Informal economy: as a source of women’s empowerment in Nepal

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Abstract: Women’s empowerment has been a most prominent issue globally these days. The aim of this paper is to highlight the momentousness of informal economy to uplift women’s status economically and socially as well. The developing countries like Nepal are not in the condition to formalize all the active population hence a well regulated informal economy can be a rigorous instrument in the hand to empower excluded by the economy together with society especially women. It is realized that converting informal economy to formal economy should be the foremost objective of the government of Nepal and other concerning agencies as well.



Informal economy describes a large and growing sector of the global economy where the worlds working poor earn a living piercingly, remaining outside the world of full-time, secure and stable jobs and in myriad cases socially unprotected  (StreetNet International, 2008). Women globally remarkably over-represent (around 50 percent) informal economy, in fact, this is a sheer option in their hands (Sigmund, nd), though gender disparities are extreme (Ramani, Thutupalli, Medovarszki, Chattopadhyay, & Ravichandran, 2013). Concurrently, it contributes noticeably to the total GDP of Nepal. Doubtlessly, informal economy accrues economic as well as the social condition of those involved in. Economic development enhances the quality of life and sustainable livelihoods of the population ((Ngundu, 2010) same as social development meets the basic requirements aiming to alleviate poverty and promote the highest possible level of human development (Ngundu, 2010). Hence, it empowers and uplifts subsistence of women and disadvantaged and vulnerable groups.

Informal Economy: Two facets of coin

Chen (2004) notes that over the past decade the informal sector has provided employment and this phenomenon has proliferated and blossomed rapidly in all the regions of the world likewise in most developing countries (Guha-Khasnobis, Kanbur & Ostrom, 2007). In addition, Chen, Vanek and Carr (2004) posit that it has also emerged in new guises and unexpected places. Indeed, Nepal alike less developed countries pretty often uses “unorganized” and “informal” interchangeably (Suwal & Pant, 2009). Any enterprise in the form of industry, trade or profession which is conducting by individual, family or as a self-employed on the basis of oral agreement or contract running with less than ten workers substantially semi-skilled or unskilled, less capital, raw technology and technique, mostly eluded by national income accounts and with odd and no certain working hours stands for informal economy (Maryadit kaam ra maryaita jivan ka lagi abhayas pustika, (nd).

Chen (2004) argues that all kind of people with higher education or no education, low to handsome income is involved in the informal economy even to augment more money to their formal income some are captivated to this. But, in case of Nepal due to lack of education and awareness, low social and economic status, lack of knowledge and skill, no other option of subsistence (Musiolek, 2002) are the causes to embrace informal economy (Maryadit kaam ra maryaita jivan ka lagi abhayas pustika, (nd). The informal economy is not protected in terms of remuneration and occupational health and safety as they are working without written contracts (Mofokeng, 2005; Bertulfo, 2011). Difficult physical conditions, heavy manual work, long work hours with low and discriminated wage rate, work under tough climate conditions, work-related health problems, social protection, cheating by the employers on payments of salary, inhumanely abusing, master-servant relationship, harassment and humiliation, sexual exploitation and harassment are widespread in informal economy of Nepal (ILO, 2004; Suwal & Pant, 2009). Hence, Mofokeng (2005) adds, this exacerbates poverty and vulnerability among involved. Despite the diversity in the informal economy, there is one common factor among those engaged. It lacks economic security and legal protection (Chen, et al., 2004) as well in Nepal (Maryadit kaam ra maryaita jivan ka lagi abhayas pustika, (nd).

A massive portion of agriculture economy of Nepal is informal (ILO, 2004). Broadly, Nepali informal economy is vast and wide-ranging which overwhelms farm and farm-related work, trading (street vendors, hawkers etc), craft workers (bamboo, wood, metal craftwork etc), construction workers, transport helpers, micro-enterprise (family based shop), home-based work (Sigmund, nd). From the discussion, informal economy comprises of robust productive activities and being means of livelihood and survival strategy for large.

Informal economy and its contribution alleviating poverty

The poverty of Nepal has engulfed around 28 percent of the total population; however, international agencies working in Nepal differ with this figure. They claim more than 50 percent of the population is below the absolute poverty. Whilst, Transparency International report (2017) discerns the staple reasons of existing poverty in Nepal is lack of good governance and tendency of corruption. In fact, the poverty rate of rural area is significantly higher as reported by NDHS 2016/17.

Consequently, more than 70 percent of the economically active population of Nepal is in the informal economy (ILO, 2017). The augmentation of the informal economy in Nepal is because of the poor business environment, political instability, and weak infrastructure which restrain private sector development (Afram & Del Pero, 2012). The contribution of the informal economy is quite large even ironically larger than the official statistics speak (Chen, et al., 2004). It is very tough to obtain authentic data relating to the informal economy (Kok, Deijl & Essan, 2013) besides, the actual level of unemployment is masked by informal economy in most developing countries (UN, 2016). It has been an asylum for unemployed and massively contributing (around 25% in Nepal as mentioned in Nepal gazette, 2018) to the GDP, a significant role in production and income generation (Schneider & Bajada, 2003) and providing low priced goods and services (Becker, 2004). Although ILO (2004) portrays lack of training and skills, consequently results in thin profit margin.

The informal economy, in contrast to the formal economy, has plausible growth scope. Rakowski (1994) condemns that a huge number of self-employment in the informal area has robust ingenuity and entrepreneurial spirit. Therefore, social activists and the very stakeholders suggest combating to formalize these vulnerable and deplorable situations in the informal economy for its betterment (Aryal, 2015). Notwithstanding, the hardships; women encounter being in the informal economy, and their sacrifices for socio-economic development of the country cannot be undermined (Tripathy, 2003).

