The Socioeconomic Performance of Women in Parallel Trading and its Implications in Ethiopia, the Case of Dessie Town

International Journal of Economics and Financial Research
ISSN(e): 2411-9407, ISSN(p): 2413-8533
Vol. 4, Issue. 5, pp: 107-114, 2018
URL: http://arpgweb.com/?ic=journal&journal=5&info=aims
Academic Research Publishing
Group
107
Original Research Open Access
The Socioeconomic Performance of Women in Parallel Trading and its
Implications in Ethiopia, the Case of Dessie Town
Sebsib Hadis
Wollo University, Department of Civic and Ethical Studies, Ethiopia
Abstract
This paper presents the Socioeconomic Performance of Women in parallel trading and its Implications in Dessie
town Ethiopia. The study was carried out in Dessie town Ethiopia. Primary Data were gathered from parallel traders
through questionnaire and observation, and secondary data sources were accessed from Dessie town trade and
transport office and CSA (Central Statistical Agency). The paper has purely mixed explanatory sequential approach
which is based on the collection and analysis of quantitative data to be followed and supported by a qualitative data.
The finding of the study has shown that parallel trading is the first among alternatives for women‟s divorced or
widowed and dependent hitherto to parallel trading. Women in parallel trading were engaged in retails of food items
that are easily accessed in the local markets, in which more than two-third of households are dependent on the gains
as well as become involved in the retails activity. Though, the economic responses of parallel trading were the bases
for women‟s livelihood, its performance would not let women‟s and their dependent family members /household to
have better house and access to education. Furthermore, the study has shown that the socioeconomic performance of
parallel trading were constrained by government regulations that exclude and discourage the trading, lack of access
to finance, lack of premises and lack of smooth supply of inputs. Therefore, it is important for both local
governments and organizations working on women affairs to reconsider their actions and create an environment
encouraging for women in parallel trading to grow and integrate to formal economic sectors.
Keywords: Informal sector; Parallel trading; Women; Growth.
CC BY: Creative Commons Attribution License 4.0
1. Introduction
Although there is no consensus on its definition, „informal sector‟ has been the area of concern for different
actors in the last few years. The major difficulties confronted are lack of suitable and proper unit of measurement
and the gap in identifying the demarcation that separate the formal from informal activities (Chaudhuri and
Mukhopadhyay, 2010). This duality was made based on the nature of exchange and economic activities of the
business, means of production and level of advancement in the production and distribution of products and services.
The notion of “informal sector” was used on the development agenda of the state by the International Labor
Organization (ILO) in the 1970s. It initially referred to survival and other unreported activities in peripheral
segments of the economy (International Labor Organization, 2002). After a couple of years, the informality of the
sector acknowledges the “easy entry for the new enterprises, dependence on indigenous knowledge, family
ownership of enterprises, reliance on indigenous knowledge and lack of governmental support” (Ibid).
According to Matthias (2011) informal sector like parallel trading is characterized by the domination of self-
governing small-scale activities produce and distribute goods and services, home-workers (in urban areas), as well as
of household enterprises and subsistence farmers (in rural areas). Accordingly, the business has been practices in the
absence of formal recognition and inspection of the local authority. Besides, the inefficient productivity of the
business, it has been vulnerable to crime and harassment from the local authorities (Central Statistical Authority,
1997).
The informal sector is a dynamic segment of the economy and the labor market. In a context of jobless
economic growth, recurrent financial crises, economic downturns and highly-skilled labor demands by formal sector
enterprises. Thus, together with the changing conditions of the local economy, the sector has been growing across
different parts of the world (Ralf, 2001). According to Chaudhuri and Mukhopadhyay (2010), from a total of forty
two countries studied, substantial employees in the 17 countries found in the informal sector. In the meantime, sub-
Saharan African states constitute the uppermost proportion to the total employment. Furthermore, informal sector
employ 43%, 45%, 72%, 77%, 58% and 41% work force from both sex in countries like Algeria, Egypt, Kenya,
Burkina Faso, South Africa and Ethiopia respectively (International Labor Organization, 2002).
