Discussion Paper No. 224 of 2019 on Factors that Determine Choice of Products Market for Businesses in the Informal Sector in Kenya

Abstract

Choice of products market by informal businesses is a critical pathway for their survival, performance and profit maximization. Kenya’s informal businesses have an option of selling their products to individual consumers, micro-small and medium enterprises, large establishments (non-MSMEs), through direct export and to the government. Unlike businesses operating formally, informal businesses do not adopt marketing strategies such as price posting that send informative signals describing the product price and their location. Lying low is key for informal businesses as they are characterized by phenomena such as tax evasion. Therefore, there is need to determine factors that influence choice of a product market by informal businesses in Kenya. Secondary data obtained from the 2016 micro, small and medium enterprises (MSMEs) survey by KNBS was used, and multinomial logistic regression used in the estimation of the factors presumed to influence choice of a product market.