THE FACTORS THAT CONTRIBUTING FOR THE GROWTH OF INFORMAL TRADE IN ETHIOPIA

Abstract

This study is designed to investigate the contributing factor that influences the growth of Informal trade in Ethiopia. The main objective of the study was to assess the contributing factor, transition intention, and constraints of the informal trade in Ethiopia. It also identifies the major cause and consequences of informal trade, the role of government in preventing the informal trade or formalizing it, and the mechanisms of transforming the informal trade into the formal sector in Ethiopia. The study is based on only the secondary data source. The study found that the main factors contributing to the informal trade are unable to fulfil the criteria of formal trade and lack of capital to start the formal business. The study that street vendors also have transition intention to formal trade. The study prevails that informal trade is the source of income for the poor or means of employment and also it is a base or formal trade. The study shows that the majority of the street vendor’ constraints were a shortage of capital and low price for a product. As a recommendation, the government should give much emphasis on a rural job opportunity for youth and women to reduce rural to urban migration and to the factors that contribute to the informal trade. Also, provide financing opportunity to those who do not have the capital to start the formal business.