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IZA Discussion Paper No. 17887
May 2025
How Organized Is the Informal Sector? The Role of Business Associations in Microenterprises in West Africa

Although microenterprises are the most prevalent employer in Africa, boosting their productivity remains a development challenge. Theoretically, microenterprise business associations could foster technology, improve access to inputs, pool risk, ensure coordination, and facilitate credit for businesses. However, basic facts about their scope and roles are missing from the literature. This study establishes descriptive results to shed light on the nature of these networks in West Africa. First, fewer than 10 percent of informal business owners are members, although there is large industry variation. Second, members tend to be older and larger incumbent businesses with male owners, potentially stifling competition and entrenching gender gaps. Third, most associations are more aptly described as providers of excludable, industry-specific services than as vehicles for collective action and advocacy. Fourth, membership helps explain performance differences among observably similar businesses. Members are more productive, profitable, and financially included relative to similar non-members, although such premia only materialize in a few industries.

Communications
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
Network Coordination
Christina Gathmann
christina.gathmann@liser.lu

The IZA@LISER Network is a global community of scholars dedicated to excellence in labor economics and related fields, now coordinated at the Luxembourg Institute of Socio-Economic Research (LISER) following its transition from Bonn.

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