9.6.2 — Informal Settlement Analytics — maturity: live
Informal Economy Indicators
Using multispectral and very-high-resolution satellite imagery to proxy informal economic activity — market density, rooftop solar adoption, construction churn and night-light intensity — in settlements outside the formal statistical record.
Satellite imagery and machine learning can reveal where cash circulates outside the formal ledger — street markets, home workshops, informal transport hubs — giving planners and tax authorities a ground-truth they cannot get from surveys alone.
National statistics offices cannot count what they cannot see. Informal settlements generate real economic output — street markets, home workshops, micro-enterprises — that never appears in GDP accounts, tax registries or labour surveys. Governments making budget, infrastructure and social-transfer decisions are therefore flying blind over the populations that need services most.
A constellation delivering sub-2m optical imagery on frequent revisit cycles changes that calculus decisively. Market footprint extent, rooftop material upgrades, vehicular traffic density and artificial light-at-night are all observable proxies for economic activity. Fused with low-light night-time imagery and Synthetic Aperture Radar coherence change detection, analysts can construct settlement-level economic pulse indices updated monthly — without a single enumerator on the ground.
The operational outcome is a living economic dashboard that planners, tax authorities and social-protection agencies can act on. Identifying a neighbourhood whose market activity has doubled in twelve months triggers questions about service provision and tax-base formalisation. Spotting a district where night-light intensity is falling during a drought triggers early humanitarian pre-positioning. Sovereign control of the data pipeline means these insights stay inside national institutions, are not filtered through a vendor's commercial priorities, and can be classified or shared at the government's discretion.
Frequently asked
What exactly can a satellite detect that tells us about the informal economy?
Satellites can measure proxy variables tightly correlated with informal activity: rooftop density and material type (distinguishing corrugated iron market stalls from formal buildings), night-time light intensity at 500 m resolution (VIIRS/Black Marble), vehicle and pedestrian flow at market hours, and impervious surface expansion. Combined with change-detection algorithms, these proxies allow analysts to track the growth or contraction of informal commercial nodes week by week without a single enumerator on the ground.
How accurate are satellite-derived informal economy estimates compared with household surveys?
Validation studies — including work published via the World Bank's LSMS programme — show that satellite proxy indices correlate with survey-based consumption at r² values of 0.6–0.8 at the settlement level, sufficient for trend monitoring but not for per-capita income estimation. The approach is best treated as a high-frequency leading indicator that triggers targeted fieldwork, rather than a replacement for surveys. Accuracy improves markedly when multi-source data (night-light, SAR, VHR optical, mobile-signal density) are fused.
Why should a government own the satellite rather than license imagery from Planet or Maxar?
Purchasing imagery as a service means the government's analytical priorities are subject to the vendor's tasking schedule, pricing, and — critically — export-control decisions by a foreign government. For applications touching tax enforcement, property rights, and economic planning, continuous, uninterrupted, and unredacted access is a sovereignty issue. A government-owned microsatellite constellation, even one with slightly lower resolution, guarantees daily tasking over every city without a licensing clause that can be revoked.
What orbit and satellite class makes most sense for this application?
A low Earth orbit (450–550 km SSO) constellation of six to twelve microsatellites (50–150 kg) carrying VHR optical payloads (0.5–1 m GSD) achieves sub-weekly revisit over target cities at a capital cost an order of magnitude below GEO. Adding one or two SAR payloads — either sovereign or via data-sharing agreements with partners such as ESA's Copernicus Sentinel-1 — provides cloud-penetrating continuity. This is the architecture used by emerging programmes in Argentina (SAOCOM), South Korea (CAS500), and the UAE (KhalifaSat).
Is there a legal framework for using satellite data to identify taxpayers in the informal sector?
No global treaty governs this specific use, but several frameworks apply: the ILO's 19th ICLS resolution defines the informal economy for statistical purposes, UN-GGIM's Integrated Geospatial Information Framework sets data-governance principles, and national data-protection laws (modelled on or equivalent to GDPR) constrain individual-level inference. Governments should adopt an explicit legal gateway — ideally through revenue-authority legislation — before deploying satellite analytics for tax purposes, to withstand judicial review.
Can night-time light data alone proxy informal economic activity?
Night-time light (NTL) from VIIRS or DMSP-OLS is a well-validated macroeconomic proxy at country or provincial scale, but its 500 m native resolution is too coarse to differentiate informal market nodes within a dense urban area. It remains valuable as a free, consistent baseline layer. Sub-settlement analysis requires it to be supplemented with VHR optical or SAR imagery to isolate individual market sites.
How do we handle communities that fear surveillance when rolling out this programme?
Legitimate concern. Best practice — recommended by UN-Habitat and documented in the OECD's Recommendation on Government Access to Personal Data Held by Private Sector Entities — is to publish the analytical methodology openly, use aggregated outputs (no individual identification), establish an independent oversight board, and focus outputs on service-provision planning rather than enforcement. Framing the programme as 'understanding where government services are absent' rather than 'finding tax evaders' significantly reduces community resistance, based on pilot experience in cities including Nairobi and Medellín.
What ground infrastructure does a sovereign programme need alongside the satellites?
A sovereign programme requires at minimum: one or two ground stations (ideally at high latitudes for polar-orbit LEO contact frequency), a secure imagery processing and archiving facility, a geospatial analytics platform (open-source stacks such as QGIS/GDAL/OpenStreetMap integration are viable), and trained personnel — geospatial analysts, ML engineers, and urban economists. The World Bank's Geo-Enabling Initiative for Monitoring and Supervision (GEMS) provides technical assistance to lower-income governments building exactly this capability.