This paper defines the informal sector (IS) as being self employedpersons assisted by family and other non-wage earners. It discusses sometheoretical aspects of the urban informal sector and presents some pertinentfindings in indonesia such as why persons enter the informal sector.relationships of the informal sector to itself and the formal sector (FS),factors affecting the competitiveness and potential of the informal sub-sectors. and the interpretation of a change in the size of the informal sectorrelative to the format sector. An analysis of Central Bureau of Statisticsdata shows that the rate of growth of the informal sector from 1985 to 1990was much tower than the formal sector and much lower than the informalsector from 1980 to 1985, with the construction and transportation sectorsbeing exceptions and the female informal sector growth rate being 39 % thatof males.