Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212769 
Year of Publication: 
2013
Series/Report no.: 
BOFIT Discussion Papers No. 14/2013
Publisher: 
Bank of Finland, Institute for Economies in Transition (BOFIT), Helsinki
Abstract: 
The recent financial crisis has reopened the debate on the impact of informal and formal finance on firm growth in developing countries. Using unique survey data, we find that in-formal finance is associated with higher sales growth for small firms and lower sales growth for large firms. We identify a complementary effect between informal and formal finance for the sales growth of small firms, but not for large firms. Informal finance offers informational and monitoring advantages, while formal finance offers relatively inexpensive funds. Co-funding, i.e. the simultaneous use of formal and informal finance, is the optimal choice for small firms.
Subjects: 
informal finance
formal finance
co-funding
growth
JEL: 
G21
G32
P2
Persistent Identifier of the first edition: 
ISBN: 
978-952-6699-17-2
Document Type: 
Working Paper

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