Research & Analysis

Relief for Informal Workers: Falling through the Cracks in COVID-19

COVID-19 BRIEFING: Insights for Inclusive Finance 

A staggering 90 percent of workers in developing countries rely on the informal economy (Bonnet, Vanek, and Chen 2019). Worldwide, there are approximately 2 billion informal workers—identified as individuals with casual work arrangements or no fixed salary (ILO 2020a).1 They are not recognized by social protection agencies and do not have the protections offered by formal sector employment, yet they make up a majority of the workforce. Many have lost income-generating opportunities due to the COVID-19 pandemic—and providing relief for these individuals is critical.

Informal workers engage in street vending, home-based work, waste picking, domestic jobs, and other short-term contracts. They may be undocumented, they usually are classified as living just above the poverty line, and they may not qualify for or even seek government support in normal times. As such, they frequently are not registered with social protection programs. They tend to depend on less formal or unregulated financial services providers (FSPs) such as pawnshops and payday lenders. Identifying, localizing, and reaching the “informal poor” or “invisible poor” is challenging—especially now.

As the COVID-19 crisis continues, governments around the globe are scrambling to respond. Social protection agencies are deploying resources and intelligence to tackle economic challenges resulting from this unprecedented health crisis. Financial regulators are facilitating access to relief measures that are designed to mitigate the economic impact on individuals and markets. Yet despite the record scale of response, including government-to-person (G2P) transfers in over 140 countries, relief programs have failed to reach many people in need. This Briefing addresses challenges faced by informal workers and why relief measures already in place may not be reaching them. We then recommend program improvements that can be made in the medium term in the midst of the pandemic and in the long term in anticipation of future global shocks.

COVID-19 is creating and exacerbating challenges for informal workers

Lost labor income is soaring. Of the 2 billion informal workers worldwide, an estimated 1.6 billion of them may lose their livelihoods because of the COVID-19 crisis. The International Labour Organization (2020b) estimates that, in lower- and low-income countries, lost labor income because of lockdown measures could mean an increase of more than 56 percentage points in relative poverty for informal workers and their families. (See Box 1.) This broad segment works in accommodation and food services, manufacturing, wholesale and retail trade, and many other sectors, and it comprises over 300 million subsistence farmers. Estimates of income loss may increase as pandemicrelated layoffs push more people out of the formal economy and into informal work. Informal workers are particularly at risk because they lack social protection, access to good health care, access to reliable electricity, and in some cases, access to sanitation infrastructure. The hardest hit sectors include retail trade and service industries like street vending and domestic work— typically low-wage jobs that rely on in-person connections (WIEGO 2020a).

BOX 1. Loss of income for informal workers in Kenya, Myanmar, and Peru

Surveys of informal workers in markets like Kenya, Myanmar, and Peru showed significant decreases in income as soon as social distancing and lockdown measures were put in place. Initial research in Kenya in April 2020 showed income drops spanning a wide range of livelihoods but hitting urban dwellers hardest.

In Myanmar, more than 60 percent of households initially experienced a work stoppage, and 38 percent closed their micro or small businesses. These numbers later spiked, with 70 percent of households reporting work stoppages and 49 percent of micro, small, and medium enterprise (MSME) owners shuttering their operations (Zollman et al. 2020; Wallace 2020). Another survey in April by Apoyo Consultoria showed that worker income in Peru fell 30 percent in the formal sector and 20 percent in the informal sector. Around 70 percent of Peru’s economically active population works informally.

Women are disproportionally affected (Grown and Sánchez-Páramo 2020). Emerging evidence from the United Nations (2020) on the impact of COVID-19 suggests that compared to men’s lives, women’s economic and productive lives are disproportionately and differently affected. In low-income countries, 92 percent of women work informally compared to 87 percent of men (Moussié and Staab 2020). Many women have lost work-from-home and other sources of income, and they must now care for a large proportion of the 1.6 billion children whose schools or childcare centers have closed (WIEGO 2020b; Saavedra 2020). The increased burden of providing meals for children— the extra purchasing, cooking, and cleaning—is an added cost and drain on women’s time. It is not surprising that a recent survey of households in India found that “across the board, women appear to be more stressed than men” (Afridi, Dhillon, and Roy 2020).

