Innovation in the Informal Economy: Evolution of a WIPO Development Agenda Project

Narrator:
The informal economy is a vital part of life in developing countries. It provides livelihoods and opportunities for millions, often surpassing the formal sector in scale and its impact.

Though closely linked to exclusion and inequality, it is also a powerful engine of creativity where people innovate daily to solve local challenges with very limited resources. To better understand this overlooked space, the World Intellectual Property Organization launched a global initiative under its Development Agenda to explore how innovation takes shape in informal settings.

In 2011, the project carried out research across regions, including groundbreaking studies in Africa, to uncover how informal innovation can drive more inclusive and sustainable development.

Today, we are very glad to sit down with Professor Erika Krämer Mbula and Sascha Wunsch-Vincent, the minds behind the original project and the publication, "The Informal Economy in Developing Nations: Hidden Engine of Innovation?" This is their publication right here.

While innovation in the informal economy occurs across developing countries, their research focuses particularly on Africa, exploring what has changed, what lessons have endured, and how informal innovation is shaping the continent's future.

Tamara:
So just to start, Sacha, Professor Erika, in brief, can you sum up what this WIPO Development Agenda project was about?

Sascha Wunsch-Vincent:
Thank you, Tamara, for this nice introduction, and hello to Erika.

Yeah. So indeed, you mentioned we are the minds behind this project, but actually the minds, or those requesting it, were really the Member States under WIPO's Development Agenda.

And the goal was really to think about innovation in a more inclusive way. And in that context, the question was, how do ideas emerge, spread, and create value contributing to economic development? And what IP, that we look after here, and innovation policy can do to foster innovation in the informal economy? So, it was really a brand-new way of looking at things.

Tamara:
So we've talked about how this project came to be, but why do you think this topic mattered then, and why do you think it matters now?

Professor Erika Krämer Mbula:
So in many African countries, a large share of work happens informally. The informal economy comprises about 80% of all employment, as well as the majority of businesses, which are primarily micro-enterprises.

The informal economy often refers to legitimate activities in retail, in manufacturing, et cetera, but somehow do not comply with some aspects such as business registration, taxation, et cetera.

And it's important to understand that, and also to understand that informality is not a binary concept, you're either fully formal or fully informal, but there is a whole spectrum of informality, from the most informal to the most formal, and everything in between.

And informality comes with a whole range of challenges, but it's important to acknowledge that much of the problem-solving and the innovation that supports livelihoods happens precisely there. And ignoring it means missing a huge part of how societies adapt and how they grow.

Tamara:
And about your approach, you wrote this incredible piece of publication, but what was novel in your approach, and do you think it still holds today?

Professor Erika Krämer Mbula:
Yes. It definitely does. At the time, talking about innovation in the informal economy sounded almost like a contradiction.

The informal sector was widely seen as static, uninventive, survivalist, everything that is opposed to, or contrary to innovation and novelty.

But what we did is we linked innovation studies with research on informality and found that innovation actually thrives in the informal sector, where people are finding solutions to everyday challenges with creativity and resourcefulness.

And what we found is that these were actually not isolated acts of survival, but they were systematic processes of learning and experimentation that drive local resilience and development. What we did is we also proposed ways of measuring this innovation through surveys, in such a way that countries could capture informal innovation instead of assuming that it didn't exist or wishing it away.

So, I would argue that that evidence-based approach is still very relevant.

Tamara:
And what about you, Sascha?

Sascha Wunsch-Vincent:
Yeah. First, let me echo what Erika says, because as an economist, initially, you equate informal economy with something which is, as she said, borderline illegal, possibly, but certainly you don't consider it traditionally as a source of growth and invention or innovation.

And so, this was really where, particularly after all these case studies, was so eye-opening also for me in particular, so we did metal manufacturing in Kenya and so forth, so it was really interesting.

When we looked at it, I also found that we had to broaden our view on how these companies were really protecting their inventions and innovations.

They, for the most part, of course, weren't using classic systems such as patents.

And so, we saw that trust, for instance, lead time, which means being first on the market, secrecy, reputation, and customer loyalty were really an arsenal of tools with which businesses kept customers happy, but also their inventions proprietary in some sort of way. So, they invented not only with new processes and processes. But also, with ways to protect their inventions.

It's not like modern companies don't use customer loyalty as a tool, but the extent and sophistication with which the informal actors did it was quite stunning.

Tamara:
Mm-hmm. And continuing on this thought, how did you study this whole phenomenon, and what were the main conclusions that you finally came up with?

