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Entrepreneurial Saving Practices and Reinvestment: Theory and Evidence from Tanzanian MSEs

Thorsten Beck, Haki Pamuk and Burak Uras

No 2014-15, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: What is the relationship between entrepreneurial saving practices and reinvestment? We develop a model of entrepreneurial finance and show that entrepreneurial reinvestment decisions depend on the efficiency of saving practices. Utilizing a novel micro & small enterprise survey from Tanzania we test the empirical implications of this theory. We find (1) saving for business purposes and earnings reinvestment are positively related; (2) the practice of saving in a deposit account of a formal financial institution is more likely to facilitate reinvestment compared to the practice of keeping savings within the household. We also show that the negative impact of saving within-the-household on investment is more pronounced for family members with inherently low intra-household bargaining power – such as females and non-head household members. Our work contributes to the recent debate on the implications of saving instruments in developing countries, and suggests informal saving practices as potential barriers to microenterprise performance.

Keywords: Micro- and small enterprises; savings; reinvestment; Tanzania (search for similar items in EconPapers)
JEL-codes: D14 G21 O12 O16 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-afr, nep-cfn, nep-cse, nep-ent, nep-iue and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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