Small Business Borrowing: Determinants and Consequences

Sonia Di Giannatale and Arnoldo López-Marmolejo ()
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Arnoldo López-Marmolejo: Centro de Investigación y Docencia Económicas (CIDE), Carretera México-Toluca 3655, Col. Lomas de Santa Fe, Mexico
Authors registered in the RePEc Author Service: Arnoldo López Marmolejo

Review of Development Finance Journal, 2022, vol. 12, issue 2, 46-55

Abstract: Small businesses play a vital role in developing economies, yet they are often faced by credit constraints, a particularly pressing problem that can determine, to a significant degree, the challenges they face to their continued development and survival. In this article, we examine the literature on the borrowing decisions of entrepreneurs and business owners. In doing so, we pay particular attention to small firms in developing economies. We discuss the effects of a range of factors, such as the presence of information asymmetry in the financial system, the wealth and saving capacity of entrepreneurs and business owners, behavioral biases in entrepreneurial and business decisions, informality, and gender. We conclude our analysis with a look at the factors that affect a firm’s decision to start up or to close down in the face of a credit crunch.

Keywords: Small firms; borrowing; behavioral finance; gender gaps (search for similar items in EconPapers)
JEL-codes: G21 G41 J16 O16 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:afj:journ3:v:12:y:2022:i:2:p:46-55

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