LGBTI individuals may also be disproportionately affected. “[Lesbian, gay, bisexual, trans, and intersex (LGBTI)] people are more likely to be unemployed and to live in poverty than the general population…. Many in the LGBTI community work in the informal sector and do not have access to paid sick leave and unemployment compensation and coverage. In addition, discriminatory paid leave policies do not cover all genders equally, and LGBTI people may not be able to take time off from work to care for family members” (UN Human Rights 2020). On 17 May 2020, human rights experts on sexual orientation and gender identity released a statement noting that transgender populations already disproportionately rely on informal work due to challenges with documentation, discrimination, and education, among other issues. Invisibility in national registries, regular denial of access to health services, and a high incidence of violence are exacerbated by the pre-existing challenges the trans community faces (OAS 2020).

Elderly informal workers need specific protections. Elderly informal workers need additional protections to ensure that they have enough monetary support (often from their families) and can securely receive benefits in a way that meets health protocols related to the COVID-19 pandemic. It can be difficult for elderly workers to recover from lost assets, and international response has been inadequate in recognizing the special vulnerability of elderly people. For example, the World Health Organization’s single set of guidance for older people refers only to those living in long-term care facilities—a rare form of shelter in developing countries (Lloyd-Sherlock and Pillemer 2020). Death rates and debt tied to the pandemic will be devastating in developing countries where many elderly people still work, especially countries with little public assistance.

Illiterate and innumerate informal workers face challenges as they seek benefits. Illiterate and innumerate informal workers may not have easy access to information on government relief programs, or they may not be able to fill out applications. Language barriers are likely to be an issue in remote rural areas where many illiterate people live and where the country’s predominant official language may not be spoken. There is a great difference in literacy rates across generations in developing countries, where elderly people (65+ years old) are less literate than younger people (Roser and Ortiz-Ospina 2013).

The lives of young people are being severely disrupted. Young people, as a segment, have experienced several shocks in recent months: disruptions to education and training, unemployment, income loss, and greater difficulty finding jobs. Estimates indicate that more than one in six young workers have stopped working since the crisis began (ILO 2020c). This vulnerable population already has limited resilience in terms of emergency savings and medical insurance, meaning that these young people have little to no access to regular health services. The pandemic increases their vulnerability.

The pandemic will leave many informal workers with no income. Research has found that local governments in India are using the lockdown to dismantle the street vending infrastructure (WIEGO 2020b). The research also found that waste pickers in Colombia want to continue working through the pandemic because they are afraid that if they do not, they will be replaced by large private waste management companies.

In addition to loss of income and the need for emergency subsidies, some informal workers are at risk for over-indebtedness. Of the household and MSME respondents to a recent survey in Myanmar, 84 percent indicated that they had difficulty servicing precrisis debt because of the economic disruptions of the COVID-19 crisis (Wallace 2020). Among those taking emergency debt, 35 percent are using it for survival essentials such as food and health purchases. The crisis highlights the need to make most vulnerable people visible and to identify ways to provide vulnerable segments with the information and support they need.

The COVID-19 pandemic has quickly revealed the vulnerability of informal sector workers who are neither visible in social protection programs nor protected by formal sector employment, even though they make up the majority of workers in an economy. This is a significant gap in the social protection system. It is unclear how soon informal workers will bounce back, and if (or when) they do, whether they will do so fully or partially. Consulting firm BFA (2020) projects no bounce back under most scenarios, rather a “limp back” or “fall back”—meaning it will take a long time for informal workers to recover, if they do at all, and that the number of destitute people will increase. If the poverty gap lasts for a long time and becomes permanent, it portends major societal problems on the horizon. But if some portions of the informal sector return to work soon at half or nearly full capacity, informal workers may prove more resilient.

