Debt portfolios of the poor: The case of street vendors in Cali, Colombia

The informal economy plays a significant role in the job market in Colombia. Cali, the third largest city in Colombia, is characterized by a high percentage of socially and economically vulnerable population groups who take part in the urban informal economy, with street vending as their primary source of income. This paper studies the socioeconomic dimensions of street vendors in Cali. In particular, it examines why they are unable to escape poverty and capitalize on their comparatively high earnings, despite a minimal tax burden due to the unregulated nature of their work and benefits from government welfare. The analysis is based on two surveys with 637 participants and 300 participants respectively. The study shows that most of the street vendors do not have access to formal banking systems. Consequently, they usually depend on payday loans with much higher interest rates which absorb a large share of their income and perpetuate their indebtedness, preventing them from improving their living conditions. However, the daily cash flow of street vending masks the high opportunity cost of loans and long-term deficits.