FINANCIAL CONSTRAINTS MATTER: EMPIRICAL EVIDENCE ON BORROWING BEHAVIOR, MICROFINANCE AND FIRM PRODUCTIVITY

Martijn Boermans and Daan Willebrands
Additional contact information
Daan Willebrands: De Lage Landen, Vestdijk 51, 5611 CA Eindhoven, The Netherlands

Journal of Developmental Entrepreneurship (JDE), 2018, vol. 23, issue 02, 1-24

Abstract: This paper examines the effect of financial constraints on firm performance using a sample of small business owners who are clients at a microfinance institution (MFI). In developing countries, a lack of access to finance is seen as a key obstacle to successful entrepreneurship and economic growth. However, empirical evidence on this is still fragmented and sparse. This study contributes to the literature by applying an alternative measure of financial constraints based on actual lending and borrowing behavior to test how borrowing affects firm productivity. We use survey data of 615 entrepreneurs from Tanzania to analyze the relationship between financial constraints and labor productivity. Using OLS regression and propensity score matching techniques the results show that financial constraints impede labor productivity and are important barriers to successful entrepreneurship. Further tests suggest financial constraints matter regardless of the measurement method used, thereby comforting researchers in a fragmented field that applies a wide range of financial constraints variables.

Keywords: Entrepreneurship; credit constraints; access to finance; firm performance; Africa; Tanzania (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S1084946718500085
Access to full text is restricted to subscribers

Related works:
Working Paper: Financial constraints matter: Empirical evidence on borrowing behavior, microfinance and firm productivity (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:jdexxx:v:23:y:2018:i:02:n:s1084946718500085

Ordering information: This journal article can be ordered from

DOI: 10.1142/S1084946718500085

Access Statistics for this article

Journal of Developmental Entrepreneurship (JDE) is currently edited by Peter Koveos

More articles in Journal of Developmental Entrepreneurship (JDE) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().