Unlocking the Power of the Informal Economy

The informal economy is the backbone of food systems in many low and middle-income countries. Street vendors, small-scale farmers, traders and transporters play an essential role in providing affordable, fresh, and nutritious foods to all kinds of consumers. In fact, between 50 and 70 percent of all trade in these countries flows through this part of the economy. Despite its scale and importance, the informal economy often operates in the shadows, with its dynamics poorly understood and underutilised in efforts to strengthen food systems.

The informal food economy plays a critical role in feeding billions, yet governments and investors struggle to engage with it. Market traders, mobile food sellers, and transporters often operate outside formal regulations and lack access to credit or support services. Issues like food safety and security, waste reduction, and fair livelihoods for vendors remain unaddressed because the informal economy is seen as fragmented and complex. Policymakers and funders tend to focus on formal entities, but without involving the main stakeholders, efforts to improve food systems fail to include the very people who sustain them.

A Targeted Approach to Change

At Wageningen University & Research, we recognize that sustainable change in food systems is impossible without engaging the key actors in informal value chains. Our approach begins with understanding informal sectors of the food system. To analyse informal food systems, we focus on specific value chains or sectors and map the key players involved. We assess their relationships, motivations, and the incentives or barriers that influence their actions, incorporating factors like power dynamics and capacity for change.

By identifying leverage points, we can determine who has the influence to drive change and what triggers might motivate them. For example, in addressing food waste, we pinpoint where waste occurs, which actors are involved, and how improvements can be made. The goal is to create a ripple effect, where one intervention leads to systemic improvements across the value chain.

Additionally, we explore why the informal sector remains undervalued and how ‘narratives’ of it being disorganised, vulnerable, or unsafe continue to reinforce its marginalisation.

Success Stories in Action

What are powerful examples of this change? Let’s look for instance at Tanzania, where small-scale female market traders faced daily income losses and food waste due to unsold goods. A lack of capital prevents them from purchasing coolers to preserve their produce, while local resellers, who are registered, were reluctant to invest because the traders couldn’t pay in installments. By working with a local bank, we can help create a credit system that allows the resellers to invest in coolers and offer the women practical payment plans. This intervention will not only reduce food waste but also boost incomes and create a new, more resilient value chain.

Another example comes from Benin, where we and our national partners highlighted the essential role of informal street vendors in feeding large portions of the population. Many of their offerings lacked essential nutrients. By collaborating with hundreds of street vendors and a local civil society organisation, spinach—a highly nutritious crop—was integrated into their supply chains. This straightforward yet impactful intervention provided nearly half a million people in 2024 with access to healthier meals every day while raising awareness about the importance of nutrition.

Expertise on informal economy & food systems

At Wageningen University & Research, we help governments and investors unlock the potential of the informal economy, with a particular focus on food systems. Our expertise includes:

  • Understanding the sector: We provide deep insights into the informal economy and its key players, continually deepening our understanding with each project we undertake.
  • Navigating complexity: Our guidance helps make sense of the intricate dynamics of (informal) food systems.
  • Learning from resilience: Informal food systems adapt and innovate during crises like conflicts or the COVID-19 pandemic. We draw lessons from this resilience to strengthen food systems.
  • Creating impact: Together with partners, we identify leverage points in value chains, sectors, or actor networks to drive meaningful change.
  • Scaling solutions: In collaboration, we design scalable strategies that can be replicated across regions, sectors, or groups.
  • Informal Sector Diagnostics: With our diagnostics tool, we can reveal underlying structures and patterns, empowering stakeholders to make informed decisions.
  • Integrating technical and socio-economic expertise: We combine our knowledge of advanced technologies with socio-economic dimensions to create comprehensive interventions in food systems.
  • Facilitating dialogue: We foster discussions with key (formal) stakeholders to address narratives and bridge gaps between formal and informal actors.

Together with partners, we can scale solutions that improve livelihoods, reduce food waste, and enhance food security. By placing informal entrepreneurs more towards the centre of decision-making, investing in their growth, and recognising their contributions, we can create more resilient food systems.