The nature and role of informal sectors strongly influence their recruitment pattern. The presence of a vast
multitude of women and child workers in the informal sectors of urban and rural economy is a well-documented fact
that has been served as a tool to instigate local development. According to Biswajit (2001), of the total working
population in Bangladesh, over 92% are in the informal sectors, and vast majorities (94 per cent) of them are women.
Whilst in urban India, 80 percent of women workers are employed in informal activities like household industry,
petty trades and services, and building construction.
Though data is not able to be obtained to figure out the number of women engaged in the sector (parallel
trading) in Ethiopia, different research reports reveals that significant number of women find themselves in the

108
informal sector in a way that was not expected. For instance, Central Statistical Agency report shows that, 52%
(Central Statistical Authority, 1994), 59.99% (Central Statistical Authority, 2003) and 61% (Central Statistical
Authority, 2011a) of women involved in the sector. Women‟s engagement increment can be justified by the alarming
rate of rural-urban migration. They look for job in the formal economy but most of them became unemployed, and
then a connection with informal sector (particularly parallel trading) has been made to secure employment.
According to Central Statistical Authority (2006) report, self-employment accounts for over 80% of the total
employment whereas; the rest belongs to wage employment in the informal sector. Self-employment sector such as
street vending, retail trade and local drinks are activities in which an enormous number of women are engaged to
help themselves and sustain their life from the suffers of poverty.
In developing countries poverty is growing caused by the uncontrolled and rapid population growth. This
resulted in serious social and economic hazards in which Ethiopia is part of it. Another danger in relation to this
appears to be rapid urban population growth as a consequence of rural-urban migration. As a result, the number of
unemployed people in towns is actually growing. On the other hand, informal sectors play an important role in
employment generation for substantial number of women in Ethiopia not only accompany them with stuff but also
provide them with necessary goods and services. So, informal sector particularly parallel trading (called street,
pavements, sidewalk or open-air selling, or called street net; besides the term embraces the aspects business, not
designate the place where the business activities take place nor the manner of business) provides significant
contribution to the local economic development pertaining to employment output in many African countries
(International Labor Organization, 2002) and (Matthias, 2011). However, in Ethiopia this sector has got
marginalized and much less emphasis in general and in Dessie in particular. Hence, hitherto there is no study on
women and informal sector (parallel trading) resulted in unfathomed knowledge gap. Thus, it is found necessary to
study the socioeconomic performance of women in parallel trading and its implications in Ethiopia with particular
reference to Dessie town. Accordingly, this study tries to address the following specific objectives include:
1. Assessing the driving factors that cause women to parallel trading activities.
2. Assessing the socioeconomic status of women in the sector.
3. Assessing the challenges on the performance and growth of parallel trading.
2. Methodology
2.1. Description of the Study Area
The study was carried out in Dessie town. In 2007 the population of Dessie town was about 151,174, consisting
of 48.23% male and 51.77% female (ibid, p.8) and during 2008 estimated to be more than 200,000 (Dessie Town
Urban and Planning Program Office, 2008). The majority of the people in the town engaged in more than 6,500
business entities/trade dominant and commerce, government and private employees (Dessie Town Trade and
Transport Office, 2010), and 12, 321 (18.4%) of the population in the town is unemployed (Central Statistical
Authority, 2011a).
2.2. Research Design and Data Sources
The (design) used in the research is Mixed Sequential for both qualitative and quantitative methods.
Employment, income and expenditure to (social issues) of people engaged in the trading, housing, education, health
status is used as the main variables in the study. The data on the operation and growth of parallel trading were
collected in the survey from April-May-June 2014. Both primary and secondary data were used to undertake the
study. Primary data congregated from those engaged in parallel trading, using questionnaire and observation.
Secondary data generated in the study came from Dessie town trade and transport report, CSA and other published
and unpublished sources and Medias.