Nepali women as a prominent actor in the informal economy

The informal economy is classified by location of work, a sector of the economy, employment status, social group, and gender (Chen et. al (2004). In the changing scenario, it has been a convenient avenue for absorbing retrenched workers, creating alternative jobs for women and the unemployed youth (Musiolek, 2002). According to the international advocacy group WIEGO, in developing countries, a significant number of women are employed in informal economy than formal economy (Women in Informal Economy Globalizing Organizing [WIEGO], 2017). ILO’s statistical update (2016) shows that women outnumbered men as a percentage (around 9%) of informal workers in industries other than agriculture in developing (Chen, et al., 2004) and developed nations as well (Mofokeng, 2005).  However, there is a reasonable amount of discussion in ILO literature to highlight women’s disadvantaged position within this. Women are generally involved in domestic service, self-employed own account work, and unpaid work within small enterprises or the home (ILO, 2016). The reason behind is ease of entry, flexibility to operate and downsizing of the formal economy still exceptionally this might not be the exact and optimum utilization of their time and energy (Duflo, 2012). Another reason for it being limelight for women, this provides opportunity for women with little or no skills; it means no formal trainings and education (Leach, 1999), differential positioning of men and women in the society (Musiolek, 2002), disadvantaged status due to gender hierarchy in the households (Chen, et al., 2004) and low and lack of education than men let women back to informal job market (Mituallh, 2003).

nepali women

Eapen (2001) clarifies a large portion of women are bound to remain bottom of the ladder and have low pay and the very nominal scope of improvement, work status mostly blue collared jobs in Nepal (ILO, 2004), despite their work enlarges to the real income of the family, they do not get any remuneration for that. Astoundingly, poverty is harshly more severe to women that is why half of the working population in many countries follow informal economy to improve their living and working conditions through increased income, leading overall economic growth in return reduced poverty in the long run (Bertulfo, 2011). Though informal economy discriminates in between wage rate in men and women moreover the economy is weak to raise voice and defend their right (Orser, et al., 2006).

Especially women have extremely scarce opportunities for decent employment because it has low absorption capacity (Mofokeng, 2005). Nepali women do not have the facilities required for education (two out of five women have no education, Demographic and Health Survey, 2016), health, technical and vocational training to upgrade them to involve in gainful formal activities for their subsistence (Chen, et al., 2004; Mofokeng, 2005). Mayoux (1995) envisages the multiplying number of women to this is not a conscious choice preferably the last hope, as they do not have enough possibilities for employment.

Women are rigorous pillar of any economy and if they are kept at centre of development strategies can accrue economic growth (Tripathy, 2003) as globally they produce half of the world’s food supply, they constitute a quarter of the developing nation’s industrial labour, they carry major responsibility of child care and household chores, they are contributing 37 percent to the global gross domestic product (ILO, 2016). Identically, the informal employment in Nepal by 2008 has represented 96.2 percent (Suwal & Pant, 2009) leading by women. Therefore, gender inequality in the form of women empowerment is to be accounted for the effectiveness of developmental work (Bertulfo, 2011).

Informal Economy: Empowering women below the poverty line

Mead (1998) observes that the health of the economy as a whole has a strong relationship with the health and nature of the informal economy. It contributes to GDP, providing employment, facilitating the distribution of goods and services (Buame, 2004). This directly leads standard of living of women involved in, at least, it allows maintaining minimum levels of their subsistence. Women’s earnings contribute to basic needs of their family (Vishwanath, 2001; Paramanandam & Packirisamy, 2015) which is gained through maximum opportunities in the informal economy, without constraints and interferences. However, women in informal economy have their issues and concerns that need to be rectified which may assist them to perform full-fledged and excel than their counterparts (Krishnan & Kamalnabhan, 2015; ILO, 2017) and foster their abilities to participate rigorously in labour market. In the Shtrii Shakti study Nepal, it is observed that women’s contribution to their family and to the nation is exuberantly comparing to men (Upadhya, 1996). Empowered women whether economically or socially can only transform their living standard.

Despite the progress in combating poverty and social exclusion by means of informal economy (Balckburn & Ram, 2006), both remain a major concern in the developing world. According to the World Development Report (World Bank, 2012), currently 200 million people are deprived of work and an even greater number is not being able to lift themselves out of poverty through the fact that they are working (“working poor”), Nepal has 3.2 percent of unemployment rate in 2016 ( Job creation in the private sector can reduce poverty and pull social excluded to the mainstream; over the past 30 years, it has contributed to a sharp decline in the share of the population in the developing world living below the poverty line from 52 to 22 percent (World Bank, 2012). It enhances women’s leadership qualities and increases their decision-making capabilities in their personal, family, and social life (Krishnan & Kamalnabhan, 2015).


In a nutshell, the informal economy is to be primarily prioritized to formalize in Nepal too as most of the other countries have stepped to and being benefited by the initiation. It can be the right time to formalize informal economy by ensuring minimum wages, developing and extending social protection scheme, building awareness and education in a rights-based track, establishing micro financing institutions and most importantly policy intervention to revise the national framework in favour of workers and self employed involving in informal economy by the stakeholders, it would not be overemphasized to say it can be the buzzword for less developed nations like Nepal to upgrade economic condition, extract and channelize unproductive and underutilized  human power and mainstream unprivileged. Gainful informal economic activities have been urgent in order to mitigate vulnerability and exploitation of immigrating voiceless poor women and to uplift their family and bright future of their children as a whole.

                                                           Research by prof. Vandana Jain, Viratnagar, Nepal

Women Career Series


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