Does ‘Debrouillardise’ translate to ‘Resourcefulness’ or 'Poverty Trap'?  

Ghana is a West African country with a growing economy that drives a lot of entrepreneurs to establish their own businesses. Many of these businesses are micro, small, and medium enterprises (MSMEs) that operate outside of formalized business processes and procedures. For many, this informal economy, also known as System D, which stands for debrouillardise, meaning ‘resourcefulness’ in French, is the culture of business. It is a system marred by a lack of transparency seen in findings by Ghana Trades Union Congress (TUC) indicating that only about 7% of informal economy workers have a written employment contract. However, it offers opportunities for many to generate income, bypassing the cumbersome bureaucracies that might have otherwise deterred them from starting their own business in the first place. 

In fact, by taking a closer look at the economic opportunities that the informal sector offers, it becomes clear that System D is actually well connected to the formal sector, as many of its networks are intrinsically linked to global formal markets. For example, a fisherman in Ghana not only stimulates the local economy but the global economy as well, since the fish are also exported to other markets. However, Ghana is a lower middle-income food-deficit country, importing more fish than it exports. Big corporations have already identified the potential in these grey economies and have integrated them into their supply chain and distribution channels. For example,  multinational firms such as Fabletics, Nike, UAC foods (United Africa Company), MTN, and Procter & Gamble, depend on these unregulated and informal enterprises in emerging economies to develop and sell their products. 

We have painted a picture of an empowered informal economy that allows people to bypass the state and cumbersome bureaucracy by utilizing both formal and informal networks. However, beneath the surface lies an inevitable problematic power dynamic between formal and informal economies that inherently limits one’s growth and upward mobility as a business owner. When Procter & Gamble utilizes these informal networks for their distribution, are they truly empowering local businesses? In 2002 development economist Judith Tendler referred  to this anti-development dynamic as “the devil's deal."  This is when businesses become increasingly dependent on these networks instead of being empowered to expand and grow beyond their current place in the value chain. A more recent example of this presented itself when Time Magazine wrote a scathing piece detailing the abuse, mistreatment, underpay, and overwork factory employees were subjected to. Therefore, informality actually traps small business owners and keeps them from growing beyond their operational capacity. 

Even though System D is often painted as a resourceful way to bypass the barriers of the formalized financial sector as a more egalitarian solution, free of the restraints of governmental involvement, the reality is that informality makes the success of one’s business venture particularly fragile. Even if interwoven with the formal sector, the ties are not strengthening these businesses but only serving to further disenfranchise them. When Procter & Gamble makes use of the informal economic networks, they do so for their own benefit rather than to encourage inclusive growth. And when the financial sector presents a barrier to these owners with high account fees, these are not just barriers to formalization, these are also barriers to generating national tax revenue. Being part of the informal economy is not empowering. It's a band-aid solution to a deeper rooted problem of a broken formal system. One that not only continuously keeps local enterprises from growing up the value chain but also hinders the country’s ability to mobilize tax revenue and grow beyond foreign aid. 

Authored by Songuifolo Yeo and Lale Ceylan

SGI’s Finance Equity and International Relations & Development Working Groups

Cited Works:

Tendler, J. (2002). Small Firms, the Informal Sector, and the Devil's Deal. IDS Bulletin, 33(3), 1-15. doi: 10.1111/j.1759-5436.2002.tb00035.x