The response and its impact

Informal workers often are excluded from relief efforts because they are relatively invisible to governments, relief agencies, and FSPs. This “formal invisibility” needs to be addressed (Hamilton 2020). Little data are available on the 300–400 million workers who live just above the poverty line and typically do not qualify for government safety net schemes. In Africa where more than 85 percent of the population works in the informal sector, governments mostly have focused on the formal African economy: airlines, energy, insurance, and formal businesses (ILO 2020d). Some governments have announced measures to support the informal sector with the caveat that it will take time to implement those measures. However, assistance may not reach vulnerable informal workers for several reasons, including the following:

  • Eligibility and qualification rules may exclude informal workers from income support programs.
  • Governments and aid agencies may face obstacles in identifying those in need.
  • Difficulty delivering support can limit who has access to support measures.
  • Uneven implementation of debt relief measures often exclude informal workers.
  • Policy makers may not promote the relief that is available.

More insights into how relief responses affect several segments of informal workers are required to better understand and address these underlying issues.


There are little data on beneficiaries. Rules on who qualifies for aid and how they secure it have created challenges and barriers in delivering COVID-19 emergency relief (Jerving 2020). Informal workers may be difficult to identify and reach because they tend to fall outside the categories of people formally registered with governments. Even during normal times, they may not qualify for social protection programs that use means testing and other mechanisms to determine eligibility.

South Africa has identified approximately 6–8 million informal workers—more than 10 percent of the population—who earn no income due to the impact of COVID-19 and lockdowns. The South African government designed a grant for this segment and can now for the first time compile a list of those who fall into the informally engaged category.

Identification and targeting are challenging. Issues around properly identifying poor people have been documented and tackled for years in terms of social transfers. In some cases, there are several ID systems, there is duplication, or people are not able to get identification and are therefore invisible. Addressing barriers is especially urgent now so that relief efforts can reach vulnerable segments. As the Mercatus Center notes in its recommendations for addressing cash relief for the economically vulnerable in India: “[D]aily wage earners in the informal sector are truly invisible in the Indian policy framework” (Rajagopalan and Tabarrok 2020).

WIEGO (2020a) notes that in the pandemic, “restrictions on mobility make it difficult for informal workers to collect income support” because many do not have digital bank accounts or access to mobile money transfers. In some countries, temporary closures of bank branches and automated teller machines during lockdowns cut off access to cash for those who rely on it most (Hernandez and Kim 2020).

Other research shows that more than half of poor women in India are likely excluded from the government’s emergency COVID-19 cash transfer program because emergency transfers are routed to PMJDY accounts, which are owned by only 150 million out of an estimated 326 million poor women (Pande et al. 2020).2 Further, one in five poor women lives in households that lack ration cards, which typically grant access to the central food ration system.

This highlights the concerns about eligibility rules that require a form of identification that is not available to everyone. A study in the Philippines found that only 11 percent of microenterprise members surveyed received cash assistance from the government, despite 30–50 percent losing their livelihoods (Rapisura 2020). There are concerns in Bangladesh that a recent government stimulus package will not reach the informal sector even though it needs it the most and lacks the capital to recover from losses (Kabir 2020). (See Box 2.)

BOX 2. Bangladesh relief programs target informal workers but fail to deliver for them

Daily wage earners were among the hardest hit when the government of Bangladesh announced an economic shutdown in response to the COVID-19 crisis. More than 85 percent of the country’s labor force is informal, which amounts to almost half its GDP (Independent 2020; ADB 2010). A study by the Power and Participation Research Centre and BRAC Institute of Governance and Development (2020) further indicates that incomes of the country’s ultrapoor, moderately poor, and vulnerable nonpoor have fallen by 70 percent because of the pandemic.

In April, as part of the government’s $11 billion crisis response, the prime minister announced a $90 million scheme to support “day labourers, rickshaw pullers, transport workers, construction workers, newspaper hawkers, restaurant and hotel staff, and others who have lost jobs due to the general holiday or partial lockdown” (Shawon 2020). The one-time cash transfer would be deposited into workers’ bank accounts, but this left out a large segment of the population. (The World Bank’s Global Findex shows that only 50 percent of Bangladeshi adults had access to accounts in 2017 [Demirguc-Kunt et al. 2018].) The government also enrolled 5 million extreme poor and vulnerable people into its food-friendly program and announced that 5 million poor households would receive approximately $30 in mobile cash assistance (Business Standard 2020).