2.3. Sampling Technique and Data Collection
During the study random sampling techniques were used to take samples from the total of 206 parallel traders
determined using the unknown sample size determination formula (Sarantakos, 1998). Therefore, 206 respondents
were used including the return rate (5%) of the respondents.
Both primary and secondary data were collected during the study. Primary data were collected from 206
randomly selected respondents running the business (parallel trading).
2.4. Method of Data Analysis
Both qualitative and quantitative data were collected and analyzed from the view point of research objectives.
The collected data were entered into SPSS version 20.1 and analyzed by using explanatory sequential analysis:
quantitative data was first processed and it was followed and supported by a qualitative data involving exploration
with a few cases or individuals. Averages, mean, percentages, tables and figure were used in the analysis (Creswell,
2009).
2.5. Discussion and Analysis
The socio-demographic features of women‟s, parallel trading, major factors that lead to informal sector (parallel
trading), sources of startup capital, the sector socio-economic impact; employment extent, monthly income of
women, housing situation, health care affordability and education accessibility and working conditions are discussed.
In addition, the support of any external bodies including government offices like (Trade and transport office) and

109
non -governmental bodies in the study area, and the challenges to the operation and growth of parallel trading are
presented under this section of the study.
2.6. Socio-Demographic Characteristics
In the study, women‟s socio-demographic characteristics are explained using age, marital status, educational and
family size. Respondents were asked to indicate their age, marital status, educational background and family size in
order to get an insight about the demographic characteristics of the respondents and to see if their personal
background has something to do with their engagement in the sector. In the following paragraphs below, the data
(Table 1) pertaining to such variables are presented.
Accordingly, majority of the respondents (39%) and (30%) were between the age of 19-34 and 35-44 years
respectively. About 8% of the respondents were below the age of 18, and 23% of them are above the age of 45. All
but 8% of the respondents are above the legal minimum age requirement to engage to work. This indicates that
except 8% (found in the Minimum Age Convention prohibited by International Labor Organization (1973) and
ratified by Ethiopia, working at the expense of their schooling) of the respondents, all are found in the legal age
requirement to work, and it is possible confidently to say that informal sector is the best job alternative for those at
the age of maturity.
Among those engaged in the sector, 16% of them were married and the unmarried women were about 25%.
More than half (59%) of the respondents were widowed or divorced. This indicates that parallel trading has been
dominantly practiced when women becomes widow, divorced or unmarried. Thus, parallel trading has something to
do with the unmarried section of the society, and consider it as an alternative economic activity for those with some
social problems.
Based on data from the survey, parallel trading created employment opportunity to 46.8% of women who are
illiterate, 36.8% of those who can read and write, and others who attended primary and secondary school accounted
for the rest 17.6% of the sampled population. Accordingly, majority of women in parallel trading were found
illiterate and with low level educational status. This figure indicates that when women‟s level of education gets
higher and higher the chance of their engagement in parallel trading goes down. Thus it proves the „inverse
relationship‟1
between education and informal sectors employment to what was reported by Nzinga and Tsegay
(2012), that would affect the prospects business development.
Women engaged in parallel trading with a family size of 1-3 and 4-6 members per a family accounted for 26%
and 41% respectively. In account, it is found to be the case that there is direct relationship between family size and
women engagement in parallel trading, i.e. the number of women engaged in parallel trading having large family
size is in considerable extent greater than those with small family size. Because, the growing number of family size
in most of the poverty prone sections of the people became the factor that drive women to join parallel trading as a
means of economic survival. Thus, the study confirms with the report of Central Statistical Authority “parallel
trading remain an alternative sector for large numbers of families in a widespread and growing phenomenon” (2011).
Table-1. Age, marital status, levels of education and family size of respondents
Characteristics Percent Number of the respondent/parallel traders
Age % N
<18 8 19
19-34 39 77
35-44 30 58
>45 23 44
Marital status % N
Married 16 31
Unmarried 25 50
Others (widowed & divorced 59 117
Level of education % N
Illiterate 46.8 93
Write and read 36.6 72
Primary 11.6 22
Secondary 6 11
Family size % N
None 14 28
1-3 26 51
4-6 41 82
>6 19 37
Source: Own Survey, Dessie, 2017
1
The increases in educational attainment support the claim that the decreases in labour force participation rates are due to increases in schooling.

