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Policy highlights:
  • As the informal sector is still growing, extending social protection coverage to informal sector workers is a continuing concern among policymakers.
  • Reaching informal sector workers in an effective and efficient manner poses a serious challenge, because: 1) the sector is highly heterogenous; 2) informal sector workers have working locations that are often mobile or even unknown; 3) their income is mostly highly irregular, while formal insurance schemes presume a regular flow of income; and 4) the priority needs of informal sector workers are different from those in the formal sector.
  • Despite these challenges, there are a number of options for policymakers to ensure that social protection coverage is extended to the informal sector. Although all options have their own limitations and challenges, policymakers can: 1) expand the scope of formal social insurance to include informal sector workers; 2) assist communities in setting up self-financed and self-managed social security arrangements; and 3) establish non-contributory schemes that target poor informal sector workers.

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