Abstract: Since it’s first coined by Keith Hart several schools have emerged to interpret and explore the informal sector concept in development literature. The present study has tried to review this concept to look at how it has grown and got the considerable currency in the development economics. It is realized that this sector has the potential to grow over time and able to build up an industrial base adaptable to local technology. In addition, it is a viable and dynamic part of the national economy which uses resources more efficiently. Obviously, this is the sector which one can identify as it constitutes a large part of the economic activity that is unregistered and unregulated on a small scale basis in most less developed countries. There may differences in the nature of activity of the informal sector between the developed and developing countries, but what is obvious is that the sector is contributing everywhere in the world, irrespective of the economic system.