110
2.7. Informal Sector Activities: Parallel Trading
The studied respondents have been working in parallel trading having an item to be consumed, called food
items2
and non-food items constitutes of (78%) and (22%), respectively (Table 2). The data obtained through
observation also strengthens the above figures that women most usually provide goods/items which could be spoilt.
They explained that easy accessibility of food items in the surrounding area is the main factor pulls them to get in to
retailing.
Table-2. Items/activities and women in parallel trading
Item/s/Activity Percent Number of respondents/parallel traders
Food and Drinks/to be consumed 78% 155
Non-food/textile, cosmetics 22% 43
2.8. Major Reason’s Driving Women to Parallel Trading Activities
Respondents were asked to indicate the reasons why they found themselves in parallel trading and their former
occupations. The following table presents the response to this question.
Table-3. Women‟s Reasons to parallel trading and former occupations
Reasons to parallel trading Percent Former occupations Percent
Searching better income 14% Dependent on husband‟s income 65.7%
Family Split (Divorced or widowed) 67% Searching formal employment 24.3%
Securing livelihood and self-sustenance 19% Other private business 10%
As indicated above, the reasons which forced women to be part of parallel trading includes marriage (many are
divorced or widowed, 67%), securing livelihood independency/self-sustenance (19%) and search for better income
(14%). Parallel trading was found as the last retreat and backing for women‟s with problems of marriage. Turning to
the analysis of women‟s former occupations before parallel trading, we can see that the largest numbers (65.7%) of
them were dependent on their husband‟s income. Those who were searching formal employment accounted for
24.3%. The above figure shows that livelihood dependent woman who faced the challenge of divorce and status of
widowed lacking spontaneity to refrain from parallel trading.
2.9. Women and Their Financial Status in Parallel Trading In the Study Area
Informal businesses (parallel trading) are characterized by the easy entry and exit, and low capital base (World
Bank Group, nd). In conforming with this report, survey data depicted in Table 4 prevails that most women start to
operate parallel trading by small business with an average of (550 ETB or 27.5 US$)3
. Furthermore, the sampled
population gets an average monthly income of only 720 ETB or 36 US$ and help people to lead in to capital
accumulation and investment. Being the source of income and employment opportunity also makes economic status
of women and local economic growth.
Table-4. Initial capital and monthly income of women in parallel trading
Items Min. Max. Mean
Initial capital(ETB) 150 750 550
Monthly income(ETB) 402 1600 720
As summarized in Figure 1 below, the major sources of initial capital to start parallel trading ventures in the
informal sector comes from family saving (36.7%), credits from relatives (29.3%) contribute much more than the
formal interest based creditors constitute of (11%). The low possibility to access initial capital from formal interest
based creditors is a sign of the failures of the formal financial institutions from offering credit to operate business
successfully, which ultimately undermine the visions of business expansion. This is mentioned by numerous studies
as among the effect of sectors informality4
(Asmamaw, n.d; International Labor Organization, 1972;2000; World
Bank Group, nd).
2
Food Items including vegetables, fruits, bread (Nsolo 2000) , local foods including enjera‟, „ቆሎ‟ (dried cereal /grain foods) of barley, Lewz
Ocholoni and fast foods like „patty potato‟, „potato chips/crisp‟, „sambusa or Samosa‟, „pastini‟ in Italy called „pasticcio’, and “production and
sell of local drinks such as „teji‟, „tela‟, „areki‟, shameta”, Ebisa (2012) and hot drinks like tea and coffee.
3
The exchange/Conversion of 1 US$ is equivalent to 20 ETB (Ethiopia Birr) accessed from the, National Bank of Ethiopia, (2015) .
