The Impact of Informal Economic Activities on Poverty Reduction in Mbeya: A Case Study of Small-Scale Traders

Aims: This study aimed to assess the impact of informal economic activities on poverty reduction in Mbeya, Tanzania, with a focus on small-scale traders. The specific objectives were to evaluate the contribution of informal economic activities to household income, identify challenges faced by small-scale traders, and assess the effectiveness of policies and programs that support the informal sector. Methodology: The study adopted a descriptive research design using a mixed-methods approach. Data were collected through structured questionnaires and in-depth interviews involving 391 respondents, including small-scale traders and local officials. Quantitative data were analyzed using SPSS version 22, while qualitative data were analyzed thematically. Results: Findings revealed that over 75% of household income for most traders came from informal activities such as food vending and small-scale retail. Key challenges included lack of access to credit (79.1%), poor infrastructure (67.2%), and lack of legal recognition (64.2%). Awareness and effectiveness of government support programs were low, limiting their impact on poverty alleviation. Conclusion: Informal economic activities are central to poverty reduction in Mbeya. However, their potential is undermined by systemic barriers and ineffective policy implementation. Enhanced support structures and targeted policy reforms are required to maximize the sector’s contribution to sustainable livelihoods.