CAUSES AND EFFECTS OF INFORMAL SECTOR: THE CASE OF STREET VENDORS IN SHASHEMENE TOWN

Abstract

The informal sector or informal economy refers to activities and income that are partially or fully outside government regulation, taxation, and observation. Street vending is one of the most visible activities in the informal economy and is found everywhere in the world, both in developed and developing countries. This study is aimed at assessing the cause and effect of street vending in Shashemene town and identify constraints and risk in the operation, specifically to examine the reason why informal operators become in the informal sector. The research design used in this study was descriptive design and purposive sampling technique was used to take sample street vendors. Instruments that used to collect primary data were questionnaire, focused group discussion, key informant interview, personal observation. Data were gathered from a sample of 130 street vendors in Shashemene town. The study identified that the major causes of street vending activities were unemployment, poverty, inflation, lack of employment opportunity in the formal sector, easy to start the business and rural–urban migration. The majority of street vendors in Shashemene town were engaged in selling a variety of clothing items including second hand. However, vending activity serves as reducing unemployment and Create employment for the urban poor and livelihood for peoples. It also causes significant problems in urban areas such as narrowing of pedestrian path, traffic congestion, and environmental pollution and reduces the revenue of the municipality, increase crime, and etc. The study findings imply that the challenges the street venders face was enormous in the study area are lack of start-up capital, lack of working space, harassment by police and inadequate skills. Finally, the study suggested Shashemene town municipality should create favorable conditions conjunction with Shashemene Woreda administration for rural development in order to reduce rural-urban migration of youth through encouraging rural employment opportunities like supplying agricultural inputs to increase productivity of agriculture and incentives to create rural job opportunities as well as social services like school, clinics, road that link rural-urban, electricity this may reduce out flow of rural young population.7