By July, the media reported that the government lacked the proper mechanisms to deliver aid to rightful beneficiaries and noted corruption as well (Rahman 2020). For example, 200 names in a money distribution list used the same phone number. Many enrolled in emergency aid programs using multiple mobile phone numbers and fake national identity card numbers. In addition, rice meant for poor people was stolen (Das 2020).

Although the government’s stimulus plan offered working capital to small and medium enterprises, most of them (including those run by women) could not avail themselves of the loans because they did not have links to the commercial banks that were chosen to distribute funds.

Delivery channels often do not reach most vulnerable people. While digital delivery models can effectively lower costs and decrease leakage, they come with their own challenges. Governments must ensure relief reaches those who need it the most—those on both sides of the digital divide. (See Box 3.) For example, the government of Indonesia’s pre-employment card program provides beneficiaries with approximately US$215 over a four-month period. Applications must be completed online, which can be a barrier for people with limited digital skills or connectivity (Gentilini et al. 2020b).

In another recent example, social welfare beneficiaries in the Philippines received immediate emergency cash transfer subsidies through prepaid cards that they already had. People who were not already in the program and did not have a card faced long delays in receiving their cash distributions from local governments (Enano 2020).


Given the challenges vulnerable populations currently face in accessing income support, they likely will need to sell their meager assets for short-term survival. This will create more fragility in the mid to long term and make it more difficult for them to recover from the effects of the COVID-19 crisis. These populations may take on new or increased borrowing to cover daily needs. In turn, this additional debt may increase their risk and be exacerbated by the fact that debt relief may not reach them at all. There are two main reasons debt relief may not reach informal workers: (i) the FSPs they rely on do not extend relief and (ii) they are not informed about their options.


BOX 3. Emergency aid to informal workers in Brazil and Peru

A new app allows the state-owned bank of Brazil, Caixa, to provide emergency aid to informal workers, the self-employed, and the unemployed. But many have yet to receive aid because of problems with the app and outdated information or because they are not listed in the government registry (Duarte de Souza 2020).

In Peru, the labor ministry and the state-owned bank set up bono independiente, a cash social transfer that can be accessed by unbanked informal workers. In March 2020 the Peruvian government approved two social transfers of approximately US$110 each to benefit low-income independent and informal workers, according to its ministry of labor database (Government of Peru 2020a).a However, the program was required to benefit only 800,000 of the over 7 million informal workers. In May the government approved a new transfer of approximately US$220 to each of 6.8 million households that have no formal income and are not beneficiaries of other social transfers (Government of Peru 2020a). Despite the effort, many low-income informal workers may not be included.

a. The government’s digital platform explains to users how to access the social transfer.

Unregulated providers are not eligible for relief measures nor are they required to grant leniency. Although regulators have mandated or encouraged payment holidays and loan reprogramming, such measures typically apply to a minority of good borrowers who are clients of regulated providers. Poor customers are more likely than others to borrow from unregulated providers that do not offer loan forbearance measures and often have barely enforceable consumer protection standards. Payday lenders are an example of the type of provider that falls outside the purview of regulators in many markets.

In Russia, consumer advocates note that repayment holidays currently are limited to a narrow range of consumers. And although microfinance operations in Myanmar were suspended until 15 May 2020, the Financial Regulatory Department found that some microfinance institutions were not following repayment directives, and their borrowers were forced to repay loans without the option of an extension (Myanmar Times 2020).

