LocationsThe window of opportunities: How Digitalization in the Informal Economy can Transform the Future for Haiti and Bangladesh
November 3, 2022
By Pierre Antoine, Head of Experimentation, UNDP Accelerator Lab Haiti
Ramiz Uddin, Head of Experimentation, UNDP Accelerator Lab Bangladesh
M M Zimran Khan, Head of Exploration, UNDP Accelerator Lab Bangladesh
Photo showing an informal business owner using a mobile phone for business purposes in Bangladesh.
Located some 15 thousand kilometers apart, Bangladesh and Haiti are two countries so distant yet so close in some of their social and demographic characteristics. With a share of the working-age population (between 15 and 65 years of age) of 68 and 63 percent respectively, both Bangladesh and Haiti are passing through a propitious demographic window of opportunities.
While a burgeoning rate of the young population represents an important asset for both of the countries to transform the socio-economic future of the countries, significant investments are needed in this young population alongside a conducive environment for them to thrive and shine. This is crucial for both countries as the demographic dynamics have and will have a profound impact on the socio-economic development of Bangladesh and Haiti.
However, the prospects are still rather grim for the vast majority of young people in both countries as the share of youth not in education, employment, or training (NEET) stands high at 27 percent and 21 percent in Bangladesh and Haiti, respectively, as per World Bank data. Coupled with an all-time high rate of poverty (20 percent and 59 percent, respectively for Bangladesh and Haiti), both countries are facing significant challenges in tackling the high unemployment rate among young people.
Interestingly, the informal sector could come to the rescue for this young workforce, which represents 64 percent of the national economy of Bangladesh and already generating 85% of employment, whereas the informal sector represents 71 percent of the national economy in Haiti. Figure-1 shows a growing trend in informality in both Bangladesh and Haiti over the years. However, the rate of unemployment has also increased along the line, much of which is due to the challenges emerging from the global COVID-19 pandemic. In 2020, the unemployment rate slightly increased from 4.2% to 5.3% in Bangladesh and 13.5% to 14.5% in Haiti.
With the advent of digital technologies, both the countries are still well-positioned to tackle the challenges of unemployment by equipping informal business owners and entrepreneurs with mainstream economic activities through digitalization. To address the SDG target 8.6.1, which conveys the NEET youth, the accelerator labs in Bangladesh and Haiti are seeking pathways to address these challenges by taking advantage of digital technologies and exploring scopes to generate employment for young people, especially in the informal sector.
Figure-1: Recent trends in informality, poverty, and unemployment rates in Bangladesh and Haiti
Recent interventions in Digitalization and Informality?
The COVID-19 pandemic has been a harrowing reminder of the volatile nature of the informal economy. However, lessons from emerging economies around the world show that this precarity can be effectively tackled by harnessing the power of digital technologies- not only for the growth of informal businesses but also for the workers engaged in the sector. Digitalization has played a catalytic role in the informal sector in many countries to access new markets by integrating digital tools and developing digital marketplaces for informal businesses and traders.
In order to map the prospects of digitalization in the informal sector, the UNDP Accelerator Labs in Haiti and Bangladesh are exploring pathways for digital inclusion to transform the informal sector. As a part of the methodical exploration, the UNDP Bangladesh Accelerator Lab conducted a survey among 150 small business owners on the usage of digital tools. Among the survey respondents, 79 percent informed that they use some sort of digital tools for running their businesses. On the other hand, in Haiti, 32 respondents (over 51 small business owners) of a survey conducted by the Global Team on informality and digitalization claimed that they have used at least one of the digital tools in their businesses.
Figure-2: Informality and digitalization in Bangladesh: findings from the survey
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Impact of Digitalization People in informal sectors, though a limited number, have learned how digitalization can improve lives and livelihoods if employees acquire new skills. Digitalization can make a difference in the informal sector, boosting technology, creating new jobs, and improving the work environment both in Haiti and Bangladesh. Case in point, new local e-commerce businesses are being launched every other month. |
Photo showing a woman with a mobile phone in a rural market carrying out a transaction in Haiti. |
Informal e-commerce has proven to be an effective tool to create new economic opportunities for the unemployed cohort of the population, enabling them to run businesses with greater flexibility in Haiti and Bangladesh. When we talk about digital technologies in this context, we are not necessarily referring to high-end, sophisticated technology, which is, in most cases, beyond the reach of the people engaged in informal businesses.
Both the Labs are, therefore, looking into solutions for informal business owners that don’t require the use of complex digital technologies or constant internet connectivity, rather the focus is on simple technologies that enable the businesses to track goods, make payments, and access financing to promote their businesses. In informal online commerce, F-Commerce (Facebook Commerce) is a relatively emerging business trend that offers a horizon of opportunities for informal business owners by providing access to a broad range of customers and targeted marketing strategies. The vast popularity of Facebook enabled F-Commerce platforms to rapidly enhance the shopping tendency of its users within a shorter period.
According to the eCommerce Association of Bangladesh (e-Cab), 700 eCommerce sites and around 8,000 eCommerce pages on Facebook were registered in the year 2017, making a cumulative transaction of BDT (Bangladeshi Taka/ currency) 10 billion ($114 million) (Figure-3). The segment grew by 25% a year before the pandemic and soared to over 50% in 2020. Many of these are informal small businesses that use Facebook solely for advertising and selling products, ranging from clothes, fashion products, food, medicines, books, and daily accessories.
Similarly, the Information and Communication Technology (ICT) sector has also been expanding in Haiti for the last few years. More Haitians now than ever are turning to these technologies for professional activities and routine tasks. Data published in January 2021 by Hootsuite shows that more than half of the Haitian population actively uses mobile phones with 38 percent having access to the internet. Moreover, about 20 percent of the Haitian population frequently uses Social Media platforms.
Figure-4: Overview of Digitalization in Haiti and Bangladesh
Digitalization can accelerate the formalization process.
By encouraging the informal sectors to get registered under the formal procedures, ensuring a digital payment system, reinforcing the laws regulated by the authority, fostering literacy, and creating awareness among the most sensitive sectors, we can achieve the sustainable development goals related to digitalization, poverty eradication, and youth development. Digitalization- when coupled with technology, database, and innovation- can create opportunities for informal sectors by encouraging them into decent work and creating full-time employment. Moreover, digitalization can help connect skilled labor in the informal sector to the global market for outsourcing, freelancing, and remote work.
In Haiti and Bangladesh, digitalization supported and empowered small and micro enterprises (SMEs) and businesses by leveraging the scope through the alignment of voices, data, and connectivity solutions fueled by innovation. They are facilitating efficiency through accessible and affordable managing platforms, resource tracking systems, symmetrical information overflow, and lower transaction costs boosting their productivity to overcome the socio-economic dent. Economic engagement in the informal system in both countries can increase income while inspiring many entrepreneurs in the transition from informal to formal economic activities.
In this photo informal market salesman selling local products in Cox’s Bazar (South-East Bangladesh)
The way forward…
The Accelerator Labs in Bangladesh and Haiti are now planning to develop a database on informal labor and their access to digital technologies by conducting studies on informality and digitalization. Once developed, the digital data platforms will be further used to generate data, integrate programs and contribute to the policy level decisions to accelerate the growth of the informal sector. Moreover, because it is a relatively low-cost model, this platform and the generated data will be geographically replicated jointly with the collaboration of different institutions and actors, both public and private sector including informal business owners for better policy making and interventions in Employment.
