Finance and Growth for Microenterprises: Evidence from Rural China

Using a survey dataset of Chinese rural households, we find that access to external finance is positively associated with the decision to become entrepreneur, the initial investment for microenterprises and the use of external finance. Also, we find that the use of informal finance is positively associated with sales growth of microenterprises with employees, but not of self-employed. We do not find any significant relationship between the use of formal finance and firm growth. Our findings underline the importance of finance for entrepreneurship and microenterprise growth, and the role of informal finance in the absence of efficient formal financial institutions.

Keywords: Finance, Entrepreneurship, Growth, China

JEL Classification: L26, G21

Suggested Citation: Suggested Citation

Beck, Thorsten and Lu, Liping and Yang, Rudai, Finance and Growth for Microenterprises: Evidence from Rural China (September 23, 2013). European Banking Center Discussion Paper No. 2013-010, CentER Discussion Paper Series No. 2013-053, Available at SSRN: https://ssrn.com/abstract=2329541 or http://dx.doi.org/10.2139/ssrn.2329541