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Regional Financial Development and Micro and Small Enterprises in Peru

Author

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  • Jennifer De La Cruz

    (Pontificia Universidad Católica del Perú)

Abstract

Empirical studies suggest that credit constraints prevent the development of Micro and SmallEnterprises (MSEs). This study contributes to the analysis by exploring whether higher regionalfinancial development affects the creation and growth of MSEs in Peru. Based on four cross-sectional databases, mainly the 2018 National Household Survey on Living Conditions and Poverty,this paper finds that there is a positive impact on entrepreneur profits; however, the effect isnegative on the likelihood of running a business. Interactions between informality and financialfrictions may explain this result. Informal financing emerges as an alternative in this context.This study addresses endogeneity issues by using the number of commercial bank branches per1,000 inhabitants in 1995 as an instrument of the degree of regional financial development in 2018.

Suggested Citation

  • Jennifer De La Cruz, 2024. "Regional Financial Development and Micro and Small Enterprises in Peru," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 47(94), pages 56-75.
    • Handle: RePEc:pcp:pucrev:y:2024:i:94:p:56-75
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    File URL: https://revistas.pucp.edu.pe/index.php/economia/article/view/30740/27296
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    Keywords

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    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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