Institute for Development Studies, University of Nairobi

This paper attempts to examine the current view of the informal sector, particularly as stated in the I.L.O. report, It suggests that the I.L.O. view is optimistic in thinking that the informal sector can be made more productive simply through organisational changes in its relationship to both government and industry. It tries to examine the constraints that act on the informal sector and concludes that it is limited in its ability to transcend barriers to entry into the formal sector through lack of access to capital resources, and is unable to gererate this capital from its own production surplus. Two case studies are given, one of an informal motor repair workshop and the other of a successful manufacturer of beds. The paper concludes that these constraints disqualify the informal sector from serious consideration as a dynamic growth point in the economy of Kenya.