4
The absence of institutional and legal regulations, because they are informal it doesn‟t mean criminal rather activities that are beyond the realm
of legal systems and institutions, and beyond formal systems of labour and social protection. No recognition under the law and hence no formal
legal definition and enforcement of property and contract rights, combined with enhanced vulnerability to crime, predation, extortion, corruption
and harassment by state authorities.

111
Figure-1. Sources of initial capital to start working in parallel trading (198/206)
2.10. Informal Sectors/Parallel Trading: Socio-Economic Responses
In spite of the fact that the gain is not enough, various research efforts have also consistently shown that
informal sector is an integral component of total national economies through employment opportunity and household
consumption security (International Labor Organization, 2002), (Armando, 2002).
The data from the table below shows that, a little above two-third (78%) of the respondent‟s household was
dependent on income generated by women house head involved in parallel trading. This figure indicates that parallel
trading was not only the source of income for the owners but also the basis of survival livelihood for family
members.
Basudeb (2006) Stated that family members may start to work as young laborers in the same occupation of their
mothers to help the family reach a subsistence level income. Similarly, in this study the majority of the respondent‟s
family members (80%) were involved in parallel trading activities. So that, parallel trading is not an individual or
personal occupation rather the study proves that it is an occupation of family members, at least playing an assisting
role.
Table-5. Percentage distributions of respondents by household occupational status and Household involvement to parallel trading
Respondents household occupational status Percent Number of Respondents
Dependent (Yes) 78 155
Independent (No) 22 43
Household involvement in Parallel trading Percent N
Yes (be involved 80 158
No (not be involved 20 40
2.11. Women in Parallel Trading and Social Sectors Response /Improvement
Informal sectors not only contribute to the economic growth but also have greater roles in improving and in the
changes of social service dimensions like housing, health and education to the owner and family members
(Armando, 2002; Ebisa, 2012).
From Table 6 beneath, out of the total sampled population, 36% of the respondents have been living on their
own house (irrespective of the standard), 59% of them are living in rented houses (from government and private),
and 5% of them are living under slum and squatter housing conditions. Since over half of the respondents (59%)
were living in houses rented, it is possible to say that they are found with less capacity to have their own private
house effected from the low level of income generating capacity of the sector (parallel trading), shown in Table 4.
Respondents were asked about the affordability of health care service. About 71% of the respondents (income
dependent up on the gain from parallel trading) were not able to find health care services in affordable manner. The
remaining (29%) respondents say that health care services are reasonably priced and affordable.

112
Table-6. Percentage distributions of women in parallel trading by housing situation, health care affordability and education accessibility
Items Percent Number of respondents
Housing situation % N
Own house 36 71
Rented house 59 117
Other (slum, squatter) 5 10
Health care affordability % N
Yes (I can afford to buy) 29 57
No (hard to afford) 71 141
Education accessibility % N
Yes (accessible 56 111
No (not 44 87
Source: own survey, Dessie, 2017
According to Todaro and Smith (2012), member countries of the United Nations promised and committing
themselves to realize the Millennium Development Goals (MDGs) to achieve universal primary education by 2015
(2012 p.23). Related with the mentioned literature, the study reveals that parallel trading for (56%) do serve owners
in educating their family. This indicates that, more than half of them have got access to educate their family through
involving in parallel trading. However, the remaining (44%) of them have faced difficulty to find access to educate
their family. Due to the above fact, a little below half (44%) of boys and girls depends upon parallel trading activity
found difficulty to complete a full course of primary schooling.
2.12. Women in Parallel Trading and Support from External Organizations
Respondents were asked to indicate the support received from governmental and non-governmental
organizations.
Table-7. Support from Local government(s) and Non-governmental bodies
As the response of this questions summarized in table above, 90% of parallel traders in the study area have
received no support from non-governmental organizations whereas 10% of the respondents received support but
could not have any significant contribution to keep them to grow and develop to micro and small business level. The
majority (76%) of the respondents said that local government‟s approach and treatments were discouraging. For the
reason that parallel trading in its nature is trading in parallel, street or pavement (Central Statistical Authority,
2011b); local administrators have faced challenges5
from parallel traders in administering the spaces for the purpose
planed. So that, the attitude (prevent or showing disapproval of the sector) of local administrators towards parallel
trading were noticed as the thing that hinders the promotion and growth of the sector.
