invaluable expertise to help broaden our research. 

Building on our earlier research into Kenya’s Repair and Reuse Economy in 2022, which engaged over 450 stakeholders, we expanded our focus to explore the entire informal economy - a thriving yet invisible sector lacking crucial data, incentives, and clarity on viable business models. We also learned about the realities of people juggling multiple side hustles across sectors (portfolios of work) and the challenges they face, such as negative perceptions and limited access to finance.

We’re talking about potentially a billion young people by 2050 across sub-Saharan Africa. In that case, we shouldn’t be talking about the informal economy of this continent, but rather, just the economy.”

- Anuj Tanna, CEO & Co-Founder of MESH, one of our partners. 

The informal economy is not a monolith; it consists of diverse segments, each with its own challenges and opportunities. Through our work, we identified the aspirations of those involved and provided actionable recommendations to shape a better future. From the insights gathered, we outlined a pathway to a future of work that is inclusive, resilient, and built by the very people driving this economy forward.

Key insights & findings

Kenya’s informal economy is a diverse and dynamic ecosystem, shaped by millions of people creating and supporting livelihoods across a vast array of sectors. Through our research, particularly focused on women and youth—who are critical drivers of these sectors—we’ve uncovered both the challenges and untapped potential that define this vital part of the economy.

Here’s what we learned:

• Micro Enterprises Dominate: Over 99% of firms in the informal economy are microenterprises, primarily engaged in wholesale and retail trade, with an average operational span of seven years.A significant portion of these microenterprises (55% female-owned and 54% youth-owned) can be classified as "livelihood-sustaining businesses," where the owner and employees lack relevant skills for the business, making it their sole income source. The diversity of livelihood strategies within the informal economy is vast, and each segment faces unique challenges and opportunities.
• There is no-one size fits all. Each segment of the informal economy tells a different story. From Mama Mboga to street performers, the livelihood strategies vary widely. Where one segment struggles with capital access, others grapple with seasonal fluctuations in demand. Women, in particular, face additional hurdles, such as lower incomes and the challenge of balancing work and family responsibilities.
• Women own 58.5% of informal enterprises. Women own 58.5% of informal enterprises in Kenya. The flexibility of the informal economy allows them to balance work with household responsibilities, elevating their economic and social status. However, despite their significant ownership, women face greater barriers than men—including limited access to capital, fewer working hours due to family obligations, and higher business failure rates. On average, men in the informal economy earn higher incomes than women, further widening the economic gap.
• Youth creating opportunities.  44% of informal workers are between 15 and 34 years old. Many young people run part-time enterprises to support their families, especially students balancing education with income generation. With the formal economy unable to create enough jobs, the informal economy has become a key source of employment for Kenya’s growing youth population
• Empower, don’t replace. The informal economy provides vital livelihoods for millions of Kenyans.  Instead of replacing these existing structures, the focus should be on empowering individuals through better access to resources, training, and improved working conditions. By strengthening what already exists, we can create more sustainable and dignified livelihoods for those working in the informal sector.
• Prosperity beyond income. For many, prosperity means more than just financial security. It includes personal growth, community connections, and access to decent working conditions. While income is crucial, well-being and a sense of belonging are equally important in shaping how informal economy participants define success and prosperity.
• Fulfilment varies across segments. Job satisfaction varies across different sectors of the informal economy. While 79% of respondents in the Creative and Entertainment sectors reported enjoying their work, only 47% of those in Agri-Livelihoods and 31% of those in Food Service Providers felt the same.
• Hope for the future. Despite the challenges posed by low and inconsistent incomes, many people remain hopeful about the future of the informal economy. There is a strong desire for acquiring new skills, particularly in finance and business, to improve their prospects and build a better future for themselves and their families.
• Technology helping break barriers. Technology is playing an increasingly significant role in the informal economy, from job-matching platforms to online creative content production. While these technological advancements offer potential benefits—such as fostering gender equality and increasing productivity—they also present challenges, including low pay and unfavourable working conditions.

A future vision for Kenya's Informal Economy

A Future where the informal Economy is recognised and valued: Informal workers envision a world where their contributions are recognised, their rights are respected, and their work is valued equally to that of the formal economy. This includes access to social protections, fair policies, and the ability to participate in decision-making processes that affect their livelihoods.

A future with inclusive digital technology: In this future, digital tools are accessible and tailored to the needs of informal workers, enabling them to connect with new markets, enhance their business operations, and improve their financial security. Bridging the digital divide is key to unlocking the full potential of Kenya’s informal economy.‍

A future where information is accessible and empowering: Informal workers envision a future where information is readily available, understandable, and actionable, allowing them to make informed decisions and access the resources they need to grow their businesses. This future prioritises transparency and the dissemination of knowledge through trusted channels.

A future with affordable, friendly finance: In this envisioned future, informal workers have access to financial products that are affordable, accessible, and tailored to their specific needs. This includes flexible credit options, insurance, and savings mechanisms that provide a safety net and support business growth.

A future with supportive policies: Finally, informal workers envision a future where policies are designed to support, not hinder, their efforts. This includes streamlined licensing processes, protection from harassment, and policies that promote their integration into the broader economic framework.

Looking ahead

As we look to the future, it’s clear that the informal economy will remain a cornerstone of Kenya’s economic landscape. To ensure its continued growth and resilience, there are several key areas for action:

1. Collaborative policy development: Policymakers need to engage closely with informal workers to create policies that reflect their realities. Streamlined licensing, better protection from harassment, and inclusive economic strategies are crucial.
2. Bridging the digital divide: Expanding access to digital tools and training is not just a technological upgrade; it’s an economic imperative. Empowering informal workers with the skills and resources to leverage digital platforms will open up new markets and opportunities for growth.
3. Innovative financial solutions: Financial inclusion tailored to the needs of the informal economy is essential. Products that are flexible, accessible, and grounded in community-based models can drive significant economic growth and resilience.
4. Infrastructure and support for all segments: Whether it's improving storage facilities for agri-livelihoods, creating safe marketplaces for food vendors, or enhancing intellectual property protections for creatives, targeted support will have a profound impact.
5. Strengthening ecosystem collaboration: Donors, funders, support organisations, and academic institutions all have a role to play. By working together, these stakeholders can create an enabling environment that supports the sustainable growth of the informal economy.

Looking ahead, our work is far from finished. This is just the beginning of a collective journey toward empowering Kenya’s informal economy. With continued collaboration, targeted investment, and a deep commitment to listening to the voices of those within the sector, we can build a future where every worker and entrepreneur in the informal economy has the opportunity to succeed.