Heterogeneity in informal sector mitigation of micro-enterprise credit rationing

  • D. W. Mushinski and K. A. Pickering (2007). Journal of International Development, 567-581
  • Abstract: Economists have observed that informal credit markets may mitigate micro-entrepreneurial rationing in formal credit markets. While informal credit markets may have that effect, the uniformity and magnitude of the mitigation is not apparent. We analyse micro-enterprise credit rationing on the Pine Ridge Indian Reservation in the United States. We find that micro-entrepreneurs have virtually no access to formal credit markets and that informal credit markets have differential impacts on micro-entrepreneurs' rationing in formal credit markets. Informal markets appear to ease credit rationing the most for the mid-size micro-enterprises in our sample, with the smallest and largest micro-enterprises still facing severe rationing constraints. We also find that micro-enterprises of all sizes face a positive probability of credit rationing. Copyright 2006 John Wiley & Sons, Ltd.
  • Theme: Finance, Formal/Informal
  • Keywords: American Indian Economic Development, Credit rationing, Micro-entrepreneurs, credit provision, informal sector, microenterprise, microfinance, North America, United States
  • Reference type: Journal Article
  • Geographic location: United States, North America, Global North
  • Quality:
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