2.13. Major Constraints of Informal Sector/parallel trading Development
The problems encountered and the constraints imposed on the informal sector have adversely affected its growth
and development. In developing countries, the sector encounters a range of problems ranging from institutional to
market constraints6
(Asmamaw, n.d).
Table-8. Major challenges of women in parallel trading
Items Total Percent
Lack of conducive Work place 83 42%
Lack of access to finance 72 36%
Lack of smooth supply of inputs 37 19%
Low demand for informal sector products 6 3%
The data obtained from respondents (parallel traders) indicated that obstacles that hampered informal sector
growth and development were lack of conducive work place (42%), lack of access to finance (36%), lack of smooth
supply of inputs (19%) and low demand for informal sector products (3%).
5
Street sellers (among the causes/factors) mentioned by the town trade and transport office in the study area is that “street sellers are among the
factors for ill-transportation flow in the town”. In response, the office in the study area have plane to find a little by little solution to keep the
footway free for safe track for a person walking, (ATV 2014) , which has been broadcasted by Addis TV saying that “Addis Ababa trade and
transport office recruit police squads have been graduated responsible for keeping the town free from street sellers” Addis, (2015) . (translation by
author)
6
Institutional and market constraints include: financial, legal, working space, inputs and products market related restrictions.
Support from Local government Percent Support from non-governmental bodies Percent
Encouraging 24 Yes 10
Discouraging 76 No 90

113
The uneasy accessibility of premises in a short distance to customer combined with places that are easily accessible
but found around sewage and far from the consumers brought lack of work place as the major challenge to parallel
trading growth and development. The second major reason (lack of access to finance; 78%) occurred due to
unfavorable government regulations in which collateral requirements to access formal financing were complicated
and difficult to fulfill the requirements. This expresses indirectly that institutional constraints were required as a
prior condition for parallel trading to perform lower than the expected level. Shortage and irregularities in the supply
of inputs combined with low demand for informal sector products (22%) confirms that informal sectors face to
smaller extent market restrictions.
3. Conclusions
This paper has examined the informal sector of parallel trading as a sector and women retrospective and its
socio-economic responses. It is shown that parallel trading sector is dominated by less educated women, operated by
the legal age requirement to work, divorced and widowed in marital status. Thus, women in parallel trading increase
when the number of families also increases. The major pushing factors for the involvement of women in parallel
trading were marriage related problems (divorce and becoming widow) and daily living costs for sustenance.
However, most of them find themselves jobless and dependent on the patriarchal gains before they joined parallel
trading.
The study revealed that the most important source of initial capital to set up parallel trading was family savings
and money borrowed from relatives. Credits from formal financial institutions were much lower than informal
interest free creditors. Because of this, businesses were found with low working capital. Though the profit is
minimal and majority of women household are dependent on the gain from street net to afford health care service
and education, many women are not inhibit in and under slum and squatter settlements.
In general, parallel trading has such and the like socio-economic role in the society. Its growth and performance
is not satisfactorily due to the destabilization approaches of local governments, lack of operating space or market
place and lack of access to finance. Lack of smooth supply of inputs also contributed its own share to the slow
growth of informal sector/parallel trading in the study area.
Therefore, it is commendable to give sufficient attention by local governments in creating environments that are
friendly to parallel trading through recognition, licensing, credit facility or financial assistance and work premises to
help grow and graduate to micro and small business level. Also, the organizations and institutions (NGOs) working
on women are uplifting, this is the right time to revisit their strategy to strengthen work on women‟s capacity
building and address challenges that hampered parallel trading from performing the expected and significant level
enabling to fulfill the pertaining demands of women‟s and their dependent households.
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