Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/224257
Authors: 
Brixiová, Zuzana
Kangoye
Thierry
Yogo, Thierry Urbain
Year of Publication: 
2020
Series/Report no.: 
GLO Discussion Paper 665
Abstract: 
In the past decade inclusive growth, that is job-rich growth, has topped the policy agenda in developing countries. This paper investigates how the access to finance affects employment in small and medium-sized enterprises (SMEs) in Sub-Saharan Africa. It first presents a model where firm creation requires entrepreneurial search and paying the start-up costs, while the firm’s size in terms of employment depends on the access to credit. Under the financial market imperfections, access to credit can be a binding constraint on firm entry and employment even when the banks have sufficient liquidity. Using an impact evaluation-based approach on firm-level data from 42 African countries, we show that SMEs with access to formal financing create more jobs than firms without access, with employment in firms having access to more affordable and larger loans growing the fastest. The impact of access to finance is stronger for firms in manufacturing than in services, pointing to sectoral targeting of finance as a possible policy supporting industrialization.
Subjects: 
entrepreneurship
financial inclusion
employment
propensity score matching
JEL: 
L2
G2
D22
C1
Document Type: 
Working Paper

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