I'd never heard of the informal economy until I came across the boda-boda bicycle riders in Malawi recently (custom made bicycle taxi's that give people backies about the place). A simple definition of the informal economy is 'an economic activity that is neither taxed nor formally monitored by the government'. It's quite literally informal. And in developing countries such as many in Africa it can account for as much as 60-70% of the total economy or labour force. I found it a fascinating concept and in even managed to find a book on the subject which contains the following chart giving a much better overview.
In countries where the majority have to live on under a dollar a day necessity is often the mother of invention. Like the former soldiers from Mozambique's long civil war who pooled together to buy a TV, a video recorder, a generator and a few old Bruce Lee tapes. These former soldiers toured villages across Mozambique showing copies of Enter the Dragon and Fist of Fury for cash or, failing that, maize and cassava. And they went down a storm, staying for days and playing the same films over and over.
Probably one of the most interesting bits of the informal economy for me is that the online economy is beginning to mirror it more and more. As we start to move into a future we can't predict, as populations migrate to urban cities in larger numbers, and where our current educational models become less and less relevant to the skills actually needed for success, it could well be the informal economy that produces the most innovation in the developed world as well as the developing. There's still plenty that can be learnt from the developing world in the move to an informal economy.
And finally here's a formal economy driving through the middle of an informal one. A great example of the informals limitless ability to adapt over and around it's formal friend.