Regional Financial Development and Micro and Small Enterprises in Peru

Jennifer De La Cruz
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Jennifer De La Cruz: Pontificia Universidad Católica del Perú

Revista Economía, 2024, vol. 47, issue 94, 56-75

Abstract: Empirical studies suggest that credit constraints prevent the development of Micro and SmallEnterprises (MSEs). This study contributes to the analysis by exploring whether higher regionalfinancial development affects the creation and growth of MSEs in Peru. Based on four cross-sectional databases, mainly the 2018 National Household Survey on Living Conditions and Poverty,this paper finds that there is a positive impact on entrepreneur profits; however, the effect isnegative on the likelihood of running a business. Interactions between informality and financialfrictions may explain this result. Informal financing emerges as an alternative in this context.This study addresses endogeneity issues by using the number of commercial bank branches per1,000 inhabitants in 1995 as an instrument of the degree of regional financial development in 2018.

Keywords: Financial Development; Micro and Small Enterprises; Informal Finance; Instrumental Variables. (search for similar items in EconPapers)
JEL-codes: G20 O16 R11 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:pcp:pucrev:y:2024:i:94:p:56-75

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