The impact of the formal employment contract on credit access in Africa

Samuel Monteiro
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Samuel Monteiro: I&P - Investisseurs et Partenaires

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Abstract: Utilizing a new database of over 200 employees surveyed in Senegal, we demonstrate the impact of formalization and employment contracts on credit access. Through a probit model, we show that formalization has a significantly positive impact on credit access since an employee's probability of accessing credit increases by 23% if they have a formal employment contract. The possession of an employment contract increases the likelihood of having a bank account by 18%. We find that other potential determinants studied in the existing literature, such as gender, education and salary, do not have a significant impact on access to credit. These results highlight the impact of formalization on credit access and make a strong case for the economic development that could result from a continuation of the efforts being undertaken to formalize African economies, which still remain predominantly informal.

Keywords: Credit access; Formal job; Employment; Banking; Africa (search for similar items in EconPapers)
Date: 2020-02-27
New Economics Papers: this item is included in nep-iue
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