The informal economy, where those living in extreme poverty are concentrated, can be misunderstood and sometimes just overlooked by the development community.
A regression analysis of International Labor Organization and International Monetary Fund data from 36 countries shows there is a link between high levels of informal employment and large percentages of populations in poverty, but there has been an incoherent approach in the poverty-reduction efforts that seek to target this particular sector.
The importance of the informal economy will perhaps figure more prominently in poverty-alleviation programs as the largely invisible but growing economy is set to flourish even further: Figures from the U.N. Population Fund show that, by 2030, urban dwellers will number almost 5 billion and reside mostly in Africa and Asia. Much of this growth will be in the form of informal settlements contributing to a widening urban informal economy.