<!-- Start of picture text --> Resear h, and External Affairs<br>LPolicy,<br>Women In Development |<br>WPS 469<br><!-- End of picture text -->

- This paper a product of the Women in Development Division, Population and lHuman Resources Department is part of a larger effort in PRE to determine if and how women's productivity (and thus family welfare) are improved when women are given more access to education, extension, training, credit, health care, and otherpublic resources. Copies are available free from the Wor!d Bank, 1818 H Street NW, Washington DC 20433. Please contact Maria Abundo, room S9-123, extension 36820 (87 pages with diagrams and tables).

The informal sector is a collection of loosely organized, small-scale competitive family businesses that rely little on nonfamily hired labor, use labor-intensive technologies, and operate largely outside of the legal, bureaucratic, and regulatory framework in terms of licenses, taxes, and contractual obligations.

In Lima, Peru, the informal sector makes up half the labor force, accounts for 61 percent of the hours worked, and generates an astounding 39 percent of GDP. More than half the street vendors are women.

Smith and Stelcner analyze Peru's urban informal sectorparticulary women's role in it - based on a theoretical model of informal retail trade (the dominant nonfarm family enterprises), using data from the Peru Living Standards Survey (PLSS).

They address these questions: What factors explain differences in the performance of retail businesses? If these can be identified, what types of policy initiatives might improve the performance of firms, especially those run by women? Among their recommendations: In the informal sector, the free play of market forces determiines returns to productive factors, especially labor. Informal enterprises are concentrated in low-income areas of urban centers, but rural households in Kenya and Peru, among other countries, have joined.

* Channeling crcdit to small businesses.

* Promoting cooperatives and self-help associations, which provide credit, facilitate bulk purchases, and establish markets for entrepreneurs.

The informal sector is an important - if not the sole -- income opportunity for growing numbers of the poor. International aid agencies have explored policies to make informal businesses more profitable. But this surge of interest is not based on much empirical evidence about what determines the firms' performance. Nor is the value of women's entrepreneurial activities reflected in the national accounts.

* Providing technical assistance, such as short-term instruction in basic management.

* Making it easier and cheaper to get business licenses.

* Provide or facilitate cooperative childcare centers, facilities for preparing food, and neighborhood facilities for basic health care to reduce the heavy workload typical for women.

The PRE Working Paper Series disseminates the findings of work undcr way in the Bank's Policy, Rcsearch. and Extemal Affairs Complex. Anobjective of thcseries is to get these findings outquickly, even if prescntations are less than fully polished. The findings, interpretations, and conclusions in these papers do not necessarily represent official Bank policy.

Produced by the PRE Dissemination Center