Commercial Law & Informal Enterprises: The WIEGO Perspective

Policy Stance

The underlying policy stance that informs WIEGO’s work in support of the working poor who run very small informal enterprises is that …

  •  half or more of the working poor are self-employed of which the largest and more vulnerable group are own account operators, including: both single person operators and those who work in family businesses or on family farms
  • legally empowering small informal businesses run by working poor individuals or households should be seen as a central pillar of a just society and a central strategy for reducing poverty and inequality
  • most policies and the global economy privilege large firms/enterprises over small firms/enterprises
  • commercial rights for informal entrepreneurs/operators should be seen as an essential part of a package of rights for the working poor in the informal economy that also includes property rights, labour rights, the right to social protection, and the right to be organized and represented in policy-making and rule-setting institutions and processes
  • other than social protection (property, health, life, disability, old age), which is relevant for wage workers as well as the self-employed in the informal economy, commercial rights are relevant to the half or more of the working poor in the informal economy who are self-employed
  • productivity and protection can and should be promoted together
  • economic policies should address issues of redistribution

Commercial or Business Rights

The working poor who run informal enterprises need basic and intermediary business/ commercial rights, as follows. Only the entrepreneurial class needs the advanced commercial rights advocated by Hernando de Soto:

  • basic commercial rights: right to work, including right to vend; right to a work space (including public land and private residences) and related basic infrastructure (shelter, electricity, water, sanitation)
  • intermediary commercial rights: right to government incentives and support (including procurement, tax holidays, export licensing, export promotion); right to public infrastructure (transport and communication)
  • advanced commercial rights: bankruptcy protection, right to raise share capital

Consider, for instance, street vendors of several types:

  • those who sell fruit and vegetables: they need basic and intermediate commercial rights
  • those who sell cooked food: they need basic commercial rights and intermediate commercial rights but also need to be regulated for public safety concerns
  • those who sell small domestically-produced manufactured goods: they need basic and intermediate commercial rights and may also need to be regulated to ensure the goods are not pirated
  • those who sell more valuable imported manufactured goods: they need basic and intermediate commercial rights and may also need to be regulated to ensure that the goods are not smuggled or pirated

Policy Approach

WIEGO recommends a policy approach that …

  • recognizes and addresses the bias in existing commercial policies, regulations, laws, and procedures that favor larger firms/enterprises
  • seeks to extend government incentives and procurements to the smallest informal enterprises
  • seeks to build backward and forward linkages on fair terms between larger and smaller firms
  • seeks to promote market access and fair trade for smaller firms and enterprises
  • promotes social protection for informal operators (property, health, life, disability insurance) plus retraining, life-long learning, and other support to mobility