Zusmelia, Firdaus, Ansofino
Indonesia is a developing country with a large informal sector. However, the various studies claim that this sector has not received priority in both economic and development policies. The implication is that the informal sector (in traditional markets) is difficult to develop and is unable to solve their main problems which are sourced from formal legal aspects. This study shows that the legality problem makes the informal sector persistent in their three main problems; we call them uncertainty of space, financial and skills limitation. These three problems are the root of various problems in the informal sector, ranging from disorganized, slums to poverty. In this article, we argue institutional is the most effective approach to addressing the problem of the informal sector by strengthening small traders. For implementation of strengthening through institution, we purpose three programs according to their main problem, namely facilitating the space, providing and facilitating financial institutions and capacity building.