The Informal Economy Runs African Markets. Here's Why Your Research Misses It.
Formal systems and informal systems exist side by side. Only one usually appears in a report — and it is rarely the one that determines outcomes.
A
Aminu RabiuFounder, Kofa Insights Limited
July 2026
9 min read
Every year, organisations with serious capital and serious intentions make decisions about African markets based on what the research says. They commission studies, review market data, brief analysts who have studied the sector, and read reports from institutions that have been asking the same questions for decades.
And then, often enough, they are surprised by what happens next.
The research wasn't dishonest, and the analysts weren't careless. The research described a market that exists in formal systems: the documented economy, the official channels, the structures that appear in surveys and statistics. The decision played out in a market that operates on a different logic entirely.
Formal systems and informal systems exist side by side in every market. But in many African markets the informal one isn't just running alongside the formal one — it shapes how the formal one actually behaves: who gets credit, how goods move, whether a community participates, whether a programme succeeds, whether a policy lands. The formal system is the description; the informal system is closer to the operating reality.
The gap — what formal research describes vs what is actually happening
Context
What the formal record says
What ground truth reveals
SME credit · Accra
Loan products are available. Eligibility criteria are published. Approval rates are improving. Demand is documented in survey data.
Businesses that qualify do not apply. The branch officer's discretion — shaped by relationships, not criteria — determines more outcomes than the published eligibility requirements.
Public procurement · Nairobi
Tenders are open and technically evaluated. The process is documented. Qualified suppliers have equal access to the published criteria.
The relationship established before the tender closes determines who wins it. Technically superior submissions lose routinely. The evaluation is real — but it happens in a context that was already decided.
Programme uptake · Kigali
Community consultations were completed. Participation was confirmed. Survey data shows positive intent. Implementation begins on schedule.
Two community leaders have not spoken in eleven years. The programme entered that dispute without knowing it existed. The community agreed publicly. It did not agree privately. Implementation stalled within the first month.
Agricultural supply · Zambia
Distribution routes are mapped. Logistics costs are modelled. Infrastructure is assessed. The supply chain shows as viable in the analysis.
The route works in the dry season. In the rains, one unofficial arrangement with a local transporter determines whether inputs move at all. That arrangement is not in any document.
Border trade · Busia
Crossing procedures are documented. Tariff schedules are published. Official trade volumes are tracked and reported quarterly.
What moves on Tuesday afternoon operates on a different set of rules than what the procedure document describes. The published process and the actual process run in parallel — for different goods, different relationships, and different outcomes.
This isn't a criticism of research. It's an observation about what research instruments are built to measure. Surveys capture what respondents are willing to say publicly. Statistics capture what formal systems are designed to record. Reports synthesise both. None of those instruments were built to capture the loan officer's discretion, the community leaders' dispute, or the transporter's unofficial arrangement. That knowledge lives somewhere else entirely.
What the informal economy actually is
The phrase "informal economy" is often used in ways that make it sound marginal. A shadow system. Something that operates underneath the real economy, separate from it, relevant perhaps to the very poor but not to the decisions that serious organisations are making.
That's a mistake. In many African markets the informal economy isn't beneath the formal one; it's woven through it. It's the operating system that determines how the formal system actually behaves. Understanding this changes what research needs to find and who it needs to talk to.
Where informal dynamics determine outcomes — in markets that appear entirely formal
Domain
What the formal system provides
What informal dynamics determine
Credit
Eligibility criteria. Published interest rates. Formal application processes. Approval committees with documented criteria.
Whether anyone applies. Loan officers who know which borrowers are worth exceptions. Community reputations that pre-determine credit access before the application is filed.
Distribution
Mapped routes. Logistics contracts. Published tariffs. Distribution agreements between formal entities.
Whether goods actually move. The transporter whose relationship with checkpoint officers determines whether the last mile works — especially when the formal route is technically impassable.
Procurement
Open tenders. Technical evaluation criteria. Procurement regulations. Anti-corruption frameworks.
Who wins. The relationship between the procurement officer and the supplier's intermediary, established before the tender was published, that determines which technical submission is evaluated generously.
Participation
Community consultation records. Signed agreements. Participation rates from survey data. Programme monitoring frameworks.
Whether communities show up. The dynamics between local leaders whose public agreement and private agreement are different things — and whose dispute with one another determines whether participation is genuine or performed.
Hiring
Job postings. CV screening. Formal interview processes. HR policies on equal opportunity and merit-based selection.
Who gets hired. The network of relationships through which opportunities are distributed before they become formal listings — and through which the most capable candidates often move without ever seeing a job board.
