From the Informal to the Formal Sector: Micro-enterprises in a Developing Economy – Research in Progress

Small and micro-enterprises play a significant part in most economies.However, in developing countries these enterprises have tended to be looked at from a development, or poverty alleviation perspective, rather than as potentially growing businesses. This paper explores the possibility of micro-enterprises in developing economies moving from the informal to the formal sector - what this actually means and the process involved. The purpose of this paper is to document the activities of a group of micro-entrepreneurs in Beira, in Central Mozambique, who received micro-financing to establish or grow their micro-enterprises, all of which were in the informal sector, and to examine these enterprises in terms of their potential for long term success. This provides a sample of a population that is being recognised as very important in the development of African economies, particularly where there are high levels of extreme poverty. The paper also proposes a methodology for monitoring the development of informal businesses in developing economies in Africa and identifying the critical factors in the transition from informal to formal, and from survival entrepreneurship to a sustainable business.