Financial regulators are not effectively communicating information on who is eligible for relief and how they can access it. The few who benefit from loan forbearance measures may not understand the full terms and conditions of the loan and could end up worse off due to interest and fees, especially if forbearance leads to balloon payments. Navigating and understanding the array of various relief measures can be extremely complicated, and borrowers who have little or no experience with formal financial services may be ill-equipped to weigh the options. Without explicit communication initiatives, vulnerable clients may not even be aware that options exist. In Peru, consumers increasingly turn to the country’s main consumer organization for information because loan forbearance measures are encouraged rather than mandated and providers can implement them in different ways. Similarly, consumers in Malaysia have been calling the country’s consumer association, FOMCA, for information because they are not getting the information they need from banks.

Building back better and offering future relief

The pandemic exposes weaknesses in relief systems and bears lessons for moving ahead. It has underscored the dire need to be better prepared and coordinated for unforeseen scenarios. Although solutions must be tailored to the specific needs at hand, governments and industry should address three overarching questions to prepare for the next global crisis:

  1. How can we identify vulnerable segments on an ongoing basis so that we know who they are before another crisis occurs?
  2. How can we ensure that relief is appropriate for vulnerable people and delivery channels are in place to reach them?
  3. How can regulators monitor market developments and consumer issues to better identify and understand the needs of vulnerable segments?

How can we identify vulnerable segments on an ongoing basis so that we know who they are before another crisis occurs? Some examples of how to do this include the following:

  • Government agencies could develop and formalize relationships with organizations and representatives of these segments, such as NGOs, consumer associations, women groups, or professional associations.
  • Agencies could ensure better integration of data sources and use proxies to identify where people need support the most—for example, by developing data-protected ways to use health data from social services to identify gaps in relief delivery. In another example, the Somali Cash Consortium is linking some of its cash transfers to health systems so that it can target households with COVID-19 cases and ensure that those families have enough money to be able to go into quarantine (Jerving 2020).
  • Government agencies could learn more about the financial products and channels specific segments depend on and identify the relief delivery channels they find to be the safest and easiest to use.
  • Agencies could test crisis scenarios to improve their understanding of the needs of vulnerable people and identify gaps in the safety net.

How can we ensure that relief is appropriate for vulnerable people and delivery channels are in place to reach them? Delivery systems need to be tested through simulations and optimally coordinated with public and private sector actors, including the following:

BOX 4. Grievance system in the Philippines

The Department of Social Welfare and Development in the Philippines set up a COVID- 19-specific grievance system for people who have been denied aid or who are unable to access it. It is important to continually assess the nature of demand as the crisis continues. Early reports from the Philippines show a drop in the number of credit applications as people focus on immediate needs. This is expected to change as countries emerge from the crisis and informal workers again need working capital.

Regulators must clearly articulate how late or unpaid loans will affect customer credit histories. Some countries have specified that lenders should not report as delinquent any delayed payments that are part of a payment relief agreement with a borrower. In such cases, it is equally important that customers understand how to challenge inaccurate reporting to a credit reference bureau, for example, through a complaint mechanism.

  • Public and private agencies could initiate ongoing interagency efforts to prepare and coordinate their responses, including operations on the ground and their internal and external communication. Better communication with the public and inter- and intrainstitutional coordination is key. (See Box 4.) Government, industry, and civil society actors need to work closely together so that authorities can quickly understand the dynamics in a crisis and coordinate their responses.
  • Digital financial services could help make the delivery of relief more efficient and effective. While some countries have digital infrastructures in place, many do not have an infrastructure that can reach everyone. In times of economic crisis, it is important to have well-developed agent networks in place so that the number of cash-in/ cash-out points for receiving funds can be increased when there is a need (Baur-Yazbeck, Chen, and Roest 2019; Hernandez and Kim 2020). In addition, policies on public funding for phones or low balance accounts may help the people in most need access digital channels.
  • Providers must have plans in place to respond to a range of crisis scenarios. Since it is possible that the next crisis could cause widespread disruption to digital technologies, disaster response plans should include analog relief measures, such as mailed vouchers, prepaid cards, and door-to-door cash distribution. They also should plan to quickly scale up remote call centers.

