Kenya's Informal Economy: The Jua Kali Sector That Powers 80% of Employment

Behind Kenya's gleaming skyscrapers and tech hubs lies the true engine of the national economy — the informal sector, locally known as Jua Kali (Swahili for "fierce sun," referencing the open-air conditions under which artisans work). This vast, dynamic ecosystem of small-scale traders, artisans, service providers, and entrepreneurs accounts for over 80 percent of Kenya's total employment and generates an estimated KES 1.5 trillion annually. Understanding the Jua Kali sector is essential to understanding how Kenya actually works.

The Scale of Kenya's Informal Economy

According to the Kenya National Bureau of Statistics (KNBS) 2025 Economic Survey, the informal sector created 703,700 new jobs in 2024 — representing approximately 90 percent of all new employment generated that year. Total new job creation stood at 782,300, with only 78,600 positions created in the formal sector. This pattern has been consistent for decades: the formal economy cannot absorb the roughly 800,000 young Kenyans who enter the labor market annually, leaving the informal sector as the de facto employer of the nation.

The informal economy contributes between 24 and 32 percent of Kenya's gross domestic product, though many economists believe this figure is significantly understated because much informal activity goes unrecorded. The sector spans virtually every economic activity — from manufacturing and construction to retail trade, transportation, food processing, and personal services. In Nairobi alone, informal settlements and marketplaces host millions of economic transactions daily.

What Is the Jua Kali Sector?

The term Jua Kali originally referred to metalworkers and artisans who fabricated goods — jikos (charcoal stoves), steel gates, window frames, furniture, and tools — in open-air workshops along roadsides and in industrial areas. Over time, the term expanded to encompass the entire informal economy. President Daniel arap Moi's government formally recognized the sector in the late 1980s after a landmark International Labour Organization (ILO) study highlighted its economic importance.

The Jua Kali Association of Kenya was established to represent informal sector workers, and the government created Jua Kali sheds — basic covered workspaces — in various towns to provide artisans with sheltered working areas. While these interventions acknowledged the sector's significance, support has remained insufficient relative to the sector's massive contribution to the economy and employment.

Key Sub-Sectors of the Informal Economy

Manufacturing and Fabrication

Jua Kali artisans produce an enormous range of manufactured goods. Metalworkers in areas like Kamukunji in Nairobi fabricate cooking stoves, water tanks, wheelbarrows, animal feeders, and construction materials. Furniture makers in Gikomba and along Ngong Road craft beds, sofas, tables, and office furniture that serve both residential and commercial markets. These workshops often use recycled materials and innovative techniques to produce goods at a fraction of the cost of factory-manufactured alternatives.

Retail and Trade

Open-air markets (masoko) and roadside vendors form the backbone of Kenya's retail distribution system. Major informal markets include Gikomba (clothing and textiles), Wakulima Market (fresh produce), Toi Market (second-hand goods), and Burma Market (hardware and building materials) in Nairobi. Across the country, weekly and daily markets connect rural producers with urban consumers, with traders providing essential price discovery and distribution functions that formal retail cannot match in reach or affordability.

Transportation: Matatus and Boda Bodas

The matatu (minibus) industry is perhaps Kenya's most visible informal sector. Privately owned 14-seater and 33-seater matatus provide over 80 percent of urban public transportation in Nairobi and other major cities. The industry employs hundreds of thousands of drivers, conductors, stage managers, mechanics, and support workers. The National Transport and Safety Authority (NTSA) regulates the sector, but enforcement of safety and operating standards remains challenging.

Boda bodas (motorcycle taxis) have exploded in number, with an estimated 1.5 million motorcycles operating across Kenya. They provide last-mile transportation in urban areas and primary transportation in rural regions where road infrastructure is poor. Digital platforms like SafeBoda and Uber have attempted to formalize parts of this sector, though the vast majority of boda boda operators remain informal.

Food and Agriculture

Informal food processing, preparation, and sale employ millions of Kenyans. Street food vendors, mama mboga (vegetable sellers), and small-scale food processors produce everything from mandazi and chapati to roasted maize and nyama choma. The fish trade around Lake Victoria, the miraa (khat) supply chain, and the charcoal industry all operate predominantly in the informal economy. Urban food kiosks — known locally as kibandas or vibandas — serve affordable meals to workers across cities and towns.

Services and Technology

The informal services sector includes hairdressers and barbers, tailors, phone repair technicians, plumbers, electricians, and domestic workers. Kenya's tech-savvy youth have created a growing digital informal economy through freelance work on platforms like Upwork and Fiverr, social media commerce, and mobile-based businesses leveraging M-Pesa for transactions. This digital dimension represents what some analysts call Jua Kali 2.0 — the reinvention of informal entrepreneurship through technology.

Challenges Facing Informal Workers

Despite its enormous economic contribution, the Jua Kali sector operates under severe constraints. Workers lack social protection — no pension contributions, health insurance, paid leave, or job security. Income is unpredictable and often insufficient, with many informal workers earning below the minimum wage. Workplace safety is minimal, with artisans exposed to hazardous conditions including toxic fumes, unguarded machinery, and extreme weather.

Access to finance remains a critical barrier. Most informal businesses cannot access bank loans due to lack of collateral, formal registration, and financial records. While mobile lending platforms like Fuliza, KCB M-Pesa, and Tala have increased credit access, they charge high interest rates that can trap borrowers in debt cycles. The Central Bank of Kenya (CBK) has raised concerns about predatory digital lending practices affecting informal sector workers.

Regulatory harassment is another persistent challenge. County government askaris (enforcement officers) frequently demolish kiosks, confiscate goods, and arrest hawkers for operating without permits. The tension between urban planning objectives and informal sector livelihoods remains unresolved, with vendors often subjected to violent evictions without adequate notice or alternative provisions.

Government Policy and Support

The government has implemented several initiatives targeting the informal sector. The Micro and Small Enterprise Authority (MSEA), established under the Micro and Small Enterprises Act 2012, is mandated to promote and develop the sector through training, market access, and business development services. The National Industrialization Policy includes provisions for upgrading Jua Kali manufacturing through technology transfer and skills development.

The Hustler Fund, launched in December 2022, targets informal sector entrepreneurs with small loans (KES 500 to KES 50,000) at an 8 percent annual interest rate, significantly lower than alternative digital lenders. By 2025, the fund had disbursed billions in microloans, though uptake and repayment rates have varied. The National Social Security Fund (NSSF) and the Social Health Authority (SHA) have introduced voluntary registration options for informal sector workers, though enrollment remains low.

County governments play a crucial role through market infrastructure development, business licensing frameworks, and technical training programs. Some counties have established industrial parks and market complexes specifically designed for Jua Kali operators, providing secure workspace, electricity, water, and sanitation facilities.

Formalization: The Path Forward

Formalization of the informal sector is a key policy objective, but progress has been slow and contested. Many informal operators resist formalization, fearing taxation, regulatory burden, and loss of flexibility. Successful formalization requires making the benefits of formal status — access to credit, legal protection, social security, government contracts — clearly outweigh the costs of compliance.

Kenya's informal economy is not a problem to be solved but an economic reality to be supported, upgraded, and gradually integrated. The sector's resilience, innovation, and capacity to create livelihoods for millions make it indispensable. Any serious economic strategy for Kenya must place the Jua Kali sector at its center, investing in skills development, access to finance, infrastructure, technology adoption, and social protection to help informal workers and businesses thrive and grow.