Small Business Performance
Is It Access to Formal or Informal Credit that Matters
Bibliographic Data
| ID | 21737592 |
|---|---|
| Authors | Kingstone Mutsonziwa (FinMark Trust), Ashenafi Beyene Fanta (0000-0001-9154-3518, Stellenbosch University, corresponding author) |
| Year | 2021 |
| Volume | 22 |
| Issue | 4 |
| Pages | 550-563 |
| Publication date | 2021-10-02 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of African Business (JOURNAL) |
| Journal identifiers | ISSN: 1522-8916 • E-ISSN: 1522-9076 |
| Publisher | Informa UK Limited (PUBLISHER • GB) |
| DOI | 10.1080/15228916.2020.1826854 |
| OpenAlex | W3092035116 |
| Language | EN |
| Citations received | 3 |
| References cited | 45 |
While literature is clear on the role of finance in small business survival and growth, the relative importance of formal and informal credit in small business growth remains contentious. While earlier studies report the importance of formal credit in driving growth of firms of all sizes, recent studies find informal credit to drive the growth of only small businesses. The aim of this paper is therefore to contribute to the debate by bringing the context of four developing economies in the Southern African Developing Community (SADC) using the FinScope surveys on 10,830 Micro Small and Medium Enterprises (henceforth MSMEs). To address selection bias caused by various factors affecting small business participation in the formal/informal credit market, we used propensity score matching (PSM) where we paired small businesses from the two groups. We examined the effect of access to formal/informal credit on business performance using Average Treatment Effect (ATE) as well as Average Treatment effect on the Treated (ATT). Our results suggest that firms accessing formal credit tend to exhibit better performance in Zimbabwe but a similar performance gain was not observed in the rest of the countries. For informal credit, our results show that firms accessing informal credit tend to perform less than those without access, suggesting value depletion effect of informal credit
Bond market · Business · Developing country · Economic growth · Economics · Informal sector · Propensity score matching · Selection bias · Small business · Corporate Finance and Governance · Microfinance and Financial Inclusion · Working Capital and Financial Performance · Finance
Formal versus Informal Finance
Relationship Lending and Lines of Credit in Small Firm Finance
The central role of the propensity score in observational studies for causal effects
Community development and micro-enterprises
Informal financial markets under liberalization in four African countries
Moneylenders and informal financial markets in Malawi
| Unique citing works | 3 |
|---|---|
| Citations per year | 3 |
| Citation span | 2025 - 2026 (2) |
| Citation velocity | current |
| Highly cited | No |
| Citation types | Neutral: 3 |