How to engage informal midstream agribusiness in enhancing food system outcomes: what we know and what we need to know better

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In this study we explore what roles informal midstream businesses have in food systems, and the outcomes they influence – such as food safety, food availability affordability and accessibility, various dimensions of livelihoods (including employment and labour conditions), and the environment. Informal businesses operate outside of the formal economy. They are often not officially registered, do not maintain bookkeeping, pay income taxes, or own a bank account, and do not hold official employment relations with their workers. There are multiple perceptions and theories on informality, but recent insights inform us that the informal economy can play a constructive and rational role in complementing the formal economy. Informality is not a stage in development, which will disappear with modernisation of the economy. informality is an intrinsic part of the whole economy and therefore set to stay. Most efforts by governments to formalise the informal economic sectors have failed. Governmental efforts to regulate the informal economy come with significant risks and may have an adverse effect on economic growth and its inclusivity. We conclude from this study that informal midstream businesses contribute in many ways to food system outcomes, such as access by poor consumers to affordable food. But they sometimes also constrain such outcomes by, for example, maintaining poor workers’ conditions. As they operate outside regulation policies for food safety and may lack knowledge on hygiene standards, informal food provisioning may also come with higher health risks compared to formal food suppliers, such as supermarkets. Social capital and trust have significant effects on the performance of informal businesses. This is related to the observation that informal entrepreneurs are often not only driven by economic rationale but also by social goals. Governments can support informal midstream businesses by improving infrastructure, but also including them in policy dialogue. However, the repertoire by governments of incentives that trigger informal midstream businesses to contribute to public goals is limited. Other actors in the food system, such as retailers, consumer (movements) and investors are better positioned to reach out to the informal midstream businesses. Informal midstream businesses can have both positive and negative impacts on food system outcomes. We conclude that private sector-led innovation, in which informal businesses define their priorities, co-operate in networks, take the lead, and contribute to enhanced food system outcomes, is an important yet highly unknown area. If informal businesses are to contribute to enhanced food system outcomes, we must unpack that black box allowing better understanding of their roles, processes to involve them, and what can be done to stimulate them to contribute to enhanced food system outcomes.
Original languageEnglish
Place of PublicationWageningen
PublisherWageningen Economic Research
Number of pages33
Publication statusPublished - 2022

Publication series

NameWorking paper / Wageningen Economic Research


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