The informal economy is not a workaround. It is the context formal systems operate within. Ignoring it doesn't make your research more rigorous — it makes it less accurate.
Describing a market without understanding its informal dynamics is like describing traffic without understanding which roads are closed. The map exists. The territory is different.
Five specific ways formal research misses it
This is not an abstract claim about research limitations. It shows up in specific, repeatable patterns — organisations build well-designed programmes or deploy serious capital, then discover too late that they were operating on a description of reality rather than reality itself.
Five specific ways formal research fails to surface what determines outcomes
01
Credit products nobody uses despite qualifying
Survey data shows demand. Eligibility criteria are met. Approval rates are improving. The product is available, affordable, and designed correctly. And yet uptake remains far below projections. The formal research could not see the reason — which is usually not about the product. It is about the relationship between borrowers and the specific branch officers whose discretion determines whether an application is worth filing in the first place.
From the field
"Everyone in this area knows that Branch X is where you go if you have the right introduction. Branch Y processes applications correctly but nothing moves unless you know someone. The survey will show positive sentiment toward the product. It won't show which branch they're actually avoiding."
02
Supply chains that work on paper and fail in the field
The logistics model is sound. The route is viable. The costs are within acceptable ranges. Contracts are in place. The supply chain assessment shows no structural barriers. What the assessment cannot see is the informal arrangement at a specific point in the chain — a relationship, a side agreement, a dependency — that is invisible in any document and essential to whether goods actually move.
From the field
"The formal route is viable six months of the year. In the rains, one person's arrangement with the checkpoint makes the difference between goods moving and sitting for two weeks. That person is not in any contract. You wouldn't find them in a logistics assessment. But remove them and the supply chain stops."
03
Programmes that communities agree to publicly but not privately
Community consultation records show agreement. The local authority has signed. The monitoring framework is in place. Participation rates at launch look positive. But the programme is entering a community that has a history — relationships between leaders, disputes that predate the programme, informal authority structures that the consultation process was never designed to surface. The public agreement and the private agreement are different things.
From the field
"The cooperation signed at the ceremony means something different from the cooperation you need for implementation. One happens in front of cameras. The other happens at the meeting the cameras weren't at."
04
Market demand that exists in surveys and not in practice
Survey respondents indicate positive intent. Focus groups show genuine interest. Market sizing models calculate demand based on population, income distribution, and stated preferences. The product launches. Uptake is a fraction of projections. Not because the demand was fabricated — because stated intent and actual behaviour diverge in ways that surveys are structurally unable to capture. The informal factors that determine whether someone actually purchases — social norms, community trust, the recommendation of someone whose opinion they respect — were never measured.
From the field
"In a survey, people will tell you they're interested because it is easier than explaining why they wouldn't actually buy. The real conversation happens when their neighbour who tried it tells them what happened."
05
Policy reforms that change the rule without changing the outcome
The regulation is updated. The incentive structure is redesigned. Technically, the barrier has been removed. The reform is well-designed. And yet behaviour does not change — because the behaviour was never being determined by the formal rule. It was being determined by an informal norm, a relationship, a practice, or a structural dependency that the reform did not reach and the analysis did not surface.
From the field
"Changing the policy changed what the policy says. The people whose decisions actually determine outcomes are still operating on the same logic they were before. The rule changed. The system didn't."
Why the evidence exists — but never reaches you
Here is what makes this problem different from most research gaps. The knowledge required to understand the informal economy is not missing. It's not buried in archives or locked inside institutions. It exists, in extraordinary detail, in the people who have spent years working inside these markets.
The loan officer who has interviewed hundreds of borrowers knows exactly why uptake is low in specific areas. The cooperative leader knows the community dynamics that the consultation process missed. The logistics manager knows which informal arrangement is holding the supply chain together. The procurement officer knows why qualified suppliers keep losing contracts. The knowledge is present. The problem is the distance between where it lives and the room where the decision is being made.
The distance from where knowledge lives to where decisions are made
P
The practitioner — the knowledge source
A loan officer in Dar es Salaam. A cooperative leader in Kampala. A logistics manager at the Busia border. They hold the operational knowledge that determines how markets actually behave. It is specific, current, and inseparable from the conditions it was learned in — shaped by years of proximity to the work.
—
Not in any database. Not on LinkedIn. Not reachable by cold outreach.
R
The researcher or consultant — first intermediary
If reached at all, the practitioner speaks to a researcher. The researcher takes notes, and the notes are selective, shaped by what seemed most important in the moment, what fits the framework, what can be reported without discomforting the client. The qualifications begin to disappear here.
Context lost
Compressed into findings. Conditions and exceptions stripped.
