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Does informal finance matter for micro and small businesses in Africa?

Author

Listed:
  • Mago, Stephen

    (Nelson Mandela University, Faculty of Business and Economic Sciences, Department of Development Studies - Gqeberha - Eastern Cape Province)

  • Sewela Modiba, Florah

    (Nelson Mandela University, Faculty of Business and Economic Sciences, Department of Development Studies - Gqeberha - Eastern Cape Province)

Abstract

Globally, micro and small businesses require finance to support their business activities. Most of them have low profits because of the lack of support from the formal financial system. Micro and small businesses in developing countries have a dire need for financing start-ups and existing business operations. The lack of support from the formal financial system and the government forces them to explore other financial support mechanisms, making it important to investigate alternative financial channels. This paper investigates whether informal finance matters for micro and small businesses. We used a systematic literature review to answer the predetermined research question. Thirty (30) primary studies were surveyed to establish the importance of informal finance for micro and small businesses. The findings show that informal finance is a workable alternative for micro and small businesses. It supports business start-ups, existing businesses and enhances business growth, business owners? livelihoods and livelihoods in their communities. Informal finance models can be improved to work as small business promotion tools. The original value of the paper is based on the use of a systematic literature review to assess whether informal finance matters for micro and small businesses and connect theories with emerging themes. It further contributes to the debates on the importance of informal finance and contributes to future lines of research on informal finance.

Suggested Citation

  • Mago, Stephen & Sewela Modiba, Florah, 2022. "Does informal finance matter for micro and small businesses in Africa?," Small Business International Review, Asociación Española de Contabilidad y Administración de Empresas - AECA, vol. 6(1), pages 415-415, March.
    • Handle: RePEc:aaz:sbir01:v:6:y:2022:i:1:p:e415
    DOI: 10.26784/sbir.v6i1.415
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    References listed on IDEAS

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    More about this item

    Keywords

    informal finance; financial exclusion; micro and small businesses; systematic literature review; Africa;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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