An assessment of the challenges facing the urban informal sector in the Wallaga Zones of Oromia Regional State, Ethiopia

Abstract

The objective of this study is to assess the challenges facing the urban informal sector in the Wallaga Zones of the Oromia National Regional State, Ethiopia, using a cross-sectional research design. A total of 404 urban households engaged in informal sector activities were selected through a multi-stage random sampling technique. The study collected primary data using structured questionnaires with five-point Likert-scale items and reviewed secondary sources and relevant literature to support the discussion. The results from the Principal Component Analysis revealed that 59.69% of the variation in the challenges experienced by informal sector operators was explained by seven key factors, namely, income instability, limited access to finance, unfavorable government policies, unfair competition, inadequate legal support, insufficient social support, and lack of access to relevant information. The one-way ANOVA results indicate that the mean scores of the seven identified challenges differ significantly across different types of urban informal sectors selected. The findings of the study also indicated that the challenges that significantly constrain the growth and sustainability of the urban informal sector were shaped by a combination of demographic, socio-economic, and enterprise-related characteristics. The policy implication of the study is that there is an urgency for targeted policies to facilitate access to credit, improve infrastructure, and simplify the business registration process, aiming to promote sustainable urban livelihoods and contribute to broader urban development policies in Ethiopia.