Ethiopia and Kenya are formalising small-scale trade, but traders might still choose informal routes

This article published by Trade Finance Global (TFG) interviewing out CEO explores one of most important trade policy experiments in East Africa: the new Ethiopia–Kenya Simplified Trade Regime (STR) at Moyale. The initiative seeks to formalize small-scale cross-border trade by introducing simplified customs procedures for licensed border traders. The article highlights a fundamental tension at the heart of formalization policies: governments seek greater regulatory control, while traders seek the lowest-cost and most predictable way to earn a living. As long as formal channels remain more costly, restrictive, or less convenient than informal ones, many will continue to operate outside the formal system. The discussion then reframes trade facilitation as behavioural economics. The central message is essentially: traders do not become formal because governments create a legal framework. They become formal when the legal framework is more attractive than the informal alternative.