Professor Erika Krämer Mbula:
Our main approach was to run sectoral case studies in Kenya, South Africa, and Ghana, and we cover sectors such as manufacturing of traditional medicines or herbal medicines, metal manufacturers, as well as personal and home care products in small enterprises in the formal sector.

But we also found some distinct characteristics of how innovation develops in informal settings. One of them is that it's non-R&D based. So, we looked at forms of innovation that didn't rely on conventional or more traditionally understood sources of innovation, such as investment in research and development.

We found processes of adaptation, recombination, local diffusion, to be extremely important for innovation processes in the informal sector, and we managed to capture those and document them. And I think that was a great achievement at the time when, as we mentioned, innovation and informality were seen as complete opposites.

Tamara:
And what did you think were the main conclusions? Anything that stood out to you?

Sascha Wunsch-Vincent:
Well, first, we tried to see what types of inventions emanate. So that was the first study question, and that was quite fascinating.

So you had metal manufacturing, new forms of cooking stoves, new forms of repairing cars, for instance, new particular soaps. Was it in Ghana and in also in South Africa, or baby care products. So it was real hands-on sort of products, or in herbal medicines, cures to particular diseases, which probably even Western economies could learn from. So it was first to have a typology of new things and to document them.

And then also, of course, to see how these informal actors collaborate with the formal sector, because for a vast majority of cases, they didn't do this in isolation. So I'm thinking, Erika, about this case of Makere University in Uganda.

So, the informal metal manufacturing sector operating in Uganda was cooperating with a formal university to actually improve their products and processes. So you see the informal and formal sector really collaborated.

Finally, we are always interested in seeing how these innovations come about, what are the collaborations.

And what was quite fascinating to see is these huge innovation clusters. And I don't know how many were there in Kenya in these, but there was 20,000 or 30,000 different entities in some of these clusters.

And, so the way that these innovation actors would collaborate to come up with new inventions was almost similar to innovation clusters in the Silicon Valley or, let's say, in Shenzhen and so forth. Of course, with a different nature and stuff, but I think the sharing of knowledge and the transfer of knowledge was quite similar.

So we documented the types of new tools and processes, how they interacted with the formal sector, and how collaboration and knowledge-sharing took place.

Tamara:
And we've talked about the legacy, the outcomes, but do you see something concrete for its future?

What opportunities and challenges do you see, let's say, specifically for Africa's innovation landscape?

Professor Erika Krämer Mbula:
Yes, there are so many opportunities and horizons that we find in terms of applying these ideas into new dynamics of innovation that are taking place. For instance, digital transformation is creating enormous opportunities from agriculture to healthcare to services, including in the informal sector. So exploring that is really an area of interest.

Also, the space of regional integration, and particularly in the current world that we live in.

We have the African Continental Free Trade Area coming up, and it's going to make cross-border trade easier for small business. What are the implications of this for those that are informal? These are issues that deserve attention.

Tamara:
Do you think this should still be a priority, the informal sector? And what do you think is next?

Professor Erika Krämer Mbula:
Yes, I think it's very important to stress the fact that developing countries must make data collection a priority. In this data economy that we live in, having information about what happens in your country, including what happens in the informal sectors of the economy, is essential to help you make decisions, informed decisions, about in which way it's better to support and to strengthen the assets that you have.

So I think if I have to stress something, it would be that, that countries must make investing in data collection a priority, including data on innovation in the informal economy.

Tamara:
Okay. Any last comments, Sascha?

Sascha Wunsch-Vincent:
We, I think, managed, with the help of Erika and all these researchers in Africa, to make this kind of a mainstream thing in the African innovation policy context.

I wonder sometimes how much this is true for other world regions. Latin America, India has a large informal sector, and certain Southeast Asian countries. It exists everywhere. So I think it'd be nice to see how much of these policy and academic study templates have made it to other world regions, and maybe to check in again and improve on that.

Narrator:
Almost a decade ago, studying innovation and intellectual property in the informal economy was an ambitious experiment. But today, this very idea is influencing how we think about innovation, about policy and development, and not just in Africa, but also across the Global South.

From soap makers, as you mentioned before, and metalworkers to grassroot health innovators, these very stories reveal that innovation thrives in resourcefulness, cultural identity, and community resilience.

The journey is far from over. The future of innovation will be written not only in research labs and tech hubs, but also in your local neighbourhood markets, in workshops, and the hands of everyday problem solvers.

And as this conversation continues, so do the opportunities to build more inclusive, creative, and sustainable futures for all.

Tamara:
Thank you so much for being with us, Professor Erika and Sascha. Thank you for your contributions.