Informal Financial Credit and Sustainable Livelihoods: Determinants and Delinquency Patterns Among Microentrepreneurs in the Peruvian Amazon

Financial exclusion remains a critical barrier to sustainable economic development in emerging economies, particularly among microentrepreneurs who depend on informal financial credit (IFC) to sustain their livelihoods. This study aims to examine the determinants and consequences of IFC utilization and their relationship with distinct delinquency patterns among microentrepreneurs in the Peruvian Amazon. A cross-sectional survey was administered to 310 microentrepreneurs from the central market of Yurimaguas during the first quarter of 2024 using partial least squares structural equation modeling (PLS-SEM). Four determinants of IFC—motivation, lender choice, loan conditions, and financial stress—were tested alongside their influence on three delinquency types: accidental, intentional, and negligent. The results indicate that psychological motivation and social lender choice are the primary and statistically significant drivers of IFC utilization, whereas loan conditions showed no significant association. Regarding delinquency outcomes, IFC is significantly and positively associated with accidental and intentional delinquency, yet paradoxically shows a significant negative association with negligent delinquency, suggesting that trust-based social enforcement mechanisms embedded in informal lending relationships may constrain negligent default behavior. These differentiated effects underscore the dual nature of informal credit as both a livelihood-sustaining mechanism and a source of financial vulnerability. The findings contribute to the understanding of financial sustainability in excluded populations by providing empirical evidence that effective interventions must address the psychological and relational dimensions of credit behavior, rather than focusing solely on structural loan characteristics. Key limitations include the cross-sectional design, which precludes causal inference, and the geographic focus on a single market in the Peruvian Amazon, which restricts generalizability. This study offers actionable insights for policymakers and microfinance institutions seeking to design inclusive financial strategies aligned with Sustainable Development Goals 1 (No Poverty), 8 (Decent Work and Economic Growth), and 10 (Reduced Inequalities).