How can regulators monitor market developments and consumer issues to better identify and understand the needs of vulnerable segments? Countries need to build their capacity to monitor and measure the impact of policy and regulatory actions on customers so that authorities can fine tune their actions. These efforts might include the following:

  • Regulators could collect segmented information on beneficiaries so that they can better understand and assess the needs of informal workers. (See box 5.)
  • Regulators could require strong complaints statistics from FSPs, with data that, for example, indicate issue category, product, location, resolution, and other information. The data analytics systems that authorities establish could include time and peer comparisons, which would allow them to check complaints internally handled by FSPs, as well as disputes handled by external dispute resolution mechanisms.
  • Policy makers could ensure that regulators are empowered to temporarily modify and adjust rules.

Crisis situations heighten the fragility of the most vulnerable households and highlight the importance of not only resolving practical short-term challenges in reaching these segments, but also the need to provide them with basic protections. (See Box 6.) They often are not counted in social programs, they often face open discrimination, and the digital divide makes them harder to reach. They also frequently lack long-term savings, are less likely to be financially included, and have limited experience with digital technologies such as e-money product features, let alone knowledge of data protection. Authorities urgently need to develop longer term agendas that address foundational protection issues and the challenges related to digital financial services. The COVID-19 crisis provides governments the opportunity to address the pressing needs of the informal sector by including these segments in all facets of the policy-making process so that when the next crisis strikes, leadership will be ready with solutions.

BOX 5. Monitoring identifies shortcomings of relief efforts in Brazil

Monitoring and feedback on relief efforts can help identify (i) gaps where assistance is not getting through and (ii) potential failings of exclusionary policies. Feedback and data can support the need to spur policy change. For example, in Brazil, while the Office of the Federal Labor Attorney officially recommended that maids receive paid leave to stay home during the pandemic, only 39 percent of regular maids and 48 percent of daily maids have been given the benefit, according to the polling service Locomotiva (Guimarães 2020). This has prompted some maids to protest and others to demand sick pay. In addition, Brazil’s congress passed an aid bill in March authorizing a monthly US$102 “emergency basic income” payment to the newly unemployed, including informal workers. So far, however, faulty execution and bureaucratic delays resulted in just slightly over half of the 63.5 million people who applied to receive funds (Caixa 2020). Lack of internet access and other poverty-related factors may prevent millions more from applying at all. (Public Policy and Society 2020).


BOX 6. Country efforts bring cash transfer programs to informal workers

Many countries are taking steps to ensure that informal workers have access to income support, even workers who previously had not received social transfers. Cash transfers are currently being leveraged to reach informal workers in several ways, including the following:

  • Building on national social registries that are already in place (Brazil).
  • Introducing online platforms (Thailand).
  • Connecting to databases in the health and energy sectors (Morocco and El Salvador, respectively).
  • Checking against taxation information (Colombia and Argentina).
  • Establishing city-level schemes (Germany).
  • Introducing one-off cash transfer payments programs (Cabo Verde, Ecuador, Malaysia, Namibia, North Macedonia, the Philippines, and Vietnam).

These programs are universally provided in Serbia, Hong Kong, and Singapore. Because of the prevalence of informal workers in urban and peri-urban areas, countries like China, Uganda, and Trinidad and Tobago are taking steps to introduce and adapt such schemes to their own situations.

Source: Gentilini et al. (2020a).


1 According to the International Labour Office, employment in the informal economy includes employment in the informal sector plus informal employment outside the informal sector—informal employment in the formal sector and in households. National definitions and associated statistics may vary. See International Labour Office (2018, p. 11).
2 PMJDY is a government program launched in August 2014 to provide universal banking services to every unbanked adult.

To view full list of references, please see PDF

Background research for this Briefing was conducted by a CGAP team that included Mary Griffin, Juan Carlos Izaguirre, Antonique Koning, Matthew Soursourian, and Myra Valenzuela. We thank readers of earlier drafts who provided helpful comments and suggestions, in particular Jamie Anderson, Greg Chen, Gerhard Coetzee, Gayatri Murthy, and Corinne Riquet.

Website photo: Temilade Adelaja via Communication for Development Ltd. for CGAP