Finance and Growth for Microenterprises: Evidence from Rural China

T. Beck, L. Lu, R. Yang

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Using a survey dataset of Chinese rural households, we find that access to external finance is positively associated with the decision to become entrepreneur and the initial investment for microenterprises. Also, we find that use of informal finance, especially financing from friends and family, is positively associated with sales growth of microenterprises with employees, but not of self-employed. We do not find any significant relationship between the use of formal finance and firm growth. Our findings underline the importance of finance for entrepreneurship and microenterprise growth, and the role of informal finance in the absence of efficient formal financial institutions.
Original languageEnglish
Pages (from-to)38-56
JournalWorld Development
Volume67
DOIs
Publication statusPublished - 2015

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microenterprise
finance
China
evidence
entrepreneur
entrepreneurship
sales
employee
Finance and growth
Micro-enterprises
Rural China
Finance
firm

Bibliographical note

PT: J; NR: 40; TC: 0; J9: WORLD DEV; PG: 19; GA: CA0PT; UT: WOS:000348620000004

Cite this

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Finance and Growth for Microenterprises: Evidence from Rural China. / Beck, T.; Lu, L.; Yang, R.

In: World Development, Vol. 67, 2015, p. 38-56.

Research output: Contribution to JournalArticleAcademicpeer-review

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AU - Beck, T.

AU - Lu, L.

AU - Yang, R.

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AB - Using a survey dataset of Chinese rural households, we find that access to external finance is positively associated with the decision to become entrepreneur and the initial investment for microenterprises. Also, we find that use of informal finance, especially financing from friends and family, is positively associated with sales growth of microenterprises with employees, but not of self-employed. We do not find any significant relationship between the use of formal finance and firm growth. Our findings underline the importance of finance for entrepreneurship and microenterprise growth, and the role of informal finance in the absence of efficient formal financial institutions.

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DO - 10.1016/j.worlddev.2014.10.008

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JO - World Development

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SN - 0305-750X

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