A
The analyst — second intermediary
The researcher's notes become an analyst's findings. The findings are synthesised with other data. The informal dynamics that were specific and conditional become supporting evidence for a general conclusion. The loan officer's specific observation about Branch X becomes a general point about credit access barriers in Accra.
Specificity lost
Averaged across findings. What was conditional becomes categorical.
S
The summary — third intermediary
The analysis becomes a report executive summary. The report is hundreds of pages. The decision-maker reads the summary. The summary contains conclusions — clear, confident, and stripped of the conditions under which they were true. The informal dynamics have disappeared entirely by this point.
Conditions lost
Distilled to three bullet points. Confidence remains. Accuracy does not.
D
The decision room — the destination
A committee makes a decision based on the summary. The decision reflects the formal system accurately. It misses the informal dynamics that will determine whether it works. The knowledge that would have changed it existed at the start of this chain. It did not survive the journey.
Operating reality missing
Why this isn't a data problem
The instinct when you hit a gap in understanding is to commission more research — more surveys, larger samples, more granular data, better instruments. The instinct is reasonable. For this specific problem, it's also the wrong response.
More data of the same kind will not surface what the data was never designed to capture. The informal economy doesn't appear more clearly in a larger sample. The loan officer's discretion does not show up in better statistics. The community leaders' dispute is in no survey database, however carefully it was designed.
What more data produces vs what one practitioner session produces
More desk research and survey data
A larger sample of the same information — more confident conclusions about what formal systems describe
Better statistics on what respondents are willing to say publicly in a survey context
More precise mapping of formal processes — the documented version of how things work
Faster aggregation of existing knowledge — better synthesis of what is already known
No new information about informal dynamics, because the instruments were not built to measure them
One session with the right practitioner
The loan officer's specific understanding of why uptake is low in that district — conditional, specific, and current
The cooperative leader's account of the community dynamic the consultation process did not surface
The logistics manager's explanation of which informal arrangement is actually holding the supply chain together
The procurement officer's account of the relationship dynamic that determines which technically qualified supplier wins
Information that no database holds and no survey could reach — because it only exists inside the person who is closest to the work
None of this means data is useless. It means data is not sufficient. The informal dynamics that determine outcomes are not available in data form. They are available in human form — in the judgment, the experience, and the specific knowledge of practitioners who have spent years inside these markets. The question is not whether to do research. It is whether the research includes the people who actually know.
What only proximity can explain
There is a category of knowledge that cannot be derived, inferred, or approximated from data. It can only be earned through proximity — years of being close enough to the work to see how it actually functions, not how it is designed to function.
This is not intuition in the mystical sense. It is observation compressed by repetition. The loan officer who has spent years on the other side of the desk has learned things about credit behaviour that no model captures, because no model was built from the same vantage point. The cooperative leader who has navigated the same community dynamics for a decade knows things about participation no survey will ever surface. The procurement officer who has reviewed hundreds of tenders knows things about selection that no published criteria will ever explain.
What proximity produces — three things no data could have told you
Loan Officer · Commercial Bank · Lusaka
"I can tell within the first five minutes whether someone is going to repay. Not from their application — from how they talk about the business. The ones who know their receivables cycle, the ones who mention the specific buyer they're worried about this quarter. The model can't see that. The model scores the form. I score the conversation."
What data shows insteadDefault rates by sector, loan size, and geographic region. No instrument captures what the loan officer sees in the conversation that the form does not.
"The two families have not cooperated on anything for thirteen years. Every programme that comes in treats them as one community because the map says they are one community. Then they wonder why participation splits exactly where it always splits. I could have told them before the first consultation happened. Nobody asked."
What data shows insteadParticipation rates at community level. Consultation records showing agreement. No instrument surfaces the thirteen-year dynamic that determines whether that agreement is real.
Logistics Manager · Cross-border Trade · Busia
"Tuesday and Wednesday are the days when things actually move. Monday morning and Friday afternoon, the process that the documentation describes is the process you get. The rest of the time, there's a parallel process that's faster and more reliable — if you know how it works. No logistics assessment will tell you that. You learn it by being there."
What data shows insteadAverage crossing times. Official tariff rates. Published procedures. No dataset captures the Tuesday-Wednesday dynamic or the parallel process that experienced traders depend on.
What each of these practitioners knows could not have been learned from outside the work. It required years of proximity — of making decisions, watching outcomes, adjusting, and developing the kind of judgment that only comes from being close enough to the work to see what actually determines results. That knowledge is the thing formal research was never built to reach.
