Informal economies are prevalent in urban settings across Africa, including Libya, where regulatory frameworks often fall short of accommodating these sectors effectively. The research adopts a mixed methods approach, integrating qualitative interviews with quantitative surveys among urban dwellers and legal practitioners in Libya. Data collection spans both urban areas of Tripoli and Benghazi. A notable theme emerging from the qualitative interviews was the preference for informal sector activities over formal ones due to perceived ease of operation and lower costs. While regulatory gaps exist, there is evidence suggesting that some entrepreneurs in Libya actively seek compliance with existing laws. This dynamic highlights potential for targeted legal reforms that could enhance sector integration within existing frameworks. Policy recommendations include the development of more inclusive legal policies that recognise and support informal sector actors while also ensuring effective enforcement mechanisms are in place.