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> Posted by Joshua Goldstein, Principal Director for Economic Citizenship & Disability Inclusion, CFI

It has always been my unexamined belief that as economies mature the so called “informal sector” will shrink and with it the microfinance market. Sometimes unexamined beliefs based on instinct or intuition turn out to be right when subject to a fact-rich inquiry. But not this time. Upon investigating I uncovered growth trends in the informal sector and in urbanization, suggesting a refocusing for microfinance.

The informal sector is growing everywhere in the world. This segment of the economy, though its definition varies, includes activities of the working poor that are unrecognized, unrecorded, unprotected, or unregulated by public authorities. In more developed countries, also considered part of the informal economy are employment positions that have tenuous connections between the worker and formal structures and few, if any, labor rights or benefits. Globally, estimates for the total informal economy vary between 50 and 60 percent of the world’s population. According to Gallup’s 2012 World Survey, only about 40 percent of adults around the world, across all countries and income groups, have a fixed income for over 30 hours per week.

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