Making Do Under the Hot Sun
10
Informal Enterprise
Formal Enterprise
Business size
Small, <5 workers
Large, >50 workers
Start-up capital
Low, easy to start a business
High, difficult to start a business
Labor
Labor intensive
Automated production
Labor protection
Unprotected by contracts, social welfare, or unions
Protected by contracts, social welfare, and unions
Skills
Skills passed on by informal apprenticeships
High skills from formal training institutions
Selling price
Affordable for local population
Out of reach for local population
Raw materials
Scrap from formal and informal sources
New from local and imported sources
Infrastructure
Unreliable power and insecure premises
Reliable power and secure premises
Quality
Low-quality goods
High-quality goods
Resources
Limited capital goods and funding
Extensive capital goods and funding
Market Linkages
Poor distribution network, fragmented informational environment
Well-established distribution network
Flexibility
Adapts well to market conditions
Difficult to adapt
Efficiency
Efficiency through coordination among businesses
Efficiency through vertical integration
Self-sufficiency
Dependent on formal economy for resources
Dependent on government and FDI for resources
Culture
Embedded in Kenyan social relations
Adopts Western mode of production
Table 1.2 Informal vs. Formal Enterprises. Enterprises in the informal and formal economies differ on a variety of metrics. There are strengths and weaknesses of each, based on the context. It is important to note that the descriptions given here are for extremes, as we will see that formality exists on a spectrum.