Explain the reasons for the existence of informal business in Tanzania?

There are several reasons for the existence of informal businesses in Tanzania:

1. Limited access to formal employment: Many Tanzanians face challenges in finding formal employment due to factors such as limited job opportunities, lack of education or skills, and competition for formal jobs. As a result, many individuals turn to informal businesses as a means of earning a living.

2. Low barriers to entry: Informal businesses typically have lower barriers to entry compared to formal businesses. This makes it easier for individuals to start their own businesses without the need for extensive capital, permits, or licenses.

3. Flexibility and autonomy: Informal businesses offer individuals the flexibility to work on their own terms and set their own schedules. This autonomy is appealing to many Tanzanians who value independence and control over their work.

4. Informal economy support system: The informal economy in Tanzania provides a support system for individuals who may not have access to formal financial services or social safety nets. Informal businesses often operate within close-knit communities, where individuals can rely on each other for support and resources.

5. Cultural and social factors: In Tanzania, there is a strong tradition of entrepreneurship and self-employment. Many individuals have grown up in families where informal businesses are the norm, and this cultural influence can contribute to the prevalence of informal businesses in the country.

Overall, the existence of informal businesses in Tanzania is driven by a combination of economic, social, and cultural factors that make it a viable and attractive option for many individuals seeking to earn a living.

Economic Reasons:

- High Unemployment: The formal sector is unable to absorb all job seekers, leading to widespread unemployment and underemployment.
- Low Wages: Formal sector jobs often offer low wages, driving individuals towards informal businesses where they can earn higher incomes.
- Lack of Access to Capital: Micro and small businesses often face difficulties accessing loans from formal financial institutions, forcing them to operate informally.
- Regulatory Barriers: Complex regulations and licensing requirements can discourage individuals from registering their businesses formally.

Social Reasons:

- Cultural Norms: In some Tanzanian communities, informal businesses are seen as a traditional form of livelihood, perpetuated through generations.
- Social Pressure: Individuals with limited formal education or skills may feel pressured to start informal businesses to meet their needs and those of their families.
- Entrepreneurial Spirit: Many Tanzanians have an entrepreneurial spirit and prefer to be self-employed rather than wage earners.

Political Reasons:

- Government Tolerance: The Tanzanian government has historically tolerated informal businesses due to their contribution to employment and economic growth.
- Lack of Enforcement: Limited enforcement capacity and political will have allowed informal businesses to thrive.
- Policy Gap: Lack of clear policies and regulations governing informal businesses has created an environment where they can operate freely.

Other Reasons:

- Flexibility and Adaptation: Informal businesses can adapt quickly to changing economic conditions and consumer demands.
- Lower Costs: Informal businesses have lower operating costs than formal businesses, as they do not have to comply with regulations or pay taxes.
- Convenience: Consumers often prefer informal businesses due to their proximity, flexibility, and personalized services.
- Survival Strategy: For many Tanzanians, informal businesses are a vital survival strategy in the face of economic and social challenges.