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Heterogeneity in informal sector mitigation of micro-enterprise credit rationing

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  • David W. Mushinski

    (Department of Economics, Colorado State University, Colorado, USA)

  • Kathleen A. Pickering

    (Department of Anthropology, Colorado State University, Colorado, USA)

Abstract

Economists have observed that informal credit markets may mitigate micro-entrepreneurial rationing in formal credit markets. While informal credit markets may have that effect, the uniformity and magnitude of the mitigation is not apparent. We analyse micro-enterprise credit rationing on the Pine Ridge Indian Reservation in the United States. We find that micro-entrepreneurs have virtually no access to formal credit markets and that informal credit markets have differential impacts on micro-entrepreneurs' rationing in formal credit markets. Informal markets appear to ease credit rationing the most for the mid-size micro-enterprises in our sample, with the smallest and largest micro-enterprises still facing severe rationing constraints. We also find that micro-enterprises of all sizes face a positive probability of credit rationing. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • David W. Mushinski & Kathleen A. Pickering, 2007. "Heterogeneity in informal sector mitigation of micro-enterprise credit rationing," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(5), pages 567-581.
  • Handle: RePEc:wly:jintdv:v:19:y:2007:i:5:p:567-581
    DOI: 10.1002/jid.1340
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    References listed on IDEAS

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