What this means for investment and programme decisions
The gap between formal research and ground truth is not academic. It shows up as decisions that cost more than they should, programmes that underperform against their theory of change, and capital deployed into conditions nobody accurately described.
Where the informal economy gap creates the most decision risk
Decision type
What formal research misses
What that costs
SME credit deployment
Branch officer discretion. Community reputations that pre-determine credit access. The informal signals that determine who is worth an exception.
Uptake far below projections. Capital sitting undeployed in markets that were assessed as viable but were never actually accessible.
Market entry
Existing relationships between incumbents and the distribution network. Informal arrangements that make new entrants structurally dependent on people they cannot see in the market map.
Entry cost much higher than projected. Timeline extended. Market that looked accessible in research operates on relationships that take years to build.
Programme design
Community dynamics that determine whether participation is genuine. Leadership disputes that split communities along lines invisible in consultation records.
Implementation that meets monitoring targets but not outcomes. Participation rates that look positive until the second year, when the underlying dynamic becomes visible.
Supply chain investment
Informal dependencies at specific points in the chain. Seasonal dynamics not captured in annual logistics assessments. Single points of informal control that create concentrated risk.
Supply chain that performs on paper and fails at a specific point during the first operational quarter. Cost of disruption significantly higher than cost of surfacing the dependency beforehand.
Policy reform
Whether the formal rule is actually what determines behaviour. Informal norms that persist regardless of what the regulation says.
Reform that changes documentation without changing outcomes. Compliance on paper. Behaviour unchanged.
Portfolio risk assessment
Informal dependencies that don't appear in financial statements. Concentrated relationships that look like diversified exposure in formal analysis.
Risk that was always concentrated in one relationship, one arrangement, or one informal dependency — visible only to someone inside the market.
How to close the gap
The gap between formal research and operating reality cannot be closed from a desk. It requires knowledge that only exists in the people closest to the work — and a reliable way of reaching them. That is what the Kofa platform does: it structures the conversation and preserves what the practitioner says in a form the organisation can use.
This is not about replacing research with practitioner conversations. It's about adding the layer of intelligence research was never designed to produce.
One week of desk research vs one practitioner session — on the same question
One week of desk research
Question: Why is SME credit uptake low in Zambia?
World Bank reports, IFC sector analyses, academic papers on financial inclusion, Bank of Zambia publications on credit access.
What it produces
Structural barriers to credit access across Sub-Saharan Africa. Formal documentation of eligibility criteria and approval rates. Survey-based analysis of stated demand. Macro-level findings about the sector.
What it cannot produce
Why borrowers in a specific geography are avoiding a specific lender. What the loan officer's actual discretion looks like in practice. Which informal signals determine whether an application is worth filing.
Actionability
General direction. No basis for a specific decision about a specific market with specific conditions.
One practitioner session — loan officer, Lusaka
Question: Why is SME credit uptake low in Zambia?
72-hour engagement. Brief submitted. Loan officer with eight years at a tier-two lender in Lusaka, verified and prepared.
What it produces
The specific reason uptake is low in this geography — branch officer relationships, seasonal patterns, the informal signals that determine which applicants receive genuine consideration. Conditional, specific, and current.
What it cannot produce
Sector-wide conclusions. Statistically representative findings. Longitudinal trend data. One practitioner is one vantage point — deep, not broad.
Actionability
A specific, conditional understanding of the operating reality in that market — the basis for a decision that accounts for how things actually work, not how they are documented to work.
The practitioner session does not replace the desk research. It addresses the question the desk research was never able to answer: what is actually determining outcomes in this specific market, for this specific decision, right now. Not in the aggregate, not in the published literature — but in the conditions your programme or capital will actually encounter.
That question has an answer. It lives inside the people who are already there. The problem was never that the knowledge didn't exist. It was always that nobody had built a reliable way to reach it. Kofa is that way — and the conversation, once preserved, becomes a decision asset: searchable, retrievable through Ask Kofa, ready for the next decision to draw on.
One question before your next decision
On your last major market decision — what was the informal dynamic that determined the outcome, and did anyone in the room know it before the decision was made?
Aminu Rabiu
Founder, Kofa Insights Limited
Start a brief. The platform runs everything around it.
Post a brief describing the decision you are trying to make. The platform matches and verifies the practitioner closest to your decision, runs the prep room, and delivers a structured decision asset within 72 hours — and the conversation becomes a decision asset your organisation keeps.
Every brief that runs on the Kofa platform is designed around the decision it will inform — not just the question being asked. The practitioner is selected for proximity to the specific operating reality, not general sector familiarity. The session is captured completely — including the conditions, qualifications, and informal dynamics that formal research consistently misses.
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