Good Practice

Way out of informality: Facilitating formalization of informal economy in South Asia - Final Evaluation

Good Practice Description

The project has created a sizeable knowledge base on the laws and policies applicable to MSEs, the incentives and disincentives to formalization and the cost-benefits of regularization of firms. Dissemination of findings, however, has been sporadic and has not sufficiently informed relations with the social partners or action on the ground. Other tools such as the Compliance Manual and booklet on social security and welfare schemes as well as street plays by KISS have been used to create awareness among HR managers on the duties of companies and among workers of their rights. Grievance redressal has improved because of the training supported by the project but needs to be scaled up.

The formation of an association of small construction contractors represents positive steps towards formalization. In Bangladesh and Nepal, small construction contractors have formed their associations and these associations are registered with local authorities. The association has brought together like-minded contractors who had graduated from the status of workers to the contractors and they understand difficulties and challenges faced by informal workers. In both countries, they practice some of the decent work standards such as equal pay for male and female workers. In Bangladesh, some of them have started providing OSH measures including safety gears for critical/dangerous works.

The compilation of labour laws into a Training Manual and the training of Ranzunjar volunteers have enhanced the grievance redressal service they offer to contract workers in the Chakan cluster in Pune, India. These volunteers are mainly permanent workers in the automotive industry. This outreach by permanent workers to informal workers on a voluntary basis is a good practice that merits replication in other manufacturing sectors. The pre-condition for this was the commitment of one permanent worker to assist contract workers in his enterprise who suffered from the lack of social and job security. With better knowledge of legal provisions, these volunteers can now go beyond grievance redressal to facilitating access to government schemes and to social security. They have already helped many to obtain Aadhar cards as the first step towards recognition of their status.

The chambers of commerce and industries have extended support to the informal enterprises with the provision of business service desk. In Nepal, the district chambers of commerce and industries in project supported districts have established Business Service Desk where the current and aspiring entrepreneurs can seek information on business registration, access to finance, registration with tax authorities, among other services. Initially, the desk was manned for few months with the support of the project. Recognizing its merit, the chambers have decided to retain these service desks funded from their internal sources.
Private enterprises can provide apprenticeship to informal workers to the construction workers. The apprenticeships are usually provided by formal sector. In Bangladesh, BMET organized apprenticeship with a pool of private enterprises where the informal workers who have usually limited education are able to learn the skills with practical experience. The workers coming out of the programme are able to earn higher wages and better working conditions with building construction companies.