Institute for Development Studies, University of Nairobi

Like its urban counterpart, the rural informal sector is dominated by trade activities and without significant regional differences. Furthermore it appears that "trade" has the least potential for growth and therefore labour absorption. The rural informal sector is in addition dominated by male "sole proprietors" with basically primary level education and no "further training" after graduating from school. This raises questions about their potential trainability, and the means of training them. In designing policies for the rural informal sector, it would be good to keep in mind that the rural informal sector is not significantly different from the urban informal sector except perhaps in the positive public image that the rural informal sector seems to enjoy. Furthermore, except for few subtle differences which might lead to major difference in the future, no significant regional differences exist. The degree to which the potential of this sector can be increased will depend on how well and how fast the constraints affecting productivity in this sector are overcome. Chief among the constraints are credit, skills and infrastructure. Initial education is only a constraint indirectly. The demand for rural informal sector products, though not systematically covered in this study, could be a major constraint in that without increased incomes from agriculture this demand is likely to react positively to increased demand. On the whole, it seems to us that the faith in the informal sector could be slightly misplaced given the overall potential of this sector as documented in this study. However, the evidence is mixed, showing as it does that, the faith in manufacturing and services subsectors is certainly more justified as it is cheaper to create more jobs in these sub-sectors.