Using households rather than enterprises as the analytical unit, this study of 1,755 households in Nairobi's slums reveals that informal household microenterprises are indeed helping offset poverty. Microenterprises are helping households that are, a priori, more likely to be poor. Better microenterprise performance is associated with certain "business-related" factors, such as sales area, time in, and sector of operation. But "living conditions"--residential tenure and infrastructure access--also strongly influence both creation and success of microenterprises. Interventions that improve infrastructure and reduce tenure insecurity and rent-induced pressures to move may be crucial for incubating microenterprises and reinforcing their contribution to poverty alleviation in Nairobi's slums.
This study of 1,755 households in Nairobi's slums challenges the conventional belief that slums offer low-quality, low-cost shelter to a population that cannot afford better standards. In Nairobi, slums provide low-quality but high-cost shelter. Although slum residents pay millions of dollars in rents annually, and better quality units command higher rents, very little is being re-invested to upgrade quality. To resolve the challenge that the Nairobi puzzle poses for theory and practice, we develop a new analytical framework for understanding quality of living conditions. Improving conditions in Nairobi's slums requires, we argue, two simultaneous interventions: alteration of the tenure mix to enhance owner occupancy and infrastructure investment.