This study intends to investigate the situation of informal sector operators with particular emphasis on the main driving factors to engage in the sector. The study is based on a field survey of 90 informal sector operators by using a multi-stage sampling method to draw samples from major towns of the Afar region (Logiya and Asayita). Data is gathered in the year 2017 from these sample informants Employing cross-sectional quantitative research; primary. A structured questionnaire is used as a method of acquiring information which was finally analyzed using a descriptive method of analysis to account for the issues under study. The findings of the study revealed that self-sufficiency, a combination of multiple factors, and poverty are witnessed to be the major drive to engage in the informal sector. The study further identified that informal sector operators confronted many challenges which include lack of working capital, multiple challenges, lack of working space, sexual abuse, the seasonal fluctuation in demand of commodities, loss of materials, household chores, competition, and lack of business knowledge. Taking this into account, reducing informal employment by lowering the cost of transitions to formality through the creation of an enabling policy and regulatory environment is needed. For this, protecting workers’ rights and increasing the benefits of being formal by promoting greater awareness of the advantages and protection that come with formalization (business development services, access to the market, productive resources, credit programs, and training and promotional programs to upgrade informal economy units ) is needed.
Keywords: Keywords: Informal sector, driving factors, formal sector.