An Examination Of Factors Influencing The Provision Of Microcredits And Informality Of Microenterprises In Balochistan: Exploring Informal Economy Dynamics

Abstract

This research addresses the informal economy by investigating the labor markets of Balochistan to identify the determinants causing informality and credit constraints on a variety of grounds, such as individual, firm-level, industrial, and economic. Using quantitative methods ordinal logistics regression, it is based on exhaustive survey data that traces the intricate interrelationships of small firm operations with informal economy engagement. The results showed that the determinants of informality and credit inclusion highly depend on an individual's profile in several aspects (age, gender, income & education). Real estate and household services are more prone to being informal due to regulatory frictions and economic imperatives in these sectors. The research concluded that critical economic and governmental factors strongly influenced informality, with broad implications for tax rates and regulatory measures. Finally, the results offer new insights into how informal employment pervades the Balochistan labor market and help us understand those traditionally ignored by mainstream economic lenses. This comprehensive grasp of the minimally explained reasons for informality creates a strong foundation for policymakers to devise a targeted policy that effectively addresses these complexities. The implications of these findings are far-reaching, given their direct relevance for forging policies to increase formalization, ease access to credit, and develop a more inclusive and regulated labor market in Balochistan. This study can contribute towards formal interventions that propose alleviating the problems of the informal economy by enriching existing knowledge.