Factors affecting the informal sector formalization in Tanzania :a case of Dar es salaam region

The general objective of the study was to examine the factors which affect the informal sector’s effective formalization in Dar es Salaam. Specifically, the study sought to examine the financial factors and social factors that affect informal sector effective formalization and to examine the extent to which policies, laws and regulations affect the informal sector’s effective formalization. This study employed a case study design with interviews and questionnaires as the main data collection methods. A descriptive approach was used and the data collected were analyzed and presented by percentages in tables. The study findings revealed that financial factors such as lack of access to credit and the costs incorporated in the business affect the informal sector’s effective formalization since most informal businesses rely only on their commercial suppliers for their working capital. Also, the findings revealed that lack of knowledge and training on the formalization processes, corruption in obtaining business licenses, lack of harmonization of customary, traditional order, such as malikauli, affect formalization of the informal sector, along with non-tailored policies which do not conform to the informal sector’s evolving needs and operational conditions. Moreover, the findings revealed that unreliable enforcement mechanisms and unstable institutional frameworks, accompanied by brutal arbitrary municipal interventions, also affect the informal sector’s formalization processes. From its findings, the study recommends that the informal sector should be accommodated, policies should be reviewed and financial institutions should assist the informal sector financially, in order to facilitate the formalizationprocesses.