The Role of Formal, Informal, and Family Credit in the Business Performance of Young Entrepreneurs in Benin

39 Pages Posted: 17 Aug 2020

See all articles by Gbetoton Nadege Djossou

Gbetoton Nadege Djossou

Université d'Abomey-Calavi

jacob novignon

affiliation not provided to SSRN

Atchade Touwédé Bénédicte

Université d'Abomey-Calavi

Abdelkrim Araar

Université Laval

Date Written: March 13, 2020

Abstract

Young entrepreneurship is an important lever for economic growth and employment creation in developing countries. Credit uptake, however, continues to pose significant limitations to the sustainability of small-scale enterprises. We estimated the impact of credit uptake (formal, informal, and family) on young entrepreneurship performance in Benin, using 2014-2016 panel data from a World Bank survey on enterprise formalization. To address potential endogeneity and ensure robustness of results, we employed multiple models and estimation techniques (fixed-effects and Lewbel approach). Our results showed that, while formal credit was most important for larger firms, smaller firms benefited mainly from flexible (informal or family) credit. The impact of credit uptake was generally higher for women-owned firms. There were also variations in uptake according to firm owner’s age: the impact of formal credit was relatively higher for older firm owners while younger owners benefited more from flexible credit. The findings highlight the importance of Informal and family credit sources, especially for start-ups and small firms.

Keywords: Youth Entrepreneurship, Microcredit, Small-scale Enterprises, Benin

JEL Classification: D20, D25, O12, O17

Suggested Citation

Nadege Djossou, Gbetoton and novignon, jacob and Bénédicte, Atchade Touwédé and Araar, Abdelkrim, The Role of Formal, Informal, and Family Credit in the Business Performance of Young Entrepreneurs in Benin (March 13, 2020). Partnership for Economic Policy Working Paper No. 2020-16, Available at SSRN: https://ssrn.com/abstract=3673533 or http://dx.doi.org/10.2139/ssrn.3673533

Gbetoton Nadege Djossou (Contact Author)

Université d'Abomey-Calavi ( email )

Cotonou, Atlantique
Benin

Jacob Novignon

affiliation not provided to SSRN

Atchade Touwédé Bénédicte

Université d'Abomey-Calavi ( email )

Cotonou, Atlantique
Benin

Abdelkrim Araar

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
37
Abstract Views
264
PlumX Metrics