How dialogue can help address challenges to informality for refugees and host communities in Kenya

Following the release of an assessment report by ILO PROSPECTS, government, employers and informal workers representatives agree on strategies to support the transition to formality, advance inclusive economic development and sustainable livelihoods.

News | 05 January 2023
Innocent, a refugee and entrepreneur, showcases his soap products at his business located in Kakuma Refugee Camp ©ILO
Turkana, Kenya (ILO News) - Innocent Havyarimana, a refugee who produces soap products in Kakuma Refugee Camp and Kalobeyei Integrated Settlement in Turkana County, Kenya, runs a registered business and currently employs 43 people, including refugees and local Kenyans.

“Formalization helped my business grow and allowed me to create more jobs for both host and refugee community members. To date, I have trained almost 50 entrepreneurs who are also engaged in soap production because I want them to grow as well and I want to give back to the community,” said Innocent, showing his factory set up on the land provided by the government to start his business.

Formalization helped my business grow and allowed me to create more jobs for both host and refugee community members. To date, I have trained almost 50 entrepreneurs who are also engaged in soap production because I want them to grow as well and I want to give back to the community. "

Innocent Havyarimana, a refugee entrepreneur in Turkana

He added, “But going through the formalization process was a struggle. I found my way through my own research, calling people and visiting offices.” As his business started growing, he felt it would be important to obtain a certificate from the Kenya Bureau of Standards. His entrepreneurial mindset and perseverance to complete tedious administrative processes helped him to achieve this goal.

Now, to enter new markets, Innocent needs to obtain a licence from the National Environment Management Authority and is seeking guidance on how to expand formal cross-border trade.

“I would also want to find a way to register my employees. It can bring them social security and better access to finance,” said Innocent.

However, Innocent’s story is rare in Turkana, Kenya’s second largest and one of the economically-challenged counties. It is home to over 200,000 refugees, making it one of the highest refugee-to-host population regions in Africa. Informal enterprises drive employment and livelihood opportunities in the region.

According to the ILO, over 95 per cent of employment here is found in the informal economy and most small enterprises tend to stay informal and do not grow to become larger formal enterprises. Challenges that keep these enterprises stuck in a cycle of informality include burdensome and expensive business and licence registration processes, lack of access to credit and poor infrastructure in the region.

Furthermore, the refugee population faces additional hurdles to operate a formal business, such as applying for work permits and refugee IDs, and the inability to move around freely outside of the refugee camps.

Compounding this, up to 95 per cent of informal enterprises are not registered for national social security and health insurance. Weak social protection increases the risks that business-owners face in securing sustainable livelihoods. Women-owned informal businesses were also found to be much less productive than those owned by men, which would also negatively impact their ability to grow.

Facilitating evidence-based local dialogue on informality to address challenges

Under the PROSPECTS Partnership, supported by the Government of the Netherlands, the ILO facilitates an evidence-based local dialogue process to assess how challenges of job and enterprise informality affect the creation of livelihood opportunities for refugee and host communities in Turkana County.

A first stakeholder dialogue forum on informality took place on 23 November 2022 in Lodwar, Turkana County, in order to validate an assessment which identified challenges related to informality and opportunities for the formalization of enterprises and jobs in the informal economy in the county.
Stakeholders from Turkana County participate in the dialogue forum to support transition of enterprises to formality ©ILO

Participants included representatives from the Turkana County Government, the Micro and Small Enterprises Authority, the Chamber of Commerce and Industry, Jua Kali, an association representing informal workers, representatives from local cooperatives and self-help groups, agri-business representatives, informal entrepreneurs, and international development partners operating in Turkana County, all of whom were consulted during the assessment. Based on this validation, the ILO PROSPECTS team in Kenya, will assist stakeholders to develop adapted formalization strategies aligned with the diverse informal sector operators, the specific needs of the mainly pastoral and rural community, as well as the distinct challenges associated with forced displacement.

Mr Wilson Ejiyee, Deputy Director in the Ministry of Trade, Gender and Youth Affairs, stated, “There is buy-in from the local government to support the process of addressing challenges of informality affecting the business community and their workers.”

Participants called for the need to institutionalize such local dialogue process, strengthen the organizational capacities of stakeholders to address informality and address cumbersome processes to obtain ID documents for nationals and refugees. Moreover, they underlined the importance of enhancing access to social security and health coverage for workers in small enterprises, in line with the ongoing efforts of the county government. Among the medium-term priorities identified were to develop incentives for micro and small enterprises encouraging them to formalize and increasing the freedom of movement and settlement opportunities for refugee workers within the county.

Forging pathways to formality through adapted strategies

During the dialogue forum, stakeholders acknowledged that adapted strategies could support entrepreneurs who want to start a formal business. For example, Learning Lions, an NGO located in Turkana, uses an innovative model to empower young people from refugee and host communities through Information and Communication Technology (ICT) training. It provides concrete employment opportunities once they graduate from the programme through an in-house digital agency. However, many of the refugees who graduate face hurdles to register as freelancers.

“Mobility restrictions, the legal status of refugee freelancers and protection of intellectual property are some of the key issues related to informality that concern our graduates. Innovative solutions to streamline formalization and lifting mobility restrictions would greatly improve the economic prospects of our students,” said Mr Brizan Were, co-founder of Learning Lions.
Value Villages Food and Leather Ltd. employs many youth and women from the refugee and host communities in Turkana ©ILO

Similarly, enterprises, such as Value Villages Food and Leather Ltd., a fish processing farm, provide direct employment to the local community, in particular to women and young people, as well as indirect employment to fishermen and other actors along its value chain. “Supporting enterprises like these to address issues of informality in their operations, such as helping fishermen to organize, getting access to better equipment and extending access to social protection for their workers, could help to improve their productivity and ensure decent job creation as the business expands,” said Lilyanne Velo, National Project Coordinator with ILO PROSPECTS Kenya.

Coordinated efforts to support the transition to formality for inclusive economic development and sustainable livelihoods is a long-term process. It requires the engagement of a variety of actors. Stakeholders in Turkana County, with strong commitment from the county government, are taking action to create such an integrated approach which can be feasible, even within a forced displacement context.